Expenses on Rise, Homeowner Burdens Get Heavier

Reuters ^ | 05-06-03

[GovernmentShrinker]

I have a $700k home and a $200k condo with no mortgages, $$60k in the bank, and no debt of any kind,why would I "refinance"?

Not everyone has a home loan. What then?

Then you take out a mortgage. With interest rates at historic lows, you'd be crazy not to. The tax deductibility of mortgage interest makes for a tidy little arbitrage, and if you lock in these low rates it'll make for a big fat arbitrage as soon as rates move up a little.

Take out 80% of the value of your home, put the proceeds in something supersafe (think one year CDs if you don't need current income, spread out between banks if necessary, so as not to be over the $100,000 FDIC/FSLIC insurance limit at any one bank; if you do need the current income to pay the mortgage, then very high quality investment grade bond mutual funds), pay the mortgage which will be covered by your interest income, take the tax deduction, and enjoy the difference which will become huge in the next 2-3 years. At any time, you can pay off the mortgage with the capital you put in the CDs or bond funds, but unless there are some huge changes in the tax laws, it'll never make sense to pay it off.

Don't delay. I just refinanced my 2 homes yesterday at 5% and 4 7/8% (15 year mortgages). These rates won't last.

[GovernmentShrinker]

Nobody said anything about spending it -- just invest the cash that's pulled out, and take advantage of the tax deduction, to enjoy a tidy profit.

[Chewbacca]

What happens if the US$ was to collapse and all your bonds and CDs became worthless?

The best bet would be to put your cash into physical gold.

If you had done this three years ago you would have retained your wealth while the US dollar devalued 25%.

If you had put your money into bonds you would have gotten a negative return on investment. The inflation rate is well over 5% and bonds are providing an interest return of less than 2%. You would be losing money.

[Chewbacca]

Also the Bible advises against getting yourself into debt.

To be in debt to a bank by having a mortgage is to be a slave to the banker.

I am a Sovereign individual. A free man.
I have no debts, and am indebted to nobody and I shall remain that way!


"God, gold, guns."

[hsmomx3]

"I'm almost afraid we'll be taxed-and-insured out of it"

I believe this to be true in the not too distant future. Also, when I hear about all of the jobs that are going overseas or being eliminated, what are people left with? Two people working minimum wage just will not pay the mortgage, car, etc. each month.

[razorback-bert]

I noticed the sore on my butt had gone away.

What did he get banned for?

[dalereed]

I've never borrowed a cent for personal consumption or use except for a mortgage in my 65 years and never will, that's the way I was raised and it has served me well.

If you haven't got the money to pay for it, you don't need it.

[DensaMensa]

}If you haven't got the money to pay for it, you don't need it.

Amen, and Amen! I built a multi-million dollar business and only borrowed money (and left it in the bank) to establish a healthy line of credit for ease of business transactions. Paid cash (check) for everything. CIJ (cash in jeans) is king!