John A. Weeks III wrote:

- quote -

So I opened up a spreadsheet and ran the numbers for a 30 year loan.
For a $100,000 loan at 5.79% (the 30 year fixed rate from the Sunday
paper) I would make $7033.44 in payments in the first year, and the
remainder of my mortgage would be $98,723.03. So in the first year, 18%
of my payments went towards equity (more than 3x the amount you
estimated, but possibly still not enough for you). The amount that goes
to equity will increase in subsequent years.

My monthly payment is $586.12 (at 5.79%) vs. 794.44 for the 15 year (at
5.07% 15 year fixed rate quoted in the same paper). If I invest the
difference each month at 8% for thirty years, I end up with $293,429.30
plus a house. If instead I take the 15 year loan and begin to invest
the payment monthly at 8% after I have paid off the house, I end up with
$268,208.00 plus a house after 30 years. This neglects the lower loan
costs associated with the 30 year and the tax advantages of the 30 year.

I like my wealth-building strategy better than yours.

-Will

In article <41D198B7.3050803[at]paragondynamics.com> ,
Will Trice <wwtrice[at]paragondynamics.com> wrote:

- quote -

Open up a spreadsheet and run the numbers for a 30 year loan.
In the first few years, about 95% of each payment goes for
interest, and perhaps 5% goes towards equity. I simply do not
see paying 95% of your house payment to a loan shark as being
a great wealth-building strategy.

-john-

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John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
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John A. Weeks III wrote:
- quote -

Why do you say this? In a low interest rate environment, why not take
the 30 year loan and invest the difference? Or do you find that many
people with this plan end up spending the difference and not investing it?

Thanks,
-Will

In article <1104174372.173512.133290[at]f14g2000cwb.googlegroups.com> ,
"JeffD" <dtjmp3[at]yahoo.com> wrote:

- quote -

With a Roth, you can pull out your contributions without penalty
or taxes at any time. With a tradtional IRA (or in your case,
a rollover IRA), you can avoid the penalty, but not the taxes,
if you use it for a first home, up to something like $10K. But
don't do that. This is retirement money, and you will have to
eat when you are retired, and you cannot eat a house. Unless
you want to fight the alley cats for leftovers, don't raid your
retirement money.

It sounds to me like you are trying to buy more house than
what you can afford. While lenders will let you have sky
high mortgages with nothing down, that doesn't mean that it
is a good idea from a financial stand-point. You should have
a down payment saved up, 20% would be ideal to avoid paying
the high mortgage insurance rates. You should never do more
than a 15 year loan unless you like being a profit center for
the mortgage industry. Finally, I wouldn't suggest buying a
home that costs more than 3 times your annual income unless
you can do it in cash.

- quote -

No. The limit for the year is a limit.

-john-

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John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

I have two questions about planning for this next tax year. I
currently have a Roth IRA to which I contribute the maximum, and would
like to continue at the new maximum for 2005. I also have a state
teacher retirement fund account which I will be rolling over into a
Traditional IRA in June, and *probably* into a Roth after that.
However, I plan to buy a first home in July, and I would like to have
as much of this money as prudent available for a downpayment/closing
costs. I'm 24 years old, single, and have taxable income well below
the phaseout limits.

So, two questions:

1) I have not established either of these accounts for five years. Is
any of the money available for a first home without penalty? What are
the tax implications?

2) Assuming I can withdraw the money, can I count that as a "negative"
contribution, and therefore contribute $4000 *plus* some of the the
withdrawn money for 2005?

Thanks,
Jeff