Comments on: Check Out the Latest Dave Ramsey Poll

By: BeyondWeird

BeyondWeird — Tue, 26 Jan 2010 03:17:01 +0000

Its low risk to have a home paid for, but making extra principal payments on a home is risky! The reason is that if one were to INVEST until one had enough to pay off the house in full, then if one loses their job (very common these days) the house, and the money put into it, is at less risk. This is because, if needed, the money saved, intended to be used to pay off the home in the future, could be used NOW to pay the mortgage payment! As they say, “Cash is King.”

By: Mike H

Mike H — Mon, 16 Nov 2009 23:18:45 +0000

Interesting discussion. Given the assumptions made, I agree with JLP’s numbers from a straight dollars and cents perspective.

That said, my wife and I are aggressively paying down our debt (both school loans and mortgage). We’re also funding our Roth IRAs to make use of the tax advantages there. Our direction has been less of a focus on the mandated length of the mortgage, but on paying it off in much less time than either a 15 or a 30 year would require.

The reason is simply that the “medium-term” flexibility of not having the payments will allow us to more whole-heartedly focus on our other goals: giving to the Church and saving for the long-term.

Could we save the money and pay off the debt in the medium-term while having the short-term benefit of the cash on hand? Perhaps. However, the returns you can theoretically count on in the long term become less likely to match reality in the short/medium term (less than 15 years), as we’ve seen recently.

Besides, all those years WITHOUT the debt hanging out there is far more valuable to me than the straight dollars and cents. It feels a bit strange to say that, as I’m something of a math nerd… but it’s true.

Thanks for all the thoughtful discussion.

By: JLP

JLP — Mon, 16 Nov 2009 05:41:15 +0000

test

By: consider this

consider this — Sun, 15 Nov 2009 19:43:19 +0000

In the comparison above the amount in savings is only listed for the 30 year mortgage. Where does this number come from? Multiplying $458 times 180 (months) come to $82440. Nonetheless, one really important peice is missing. If I am in the 15 year category, and I just paid off my last payment of $1696. How’s about I save $1696/mo for 15 years and then let’s compare savings accounts. At the end of 15 years of saving $1696 (as I paid off my mortgge after 15 years), my savings account reads a sweet $305,280. Did I miss something?

By: 30 WIns if Unemployed

30 WIns if Unemployed — Thu, 16 Apr 2009 15:54:56 +0000

Well, now that unemployment is way up, I wonder how many 15-year mortgage holders are in a crisis because they lost a job? I’m glad I have a 30-year for peace of mind. I can pay it as if it’s a 15 anytime I want, but if I lose my job, I’m not at risk of being kicked out my house or having to go without health insurance to keep my other expenses paid (has anyone seen the rates for COBRA insurance if you lose your job? For me, COBRA would cost significantly more than my entire mortgage! It’s insane! All the more reason why we need a universal health care option available from the government so these scam artists in the insurance industry will have to compete against the lower prices of a gov’t program) because of having zero flexibility on my minimum mortgage payment.

By: It’s Called Long-Term For a Reason | AllFinancialMatters

It’s Called Long-Term For a Reason | AllFinancialMatters — Wed, 04 Feb 2009 19:07:48 +0000

[...] in some of my posts about mortgages vs. investing. Take for instance, this comment that was left on this post this morning by someone named LOL (I’m pretty sure that’s a joke): So it’s almost [...]

By: LOL

LOL — Wed, 04 Feb 2009 18:04:27 +0000

So it’s almost been two years since this blog entry was made. Ironically March 2007 was the peak for the national average house prices. Since then the average house price has lost 25% (*1) and the S&P 500 is down 40% (*2).

Looks like those loony “ramseyites” aren’t so bad at math after all

BTW, how is that massively arbitraged and up-side down mortgage working for ya?

(*1) census.gov $329,400 down to $246,900 (Dec 08)
(*2) NASDAQ:VFINX 129.62 down to 77.26

By: Another Point of View

Another Point of View — Wed, 26 Sep 2007 17:02:01 +0000

Here is another point of view that doesn’t seem to be considered yet: I treat my mortgage as a bond (which it is). I am getting a GUARANTEED Rate of Return on my 5.0% fixed 15-year mortgage — which has ZERO risk (on the investment). This allows me to invest in my 401k and IRA more aggressively because I treat my mortgage (and pension plan at 1-year T-Bill rates) as the bond portion of my portfolio.

The Mortgage Comparison given in the table above is flawed in that it is only looking at a small portion of my overall investment strategy. If it took into account the more aggressive investments in the 401k and IRA (due to treating the mortgage as a bond), then one could have a higher ROR on the investments with less risk.

Also, if you are taking on a 30-year (or ARM or any other “bad” mortgage), and you are also investing in Stocks, then you ARE financing your stock investments with your house as collateral, period.

I am a Dave Ramsey fan, and I also took significant math classes in college, and I am also a pessimist. Dave’s plan may not make much mathematical sense (as you have pointed out), but it makes “real-world” sense, in that it is designed for when the “real-world” bites you in the ass

Carrying ZERO debt, having emergency funds, etc.. all are designed to prevent someone from being financially ruined when the bad things happen in your life (and they will — Murphy’s law).

By: Robbie Roberts

Robbie Roberts — Sat, 22 Sep 2007 05:01:15 +0000

Interesting thread. Your math does not take into consideration risk and thousands of broke people with ARM’s and scores of lenders who were greedy are demonstrating this fact. When my 15 year fixed-rate mortgage is paid off and your ARM has put you in a tenuous financial position, we’ll see how good your math works in daily life.

By: scientificcalculators.check4cheap.com » Blog Archive

scientificcalculators.check4cheap.com » Blog Archive — Sat, 15 Sep 2007 15:20:32 +0000

[...] AllFinancialMatters » Blog Archive » Check Out the Latest Dave 45 Responses to “Check Out the Latest Dave Ramsey Poll Chris, part of the scientific process (in which we’re engaging here and being subject to AMT), my mortgage is extraordinarily cheap [...]