Comments on: A Follow-up to the Dave Ramsey Mortgage Post – This is Interesting! http://allfinancialmatters.com/2007/03/08/a-follow-up-to-the-dave-ramsey-mortgage-post-this-is-interesting/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Sat, 21 Nov 2009 13:00:57 -0800 http://wordpress.org/?v=abc hourly 1 By: Deb http://allfinancialmatters.com/2007/03/08/a-follow-up-to-the-dave-ramsey-mortgage-post-this-is-interesting/comment-page-2/#comment-439307 Deb Mon, 14 Sep 2009 02:51:59 +0000 http://allfinancialmatters.com/?p=1642#comment-439307 This example proves that Dave Ramsey KNOWS what he's talking about! In this example the people who paid off mtg early apparently didn't invest their extra cash and were almost even to the person who kept the 30 year mortgage. If the payed off people truly didn't invest the money that's ok, look at all the years they lived in peace, debt free!!! This example proves that Dave Ramsey KNOWS what he’s talking about!

In this example the people who paid off mtg early apparently didn’t invest their extra cash and were almost even to the person who kept the 30 year mortgage.

If the payed off people truly didn’t invest the money that’s ok, look at all the years they lived in peace, debt free!!!

]]> By: Kirk Womack http://allfinancialmatters.com/2007/03/08/a-follow-up-to-the-dave-ramsey-mortgage-post-this-is-interesting/comment-page-2/#comment-424107 Kirk Womack Sat, 06 Jun 2009 02:09:53 +0000 http://allfinancialmatters.com/?p=1642#comment-424107 Two years ago we stopped investing in our 401k and we began paying thousands against the principle on our home. We only have $1,500.00 left to pay and the property is ours and we didn't lose our a$$et$ to the stock market. We don't have to worry about losing our home to the bank. Our money isn't tied up in unstable companies that could fail in a second with no warning. We are debt free and will now be able to live comfortable lives without worry. There's something to be said about that don't you think? If all of your money is placed in the stock market, which most likely it is. You most likely are worried that you'll never get back what you just lost in the latest crisis. I don't have that worry and in 11 years, I will have saved approximately $500,000.00 that I probably would have sank into the stock market and lost. Now that is a $500,000.00 gain in 11 years. Can you beat that? I don't think so... Oh, and did I mention that God was in all of this? That is right! God. If we all would just obey the Lord and keep his word, "owe no man nothing" then we wouldn't be in the situation that were in today. Two years ago we stopped investing in our 401k and we began paying thousands against the principle on our home. We only have $1,500.00 left to pay and the property is ours and we didn't lose our a$$et$ to the stock market. We don't have to worry about losing our home to the bank. Our money isn't tied up in unstable companies that could fail in a second with no warning. We are debt free and will now be able to live comfortable lives without worry. There's something to be said about that don't you think? If all of your money is placed in the stock market, which most likely it is. You most likely are worried that you'll never get back what you just lost in the latest crisis. I don't have that worry and in 11 years, I will have saved approximately $500,000.00 that I probably would have sank into the stock market and lost. Now that is a $500,000.00 gain in 11 years. Can you beat that? I don't think so… Oh, and did I mention that God was in all of this? That is right! God. If we all would just obey the Lord and keep his word, "owe no man nothing" then we wouldn't be in the situation that were in today.

]]> By: john http://allfinancialmatters.com/2007/03/08/a-follow-up-to-the-dave-ramsey-mortgage-post-this-is-interesting/comment-page-2/#comment-404445 john Wed, 25 Feb 2009 16:17:26 +0000 http://allfinancialmatters.com/?p=1642#comment-404445 Too many people here are doing exactly what the first person said not to do. Don't take little chunks, but look at the whole thing. It is advocated by Dave that after you pay off your mortgage you continue to invest that money into the market. Once you have no debt and can invest all your income you will surpass the time that you wasted in those 3 years quickly. As for the guy that thinks that he is going to continue to get 33% - that is where the fantasy is. Too many people here are doing exactly what the first person said not to do. Don’t take little chunks, but look at the whole thing. It is advocated by Dave that after you pay off your mortgage you continue to invest that money into the market. Once you have no debt and can invest all your income you will surpass the time that you wasted in those 3 years quickly. As for the guy that thinks that he is going to continue to get 33% – that is where the fantasy is.

]]> By: Greg http://allfinancialmatters.com/2007/03/08/a-follow-up-to-the-dave-ramsey-mortgage-post-this-is-interesting/comment-page-1/#comment-386248 Greg Mon, 08 Dec 2008 20:33:40 +0000 http://allfinancialmatters.com/?p=1642#comment-386248 Very interesting read. I kind of wish now that I'd been hammering down my mortgage over the last 4 years instead of throwing money at the stock market. But now that the market has tanked so much, a part of me feels like now is not the time to go ultra conservative and throw everything at the mortgage note. Decisions, decisions. Very interesting read. I kind of wish now that I’d been hammering down my mortgage over the last 4 years instead of throwing money at the stock market. But now that the market has tanked so much, a part of me feels like now is not the time to go ultra conservative and throw everything at the mortgage note. Decisions, decisions.

]]> By: JLP http://allfinancialmatters.com/2007/03/08/a-follow-up-to-the-dave-ramsey-mortgage-post-this-is-interesting/comment-page-1/#comment-375592 JLP Sun, 02 Nov 2008 14:05:37 +0000 http://allfinancialmatters.com/?p=1642#comment-375592 Don, Clueless????? Did you READ the post before you left your comment? I do take that into consideration. Maybe you should READ first BEFORE you comment. Don,

Clueless?????

Did you READ the post before you left your comment? I do take that into consideration.

Maybe you should READ first BEFORE you comment.

]]> By: don http://allfinancialmatters.com/2007/03/08/a-follow-up-to-the-dave-ramsey-mortgage-post-this-is-interesting/comment-page-1/#comment-375536 don Sun, 02 Nov 2008 09:14:37 +0000 http://allfinancialmatters.com/?p=1642#comment-375536 Holy cow! this is the most cluless post i have ever seen, the author totally ignores the fact in his equation that if you paid off your house in 4 years you now have 26 more years to invest that payment into mutual funds and stocks, etc. YOU WILL HAVE ALOT MORE MONEY IN THE END...PAY OFF THE MORTGAGE....people who say not to just want your money..how disgusting Holy cow! this is the most cluless post i have ever seen, the author totally ignores the fact in his equation that if you paid off your house in 4 years you now have 26 more years to invest that payment into mutual funds and stocks, etc. YOU WILL HAVE ALOT MORE MONEY IN THE END…PAY OFF THE MORTGAGE….people who say not to just want your money..how disgusting

]]> By: Comment on A Follow-up to the Dave Ramsey Mortgage Post - This is … http://allfinancialmatters.com/2007/03/08/a-follow-up-to-the-dave-ramsey-mortgage-post-this-is-interesting/comment-page-1/#comment-354474 Comment on A Follow-up to the Dave Ramsey Mortgage Post - This is … Sun, 31 Aug 2008 20:00:16 +0000 http://allfinancialmatters.com/?p=1642#comment-354474 [...] Read the rest of this great post here [...] [...] Read the rest of this great post here [...]

]]> By: Rick http://allfinancialmatters.com/2007/03/08/a-follow-up-to-the-dave-ramsey-mortgage-post-this-is-interesting/comment-page-1/#comment-354396 Rick Sun, 31 Aug 2008 15:34:20 +0000 http://allfinancialmatters.com/?p=1642#comment-354396 I'm going to stick with Dave for two reasons. When my mortgage is paid off the house is mine and the bank can't come take it. While several people have mentioned that the bank would rather invest in a 6% return guaranteed by your house instead of the 8% return used as the investment comparison, the risk of being on the other side of that 30 year mortgage is not even considered. Calculate for risk, and the equation is different. Since everyone seems more into the numbers here, the second reason I'll stick with Dave is because I haven't seen too many investments making 8% right now. With retirement accounts that have had a -9% return over the past 2 years, I'd much rather invest any extra I have in owning my house sooner. I’m going to stick with Dave for two reasons.

When my mortgage is paid off the house is mine and the bank can’t come take it. While several people have mentioned that the bank would rather invest in a 6% return guaranteed by your house instead of the 8% return used as the investment comparison, the risk of being on the other side of that 30 year mortgage is not even considered. Calculate for risk, and the equation is different.

Since everyone seems more into the numbers here, the second reason I’ll stick with Dave is because I haven’t seen too many investments making 8% right now. With retirement accounts that have had a -9% return over the past 2 years, I’d much rather invest any extra I have in owning my house sooner.

]]> By: ExamineEveryViewpoint http://allfinancialmatters.com/2007/03/08/a-follow-up-to-the-dave-ramsey-mortgage-post-this-is-interesting/comment-page-1/#comment-256892 ExamineEveryViewpoint Fri, 21 Mar 2008 02:54:33 +0000 http://allfinancialmatters.com/?p=1642#comment-256892 @ post #8 Borrowing at 6% and earning 8%, you are making a 33.33% gross rate of return, not 2%. This is how banks make money. Man A deposits a dollar into his savings and the bank pays him 3%. Then the bank loans Man A's dollar to Man B for a car at 6%. How much did the bank make? It's not 3%, it's 100%, think about it. @ post 19 I like your thinking, but be careful not to think 401(k)'s grow tax free. They grow tax deferred. Any perceived tax savings today will be due later. @ post #8

Borrowing at 6% and earning 8%, you are making a 33.33% gross rate of return, not 2%. This is how banks make money. Man A deposits a dollar into his savings and the bank pays him 3%. Then the bank loans Man A’s dollar to Man B for a car at 6%. How much did the bank make? It’s not 3%, it’s 100%, think about it.

@ post 19

I like your thinking, but be careful not to think 401(k)’s grow tax free. They grow tax deferred. Any perceived tax savings today will be due later.

]]> By: Steve http://allfinancialmatters.com/2007/03/08/a-follow-up-to-the-dave-ramsey-mortgage-post-this-is-interesting/comment-page-1/#comment-228566 Steve Thu, 07 Feb 2008 09:50:38 +0000 http://allfinancialmatters.com/?p=1642#comment-228566 @43 - the OP did account for the money being put into investments afte the mortgage is paid. The problem is that the time value of money is lost when it is put into a home rather than an investment. When someone invests earlier, the time for compounding puts that money in the lead every time. And he did this for a 15 year being paid in 4 years, so you need to pay it off VERY quickly to come out ahead of the 30 year investor (It would be interesting to know what the break-even point would be.) An earlier poster asked "would you borrow against a paid for home to invest?" Well, that depends. If I was 30 years old with a solid career and didn't plan to move, then the answer is a resounding yes! I have time on my side, and I can afford to take the ups and downs of the market to make my overall return. If I were 60, then my time horizon is shortened and the proposition becomes much riskier. When short time lines are considered, then the 15 year mortgage makes sense. For example, if you plan to leave your house in 2 or 3 years, then getting the 15 year makes sense for the short term. You pay down the principle faster and have a guaranteed rate, whereas the market could take a downturn for 3 years and result in a loss. Go past 10 or 15 years, and your risk in investing becomes mitigated. For any long term stay in a home (which only makes sense if you are going to pay it off), then going with a 30 year loan and investing the difference makes sense, especially if the difference falls within the range of contributing to an IRA, which also has a tax advantage on the investment returns. @43 – the OP did account for the money being put into investments afte the mortgage is paid. The problem is that the time value of money is lost when it is put into a home rather than an investment. When someone invests earlier, the time for compounding puts that money in the lead every time. And he did this for a 15 year being paid in 4 years, so you need to pay it off VERY quickly to come out ahead of the 30 year investor (It would be interesting to know what the break-even point would be.)

An earlier poster asked “would you borrow against a paid for home to invest?” Well, that depends. If I was 30 years old with a solid career and didn’t plan to move, then the answer is a resounding yes! I have time on my side, and I can afford to take the ups and downs of the market to make my overall return. If I were 60, then my time horizon is shortened and the proposition becomes much riskier.

When short time lines are considered, then the 15 year mortgage makes sense. For example, if you plan to leave your house in 2 or 3 years, then getting the 15 year makes sense for the short term. You pay down the principle faster and have a guaranteed rate, whereas the market could take a downturn for 3 years and result in a loss. Go past 10 or 15 years, and your risk in investing becomes mitigated. For any long term stay in a home (which only makes sense if you are going to pay it off), then going with a 30 year loan and investing the difference makes sense, especially if the difference falls within the range of contributing to an IRA, which also has a tax advantage on the investment returns.

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