Givitt
Member
Cash: $ 3.50
Posts: 16
Joined: 18 Feb 2006
Location: Honolulu
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| I have a good problem?? |
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I'm lost and frustrated. Happy but worried I'm doing the wrong thing by doing nothing. My parents are void of any up-to-date finance knowledge. Please help!
1) I'm 40, have 130k in 401K & max it, and make 55k/yr
2) I owe 80k on a 5.75% mortgage. House is worth 320k.
3) I'm debt free, live within my means, and we would love to send my 1 yr old to private school. Wife does some eBay. We have 7k in emerg fund.
4) I live in Hawaii (median home 650k, cereal and milk $5, gas 3.30/g, you get the point)
The main questions I'm pondering are: 1) Do I open a HELOC now, even though I won't use the money? 2) Do I put all I can into paying down my mortgage, or use the money for education, renovations, etc? My goal was invest in rentals, but now too expensive. BUT I WANT TO DO SOMETHING! :?
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Tue Jul 11, 2006 7:23 am |
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No-Brainer
Senior Member
Cash: $ 83.45
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Joined: 29 Dec 2005
Location: Oregon USA
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| Lots of options . . . |
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You have exemplified what I have told my kids about freedom. You are now free to make more choices because you made the right ones to be financially free in the first place. It's EXPENSIVE to be broke.
I don't live in Hawaii (although I plan to go there soon) so I can't answer for sure, but I know on the mainland there are ALWAYS properties to invest in rentals without a lot of risk or expense. People make stupid mistakes in their lives and get desperate to sell, so help them out.
"You can have anything you want if you help enough other people get what they want" is a popular quote that fits here. I have bought property with a $1,000 or less down payment and created a win-win situation with the buyer more than once.
Something to think about . . .
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Tue Jul 11, 2006 2:33 pm |
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Givitt
Member
Cash: $ 3.50
Posts: 16
Joined: 18 Feb 2006
Location: Honolulu
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Thank you all for your insight. To answer some qwuestions:
1) HELOC: more than 3 people told me to do it to lock in low interest rates. But like I said we live within our means so I don't need the money. They told me borrow at 6%, invest at 5%, lose out on the 1%, but at least I got the money. Does that make sense??
2) RENOVATION: Purpose? I'm thinking because its so expensive here that I'll probably never buy a house (I own a 3bdr townh), so why not fix the place up? Just a thought at this time though.
3) MORTGAGE: Why does everyone except you Coaster tell me to pay it down and save on interest? I like your thinking though.
4) SITTING ON GOLD? What's upsetting is that I actually have all this equity in my home, but we're sitting on it. Somehow I feel I'm not doing something right. One person told me "sitting" right now is right!
.....and I do agree that you shouldn't chance real estate unless you know about it, but then, how would you ever know??
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Tue Jul 11, 2006 11:52 pm |
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Givitt
Member
Cash: $ 3.50
Posts: 16
Joined: 18 Feb 2006
Location: Honolulu
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Coaster - not at all. I sometimes talk faster than I think too.
I'm going to seriously think about not paying down the mortgage. I'll open a Roth before end of the month and start there.
Maybe I should sell my place for 300K+ and move to Wisconsin? Will that buy me a nice house with a big yard? I always liked the Packers, even though I'm a Raider fan at heart. Of course, this island family won't see too much of the outside there - we are freezing at 50 degrees.
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Wed Jul 12, 2006 12:40 am |
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Kiaser
Senior Member
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[quote="Givitt"]3) MORTGAGE: Why does everyone except you Coaster tell me to pay it down and save on interest?[quote]
The interest is tax deductible for one thing. Secondly, $80k is pretty low so it may be better to take the tax deductions from interest, and put any extra cash you would have used to pay down the mortgage towards other appreciating assets/investments.
Saving on interest is absolutely one of the best ways to invest, because it's a guaranteed return rate that you would save on interest by paying something off quicker. However, when you add in the fact of the interest being tax deductible it may make more sense to put the extra cash elsewhere. Of course, no debt is a great way to live life but then again who has the millions to do so? Mortgages, by far, are the best debt to have ESPECIALLY since you are living within your means.
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Wed Jul 12, 2006 2:35 am |
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Kiaser
Senior Member
Cash: $ 43.05
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Joined: 12 Apr 2006
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quote:
Originally posted by Givitt
Coaster - not at all. I sometimes talk faster than I think too.
I'm going to seriously think about not paying down the mortgage. I'll open a Roth before end of the month and start there.
Maybe I should sell my place for 300K+ and move to Wisconsin? Will that buy me a nice house with a big yard? I always liked the Packers, even though I'm a Raider fan at heart. Of course, this island family won't see too much of the outside there - we are freezing at 50 degrees.
If you are comparing paying down a mortgage that is relatively small already against a Roth, then you don't need to think any further. That IRA can gain you so much more safety and security in your future than ANY amount of interest you'll save on a mortgage.
And if you can seriously consider moving to the larger land mass think of the position you could be in. You have a spot on some of the highest cost land around, and you have living quarters on that land. That's just a pile of money. You could even rent it out (long term or maybe even some sort of a time share/vacation rent thing) and still keep the asset value but also bring in excess cash flow from it.
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Wed Jul 12, 2006 2:42 am |
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Blue Eyed Cat
Contributing Member
Cash: $ 2.90
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Joined: 12 Jul 2006
Location: Central Florida
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You have the wrong perspective on your house. Yes it is worth money but it isn't exactly "sitting on gold". You have to live somewhere and if you were to sell, it would cost you as much or more to buy something else. Also compare your real cost of housing as an owner to being a renter. Owning is generally better.
If establishing a line of credit you don't need is free--go for it; otherwise invest you money elsewhere.
If you want to renovate your home be realistic. How much enjoyment are you going to get from $50,000 worth of home improvements versus investing the money and having it grow and grow. Keeping the house in good repair and comfortable is another story--that is maintaining your investment and enjoying life.
Your interest rate on the house is very reasonable. If it is a fixed rate loan I would not pay it down. However I would pay off all other debt and remain debt free.
Start educating yourself about investing and get your money working for you.
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Wed Jul 12, 2006 9:58 pm |
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Givitt
Member
Cash: $ 3.50
Posts: 16
Joined: 18 Feb 2006
Location: Honolulu
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Kiaser: I would love to be able to rent this sucker out - going rate is near 1800/mo. But like BECat says, where am I going to live? The answer? Yup, on the mainland. I could really do it that way, maybe buy something for 150k in Nevada or Arizona (I need warmth!). So hard though when 98% of both my and my wife's fam is here. And we are a very tight family all around.
Well, surely something to think about. I appreciate all your words of financial wisdom - We've decided to stop making extra payments towards mortgage (well maybe just 1-2 /yr) and get rolling with the Roth.
No Brainer: Hawaii is waiting for you! 88 degrees with light, sweet-tasting winds to keep you cool. Aloha!
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Thu Jul 13, 2006 6:23 am |
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No-Brainer
Senior Member
Cash: $ 83.45
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Location: Oregon USA
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quote:
Originally posted by coaster
I just read an article on the Motley Fool website that has a bearing on this thread. Basically the article said that a HELOC is useful as a substitute for an emergency fund. As for me, I'd like to have that money available instantly, or least a good bit of it. But using a HELOC this way makes sense, especially if there aren't any fees to keep it open. You just open the HELOC and then don't borrow any money unless you need it. So basically you're using the equity in your home as your emergency fund. I suppose it makes sense to me. Anybody have any objections or problems I haven't thought of? 
I do it and have used it twice. It's as smooth as silk.
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Tue Jul 18, 2006 4:53 pm |
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BlankenshipFP
Money Talk Advisor
Cash: $ 79.56
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Joined: 05 Oct 2004
Location: Illinois
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quote:
Originally posted by coaster
Anybody have any objections or problems I haven't thought of?
Not at all - a HELOC is a reasonable substitute for cash for your emergency holdings. In essence the HELOC is margin cash, against your solid, insured asset of your home.
Jim Blankenship, CFP�, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
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Thu Jul 20, 2006 2:57 pm |
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El Presidente
Full Member
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Joined: 22 Apr 2006
Location: Colorado
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quote:
Originally posted by muneepenee
1. hang in theer baebee
yu du thangs rite. keep at it.
2. yu kood add $ tu ira's.
3. stae awae from reel estate unless yu hav speshal talent for it.
4. if yu want more inkun, tri tu find a part time job sumweer.
5. yer retire fund is much more portant than save for kids skueling.
hav kid get a job & start saving for his skueling.
6. wot wood be the purpus av "renovate"?
As a free Service I will attempt to translate:
1. Hang in there baby. You are doing fine. Keep at it.
2. You could add money to an IRA fund.
3. Stay away from real estate unless you have a special talent to it.
4. If you want more income, try to find a part time job somewhere.
5. Your retirement fund is much more important than saving for kids schooling. Have kid get a job and start saving for his schooling.
6. What would be the purpose of renovating your house?
Eye tink dis tempt maid me stewpider.
DISCLAMER: This is a attempt to translate and does not reflect my opinion.
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Thu Jul 27, 2006 10:27 pm |
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