If You Had an extra $1000 per month to invest

[71T Targa]

The quick calculator I used says that if you apply an additional $500 payment a month to your current payment, you'll be paid off in 15 years, with a savings of $120,662. Use the entire $1000 a month, and your done in 10 years, and have saved $151,542.

30 year fixed, @6.25%, additional payment starting with payment 12

https://www.thinkbank.com/calculators/calc_mortgage.html

[tc-sacto]

Originally Posted by phred68

The quick calculator I used says that if you apply an additional $500 payment a month to your current payment, you'll be paid off in 15 years, with a savings of $120,662. Use the entire $1000 a month, and your done in 10 years, and have saved $151,542.

30 year fixed, @6.25%, additional payment starting with payment 12

https://www.thinkbank.com/calculators/calc_mortgage.html

Saved $120,00 in interest, but lost out on opportunity of $145,000 gain so you'd have ($25,000) less.
($500 per month at After-tax 6% = $145,000)

I'd say if your within 10years of retirement: pay $1,000 to the Mortgage,
If you've got greater than 10 years to go invest the money.

[turbo6bar]

Originally Posted by tc-sacto

Why would one pay down the mortgage? If he is in the 25% tax bracket, his true cost of interest is 6.25%-25%tax = 4.68%. Certainly you can invest the money at an after-tax rate of greater than that.

The numbers are rarely as simple as you portray. As was pointed out earlier, how much of the mortgage interest deduction is eliminated by the standard deduction? On a $180k mortgage, the yearly interest would be roughly equal to the standard deduction. If Kurt V does not itemize deductions, his tax savings is nil.

Let's propose that Kurt V does get a full deduction on income taxes (total deductions of at least $21K+). A return of 4.68% is essentially a risk-free return, a 10 yr treasury bond. Add the liquidity of a HELOC, and it isn't a horrible investment. Is it the best investment? We lack the information to answer that question.

[tc-sacto]

Originally Posted by turbo6bar

The numbers are rarely as simple as you portray. As was pointed out earlier, how much of the mortgage interest deduction is eliminated by the standard deduction? On a $180k mortgage, the yearly interest would be roughly equal to the standard deduction. If Kurt V does not itemize deductions, his tax savings is nil.

Let's propose that Kurt V does get a full deduction on income taxes (total deductions of at least $21K+). A return of 4.68% is essentially a risk-free return, a 10 yr treasury bond. Add the liquidity of a HELOC, and it isn't a horrible investment. Is it the best investment? We lack the information to answer that question.

Agreed,
That's why I typed in my last post that if you've got 10 yrs or less, pay off the mortgage.
(Usually a smaller mortgae by then, less interest to deduct and less time for the investments to out pace the risk free rate of return after-tax)

Also, I didn't realize Kurt was in Missouri where housing is cheaper and mortgages are typically lower.

[BK911]

I'd invest in real estate. I buy a fixer upper every other year or so. Live in it while I fix it up, then rent it out and buy another one. I usually take a hundred bucks hit per month per house initially, but in a couple of years I break even, then start to make money. But if you consider equity, I probably make about ~$1k per month per house. Sometimes more, sometimes less. My goal is to have enough rental income by the time I am 50 to retire. Sell a house every couple of years after that for spend money.

My point being if you have an extra $1k a month to spend, buy a house and rent it out. It may cost you a couple of hundred out of pocket per month, but you could triple that in equity per month.

[bpoteat]

Originally Posted by BK911

I'd invest in real estate. I buy a fixer upper every other year or so. Live in it while I fix it up, then rent it out and buy another one. I usually take a hundred bucks hit per month per house initially, but in a couple of years I break even, then start to make money. But if you consider equity, I probably make about ~$1k per month per house. Sometimes more, sometimes less. My goal is to have enough rental income by the time I am 50 to retire. Sell a house every couple of years after that for spend money.

My point being if you have an extra $1k a month to spend, buy a house and rent it out. It may cost you a couple of hundred out of pocket per month, but you could triple that in equity per month.

This is exactly what my uncle did, but with government subsidized housing, and he is reaping it in. He still works (and goes in at 6am) because, well, that's just how he his, but he could probably quit if he wanted to. Of course, he is a part owner of the place he works and that's a good bit different than working for someone else.

[notfarnow]

Originally Posted by BK911

I'd invest in real estate. I buy a fixer upper every other year or so. Live in it while I fix it up, then rent it out and buy another one. I usually take a hundred bucks hit per month per house initially, but in a couple of years I break even, then start to make money. But if you consider equity, I probably make about ~$1k per month per house. Sometimes more, sometimes less. My goal is to have enough rental income by the time I am 50 to retire. Sell a house every couple of years after that for spend money.

My point being if you have an extra $1k a month to spend, buy a house and rent it out. It may cost you a couple of hundred out of pocket per month, but you could triple that in equity per month.

hmm

If you're buying property to hang onto & build equity, wouldn't it make sense to buy a 2-3 unit? That way you're not as likely to take a monthly hit?

Once I'm done the major stuff on our house, we're probably going to buy a 2nd house to fix & flip. That or a 2-3 unit to hold onto.

[sammyg2]

Originally Posted by turbo6bar

The numbers are rarely as simple as you portray. As was pointed out earlier, how much of the mortgage interest deduction is eliminated by the standard deduction? On a $180k mortgage, the yearly interest would be roughly equal to the standard deduction. If Kurt V does not itemize deductions, his tax savings is nil.

Let's propose that Kurt V does get a full deduction on income taxes (total deductions of at least $21K+). A return of 4.68% is essentially a risk-free return, a 10 yr treasury bond. Add the liquidity of a HELOC, and it isn't a horrible investment. Is it the best investment? We lack the information to answer that question.

Thanks, now I have a headache. Taxes do that to me.

[Lothar]

Buy gold. Every time the Fed trashes US currency gold takes off. Since the Fed is predisposed to do unspeakable things to the dollar. It seems like a safe bet.

[sammyg2]

looks like drugs and whores is catching up.

[on2wheels52]

Sorry Lothar, I disagree. I buy & sell gold every day and am happy to take my cut as a middleman but I always tell people it's a crummy investment. It's spiking at present but historicaly it loses to inflation.
It's hard to put a value on knowing I'll never make another house payment.
Jim

[Aerkuld]

Two chicks at the same time man.
Chicks dig dudes with money...

[Rot 911]

Wow, you guys have really laid out some great options. Glad I posted this. Of course I voted for drugs and whores in my own poll, but I suspect the wife will nix that idea.

Right now I am maxing out on the IRA's, we invest in deferred compensation, have funded the daughter's college fund and we own 2 rental properties (that I think we will sell as I hate being a landlord).

How is this for a crazy idea: the house we bought is old, built in 1926 and our garage is the old carriage house. Barely big enough to fit the two cars. I could build my dream garage for about $50K. I know I won't get that much out of it if we ever sell the house (which should be never), but I can't think of anything that would give me more pleasure than this garage I have been dreaming about. Is that being too irresponsible?

[Flatbutt1]

Originally Posted by Capt. Carrera

I'd freakin' retire....

+1 freakin' hundred

[lookin]

1. Get a financial adviser
2. Divide my mortgage payment in half and pay twice a month. (lowers the overall interest paid)
3. Invest 900/month
4. Spend 100/month on the wife and I as a treat. With every win we get a little treat and invest the balance.
5. Pay off all outstanding credit cards first and foremost.
6. Do not carry a credit card balance.
7. Read "the richest man in babylon"
8. hookers and blow (hmmmmm)

[futuresoptions]

Silly rabbits tricks are for kids ! and Hookers!


Put your $ into short term CD'S... Reinvest them as they mature and continue to buy them every month while the others are maturing. Continue this process as long as you have the extra thousand a month. When you reach a certain amount, purchase rural farm land. Continue to purchase the CD's, On your new farm land begin growing corn. Sell the corn. Buy more CD's with the money. Then buy more land. Plant more corn etc... repeat until you get board and then subdivide the land and you will have enough for Hookers and Blow, could last a lifetime rather than one weekend a month....

[notfarnow]

plastics