Money Market Accounts

[Baja28]

It can be. The money I could have used to pay off my home has made me MUCH more than the interest I've paid to borrow it. Go try to get a business loan and you'll see what I am talking about. The last building I bought the rates were in the 4% range, twice the rate a HELOC was.

I have a LOT of monthly bills but having those bills allow me to have a LOT, LOT of monthly profits. Heck, I even leave $20 for the tooth fairy (sorry, carryover from another thread). Would it be nice to be debt free? Sure!! However, I wouldn't have ever started some of these businesses if I waited until I saved enough to be able to do it out of pocket. Debt can be a good thing, a GREAT thing!!

Lot being subjective of course, what is a lot to me may not be a lot to you.

Please explain further. I'm not getting your point.

If I understand correctly, you maintain a 30 yr note on your house. You get a business loan at twice the rate of a HELOC. So now you have payments to both the HELOC and your mortgage.

I on the other hand have a $225K HELOC at half your rate AND I am putting away $18K per year ($1,500.00/mth x 12 mths mortgage pmt I no longer have).

Splain your logic again Lucy because I just don't get it.

 

[Dakota]

It can be. The money I could have used to pay off my home has made me MUCH more than the interest I've paid to borrow it. Go try to get a business loan and you'll see what I am talking about. The last building I bought the rates were in the 4% range, twice the rate a HELOC was.

I have a LOT of monthly bills but having those bills allow me to have a LOT, LOT of monthly profits. Heck, I even leave $20 for the tooth fairy (sorry, carryover from another thread). Would it be nice to be debt free? Sure!! However, I wouldn't have ever started some of these businesses if I waited until I saved enough to be able to do it out of pocket. Debt can be a good thing, a GREAT thing!!

Lot being subjective of course, what is a lot to me may not be a lot to you.

That is a little different... you are thinking wisely on 1 hand but also taking a big risk on the other. What I'm talking about is the many who just borrow on their house for toys and trips they cannot afford otherwise & that is why the market looks the way it does... why money is cheap to borrow at this point in time and why savers are not earning a darn thing at the moment.

I'm in the mindset that a house is a place to live, nothing more, nothing less. It is not something I want to use in my situation working for the man. So to me, it is not an object of wealth. Now if I had to borrow against the value to start up a business that might in turn make me more $ at a lessor interest rate than a HELOC, perhaps I would have done that.

But in general... for most... it is best to get that sucker paid off when you can.

I have a local bank and a credit union... I'm not looking to get rid of either... I am just looking to move some of those funds into something I can still get if needed and make a little extra in interest than what I'm currently earning. And I'm not going to hold my breath that interest rates are going to increase on savings type accounts anytime soon.

 

[abcxyz]

Please explain further. I'm not getting your point.

If I understand correctly, you maintain a 30 yr note on your house. You get a business loan at twice the rate of a HELOC. So now you have payments to both the HELOC and your mortgage.

I on the other hand have a $225K HELOC at half your rate AND I am putting away $18K per year ($1,500.00/mth x 12 mths mortgage pmt I no longer have).

Splain your logic again Lucy because I just don't get it.

I see how my post was very confusing (even to me after reading it again), sorry about that.

My whole point (before I miffed it up) is that if the cheapest credit a person has access to is always going to be their primary residence. Let that money work for you instead of sitting there in boards and nails.

Off on a side point:

September 21, 2012 September 20, 2013:
DJIA 13.87%
S&P500 17.22%
NASDAQ 18.83%

So say your house is worth $320K (average cost of home in MD in 2012). If you made the average of the 3 markets listed above that would be 16.64% or $53,248. $320K loan at 5% is going to run around $2K a month or $24K. So paying your house off just cost you almost $30K in one year ($53K-$24K). Yea, yea- some will say stock market took a big bounce and so on and they would be right but the writing has been on the wall that it was going to do that. There is ALWAYS some thing out there making money; real estate, gold, stock markets, etc. That $18K a year you are saving? Yea, you could be making about $25k profit on that a year AFTER paying that $18K a year back to the bank on it. That is okay though, I prefer not every one to think like I do because then supply and demand comes in to play. Banks make money cheap to entice borrowing so if everyone is borrowing then rates go up and I won't be making as much as I am now.

Baja's Gold Buying has a good ring to it. Do the math on the profits they are making!!!

 

[Baja28]

Forgive me for being slow but I'm still confused...

I see how my post was very confusing (even to me after reading it again), sorry about that.

My whole point (before I miffed it up) is that if the cheapest credit a person has access to is always going to be their primary residence. Let that money work for you instead of sitting there in boards and nails.

Off on a side point:

September 21, 2012 September 20, 2013:
DJIA 13.87%
S&P500 17.22%
NASDAQ 18.83%

So say your house is worth $320K (average cost of home in MD in 2012). If you made the average of the 3 markets listed above that would be 16.64% or $53,248. What do you mean "made"? Are you saying if I invested $320K in the stock market and earned the avg., I'd make the $53K? If so, where did I get the $320K to invest?

$320K loan at 5% is going to run around $2K a month or $24K. And?

So paying your house off just cost you almost $30K in one year ($53K-$24K). How did paying off my house cost me $30K??

That $18K a year you are saving? Yea, you could be making about $25k profit on that a year AFTER paying that $18K a year back to the bank on it. Please explain this.

Baja's Gold Buying has a good ring to it. Do the math on the profits they are making!!! Gold has peaked. Prices are dropping.

 

[abcxyz]

I'm not quite sure how else to explain it. If you make more money on money than it cost you to use that money, you make a profit.

I used $320K since that is the average home price in Maryland. Input the actual value of your house instead of $320K. Your house is paid off, a bank will let you refi your home for money, you take that money ($320K in my example) and invest it. That is where you got the money from.

The bank is going to make you pay them that $320K back in monthly installments which will be about $2K a month, equaling $24K a year paid back to them.

The difference between what your investment pays you ($53K) and the payments you make to the bank ($24K) are your profits (~$30K in my example).

 

[Baja28]

I'm not quite sure how else to explain it. If you make more money on money than it cost you to use that money, you make a profit.

I used $320K since that is the average home price in Maryland. Input the actual value of your house instead of $320K. Your house is paid off, a bank will let you refi your home for money, you take that money ($320K in my example) and invest it. That is where you got the money from.

The bank is going to make you pay them that $320K back in monthly installments which will be about $2K a month, equaling $24K a year paid back to them.

The difference between what your investment pays you ($53K) and the payments you make to the bank ($24K) are your profits (~$30K in my example).

Ok that makes sense but I still fail to see how paying off my house costs me money.

With a paid off home, I am able to get 80% of the value via a HELOC to re-invest (if I desire).

That is quite risky since the market is very unpredictable and is due for another downturn. I'm hearing some analysts saying it's going to drop to 5000 one day.

 

[czygvtwkr]

I'm not quite sure how else to explain it. If you make more money on money than it cost you to use that money, you make a profit.

I used $320K since that is the average home price in Maryland. Input the actual value of your house instead of $320K. Your house is paid off, a bank will let you refi your home for money, you take that money ($320K in my example) and invest it. That is where you got the money from.

The bank is going to make you pay them that $320K back in monthly installments which will be about $2K a month, equaling $24K a year paid back to them.

The difference between what your investment pays you ($53K) and the payments you make to the bank ($24K) are your profits (~$30K in my example).

The questions lie in what sort of investments are those, how risky are they, and what if they no longer pay you that?

The banks make money by borrowing it from someone (you the Fed etc) paying an interest rate, then in turn taking this money and loaning it out and charging that interest rate they are paying plus whatever else they want to tack on. Back in 2008 the banks investments no longer were paying them enough to pay their bills and BOOOM

 

[abcxyz]

Ok that makes sense but I still fail to see how paying off my house costs me money.

With a paid off home, I am able to get 80% of the value via a HELOC to re-invest (if I desire).

That is quite risky since the market is very unpredictable and is due for another downturn. I'm hearing some analysts saying it's going to drop to 5000 one day.

Maybe it doesn't cost you money, lost opportunity may be a better way to say it.

The questions lie in what sort of investments are those, how risky are they, and what if they no longer pay you that?

The banks make money by borrowing it from someone (you the Fed etc) paying an interest rate, then in turn taking this money and loaning it out and charging that interest rate they are paying plus whatever else they want to tack on. Back in 2008 the banks investments no longer were paying them enough to pay their bills and BOOOM

That is why I stuck with averages in my example. If you have $320K invested, you know what to get in to and get out of. Pigs get fat, hogs get slaughtered. Gold until the election (people scared of real estate needed a place to park money until Obama was elected again), stocks this year (with a side of firearms- big pensions were prodded by liberals to get out of investing in guns so stock prices dropped even with firearm sales going through the roof), getting out of those in to commercial real estate now. Lack of building and low rates makes for some good values out there.

All these trends are easy to spot. See how high the stock market is? Now is not the time to get in it. Real Estate, only the stupid didn't see that house of cards crumbling a mile away. Thing is most don't know is there was more money made on the crash than the way up!!

 

[ProfMoneyWise]

Risk and taxes negate the attractiveness of this tactic for me.

I'll take owning where I sleep and before the usual chirping that due to taxes and insurance no one really owns their home I'll pre-counter with I like running water, sewer, roads and transferring risk to the insurance company.

 

[czygvtwkr]

Thing is most don't know is there was more money made on the crash than the way up!!

There is money to be made after every crash, yet people will pull their money out of stocks after the crash has already occured every time and will wait until things have shot up to buy, never fails.

I think using your house as a margin account is way to risky and honestly would not feel sorry in the least for anyone who loses their house this way.

 

[GURPS]

It is Sad really, I remember when my Checking Account paid 4%

Savings was 8%

of course interest was 20 some % ... ah the malaise of the Carter Years