Regarding the tax incentive for taking a low, it can make a big difference if it knocks you to a lower tax bracket....I think the deduction applies to that...not sure. And the arguement that loans lessen your ability to handle emergencies doesn't make sense. If you have $500k and purchase a $400k home with cash, you have $100k available for investments and expenses. If you were to get a mortgage for the $400k home, you now have $500k for investments and expenses.
I'm with you on this and i'm pretty sure this should go into d&d. Since we're talking about martin, then i guess its appropiate. Before i ever read dave ramsey, my dad has always run our household this way. This is also the way i run my household. If you cant buy it in cash now, then you cant afford it. The money people spend on non neccessity bills greatly reduce their ability to invest. I can take the house thats paid for and instead of paying a mortgage, i can use that money to invest if i so choose. If the house the couple purchased is meant to be the house you raise your family and grow old in, at some point the value is going to go back up and stabilize. Just like my cousin and the lotto, the only thing she has to do is pay taxes on the house. Her great grandkids can have the house in the future or when she gets old and wants to sell, she can do that too. JepordE, i really disagree with your take on how rich people and poor people think or act. I know some rich or well off people and they dont have a bill except for the basic bills. They have the life,health,utilities,no car or house payments and invest. When i say rich, they're loaded too. I'm well off, but these people are self made and they talk about having cash on hand at all times.
If u have 500k, you shouldnt buy a 400k home anyway. If 40% of your net is going out,you're closer to bankruptcy than the golden trails of success. If u have 500k, whats wrong with a 175k house and invest the 325k?
Leeb, I find it very hard to believe that you are struggling with the concept of using OPM as a source. It is what almost everyone that has money does. DD
It's not a black-and-white statement ... perhaps I should have phrased it differently. My implication is not that "to get rich, you have to be able to leverage debt". My point is that there is a difference in mentality between someone who is deep in the hole and trying to balance paying monthly bills and getting back to solvency, and someone like Kevin Martin who is highly liquid and can afford to make such decisions as whether to spend a significant amount of cash buying a mansion outright or try to leverage a mortgage contract into a money-making opportunity. The bottom line is that when you're rich, you try to make your money work for you to create more money instead of just blindly allocating expenses. In this case the opportunity cost of money spent paying for the house cash down is the expected investment return on that money, and it would be foolish to ignore it.
You said it right, almost. I find it easy to use straight cash to do what i need to do because i dont have money going out. The trucks were straight cash and if i buy more, they will be done the same way. With a pile of cash, the bank if i needed would finance me for multiple $120 trucks. I'm good, its just not the way i function. I don't need or want the low interest rate.
The right thing to do is pay the money if you have it. He has no excuse to not pay this loan off. There is some tax benefits to having the loan, but he should have just paid cash and been done with it. Be the way, most of the banks have paid back the money they got so that they won't have to deal with Obama and group of control freaks.
the moment i saw money owed and value of property so disproportionate, it became obvious what he's doing. When you earn $10m a year, the effect on your credit rating is pretty much "lol" since anyone who earns that much will do the same thing and anyone lending to them knows it
I know it's the preseason and some cats are still bored (I'm not!), but how on earth is this worthy of several pages of posts? Heck, in my opinion, it should be moved to Hangout, where folks can discuss mortgages and the price of housing.
Why? do you think a bank wouldn't default on money owed to you if it could save 800k by doing so? Do you enjoy playing games where your opponent gets to play by friendlier rules than you?
Martin is not "exercising his contractual rights." He's playing chicken with the lender who now has a lien on a piece of collateral that has been devalued to the point to where it no longer covers the outstanding balance on the note. He is very specifically and conscientiously breaking his contractual obligation to pay when he no doubt has the funds to carry out the obligation he originally agreed upon. Legally though, he can do this by threatening to walk away and let them foreclose, so I guess he is exercising his legal right. I’m curious if Martin’s people will be good enough to negotiate the short sale AND protect his credit score; the lender will have to agree not to ding him. My only issue with all of this is how so many people think this is just “good business.” It seems like it was just one generation ago where so many people talked about all the business deals that were agreed upon with nothing more than a handshake. Granted, I’m starting to get a bit long in the tooth myself, but damn………..where has the honor gone? And I'm certainly not sticking up for mortgage lenders, but like my mom used to say: two wrongs don't make a right. Just seems kind of sad.
I'm assuming the lender is the bank and I'm assuming what Martin wants is that both he as the buyer and the lender (bank) share the cost of devaluation that his property has taken. I don't see how that makes Martin a bad guy.
