Richard Wakeman wrote:

- quote -

If I was in your shoes I personally would finish paying off the
existing mortgage, and then use the extra monthly cash flow from not
having a mortgage payment to do your home improvement projects one at a
time and/or help the kids with college.

If you take out a $100K 30 year loan you will be spending around
$5000-6000 a year on interest each year for the next few years (it will
slowly decline after that). That $5000-$6000 a year is money you could
be spending on something else, like more home improvements and/or your
children's college.

You don't have to do all your projects at once, and by spreading them
out over a few years you will save yourselves tens of thousands of
dollars in interest expense.

Andy

My thanks to all you guys who responded to my positing about a Home
Improvement Load, etc...

Great advice and some food for thought. I'm thinking now that if I proceed
with the loan, it would be for just the home improvements and not the other
items which depreciate fast - like cars, furniture, etc. Or I may just get
a short term loan for those items alone.

To answer the questions from Andy, I am 59 years old. I don't have really
anything actually saved for retirement, except I will have a retirement from
the State of California which will be about 1500+ a month depending on how
much longer I continue to work, and then Social Security which will
(hopefully) also kick in in about 7-8 years. Plus my wife will have
same-ish. So together, we'll be all right. But neither of us want to keep
our home when we actually do retire, as it is a lot of work and upkeep, and
we can do better with something smaller. Yes, we will have kids college age
soon. I have no plans for that. We will help them all we can. They'll
have to put themselves through school, which is what I did, over a period of
time.

Anyway, the way I look at it is, if I were to refinance our home and add
enough to fix it up, and make it a 30 year loan, I have no intention of
actually staying in the home for 30 years to pay it off. It is our plan to
sell it within 10 years. Our financial situation would be no different if
we were to sell the house now and then buy another house of equal size and
in good condition with no fix up needed. In today's market that would be
about 450,000 to 500,000, and we'd be financing about half of that for 30
years and we'd be in same boat, more or less, if we just got the home
improvement loan for our current house and fixed it up.

And so on.....

Again, thanks for all the responses!!


Richard Wakeman




"Richard Wakeman" <jrw16[at]adelphia.net> wrote in message
news:nNednfaYxt6o_NTfRVn-gg[at]adelphia.com...
- quote -

So now you are telling me that if two different families both had $400,000
to buy a house. One family put down $400,000 to purchase a home out right,
so that they could invest $2400 monthly (a typical payment if you were to
finance)and the other family financed the home with a retirement loan
which takes 20% down ($80,000). Now their payment is $1200 month so they
invested $320,000 and will plan to invest $1000 month because they were
able to free up this amount using this special loan program (which is
available). Which family would have the higher assets and be the most
liquidable? Family #2 by a very huge margin!

In article
<40c6cc2e8e7ff4b0b0da612210b4243e[at]localhost.talkaboutinvestments.com> ,
"wyser6" <wyser_6[at]hotmail.com> wrote:

- quote -

There is no greater rate of return than the peace of mind that
you have living in a paid for house and knowing that no matter
what happens, no one can take it away from you.

I am also amused at how all of your solutions involved paying
huge fees and outrageous amounts of interest to people in the
mortgage business. That is like listening to a used car dealer
tell you that a car is in real cream puff condition. You know
by default that you cannot trust the information.

-john-

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

wyser6 <wyser_6[at]hotmail.com> wrote:

- quote -

I don't exactly agree with you, but I do question doing this "pay down
the house and treat it as a fixed return" idea. Of course, it depends
on the specific situation at hand, but suppose (1) you're saving
enough for retirement and have enough insurance/whatever for
unexpected situations; (2) you have enough disposable income to lead a
comfortable life; (3) you have additional income to make loan payments
but can't afford to obtain whatever it is you want outright; and (4)
your situation is quite secure (in terms of income, property
appreciation, etc.). Why not use the extra money to live it up? You
could die tomorrow.

The reason I don't entirely agree is that I'm really against the
concept of debt (even secured debt). I'm more comfortable thinking
paying cash down is the way to go for everything, even buying a house
(i.e., don't buy a house if you can't pay for it entirely--not that
this is a logical argument; it's a psychological feeling that I
have). I'm also not happy with materialism in general but that's
another issue. But I'm quite convinced that that's not the best advice
to give or follow.

The issue is particularly relevant when you're younger. I believe
saving to death is not a good philosophy either; it seems the
motivation of why we're here gets lost (both ways).

I struggle with this quite a bit philosophically (my wife makes the
real decisions . So my general rule of thumb is that you should use
equity to take on debt in a manner that your net worth generally
rises. Even if it's slow, it's okay--at the end of the thirty years,
you'll have paid it off.

Besides, interest rates are so slow that it seems locking in a long
term rate now seems like a good idea: I don't expect rates to be low
like this again for a very very long time. Just my gamble.

--Ram

wyser6 wrote:
- quote -

Its silly to assert that equity in a house gives you no type of return.
At the very least, a mortgage-free house gives you the equivalent of
whatever fair market rent is for a similar house in your area. Another
way to look at it is that a paid-off house gives you a return equal to
the interest you would be paying on a mortgage.

Before my wife and I paid off our house we were spending thousands on
mortgage interest every year. We now invest those same thousands
instead of paying them to a bank.

Andy

Richard Wakeman wrote:

- quote -

How old are you, how much have you saved for retirement, how much will
you need in retirement, and how much do you need to save each year to
meet your retirement savings goals? Do you have any kids who will be
going to college? What is the plan for paying for that?

My point is that no one can advise you on whether or not to take out a
huge home improvement loan until they know what your overall financial
situation is. If your retirement savings and college savings are on
track, and will continue to be on track if you take out this home
improvement loan, then knock yourself out and have fun. If taking out
this huge loan will mean spending your retirement in a junky trailer
court living in a trailer built in 1953 (don't laugh; there are plenty
of these here in Arizona), then I personally wouldn't do it.

Andy

"wyser6" <wyser_6[at]hotmail.com> wrote in message
news:40c6cc2e8e7ff4b0b0da612210b4243e[at]localhost.talkaboutinvestments.com...
- quote -

Really? Say your mortgage payment had been $1000 per month and now you don't
have a mortgage payment. In terms of disposable income, that's an extra
$1000 per month. Didn't your house give you that $1000?

Elizabeth Richardson
who doesn't have a mortgage (Yea!!!)

In article
<40c6cc2e8e7ff4b0b0da612210b4243e[at]localhost.talkaboutinvestments.com> ,
wyser_6[at]hotmail.com says...
- quote -

Uh....however......

Paying off your home is the same as investing money in a fixed income
instrument. Fixed income assets with minimal risk pay in the 3-4% range
nowadays, and they're taxable.

Paying down your home is the same as investing in a fixed income
instrument, and getting the mortgage instrest rate. So, if I'm mortgaged
at 5.75%, I'm investing at 5.75%, ***tax free***. That can up your
effective ROR to 7% in some cases. That's pretty damn good.

Of course, if you're getting a bennie from your mortgage insurance
because it kicks you over the standard deduction, that has to be
deducted from the effective intrest rate you're getting from the payoff.


- quote -

Hm. Investing with borrowed money.......

Mike

In my professional opinion being in the mortgage business I feel paying off
any home is the worst thing any person can do. The reason for this is
because equity in a house gives you no type of return....it just sits
there. If you were take your equity and use part of it to fix up your
house and use the other part to invest, over time your investments will
pay for improvements. If you wanted to take the investment path one step
further you can restructure you current mortgage after taking out some
equity and obtain a Retirement Loan. A Retirement Loan will allow you to
lower your payment or keep it close to what you currently pay (even after
you cash out), and give you an opportunity to reallocate some of your
mortgage payment towards an investment account.

In article <nNednfaYxt6o_NTfRVn-gg[at]adelphia.com> ,
"Richard Wakeman" <jrw16[at]adelphia.net> wrote:

- quote -

I wouldn't get a home equity loan. They normally have a variable
rate, and rates are going up fast. You might end up with a
payment far larger than you figured.

What you really want is a new 1st mortgage at a fixed rate. What
you can do is apply for a new mortgage, and use some of the funds
to pay off your existing 1st mortgage in order to let the new loan
be in 1st position. That will get you the best rates.

Also, you want to keep the term short. It makes no sense to
finance a car, an item that falls apart after just a few years,
with a 30 year loan. Take a 10 year loan at the max. If the
payments are too high, that is your clue to spend less. And
think about getting some good used cars...why not let someone
else take the beating on depreciation?

-john-

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

if you would live in the house for 5 years, only finance things which
will be in good shape 5 years from now.

Carpet may wear and tear in the next 5 years- don't finance it, pay
cash
Counter tops would be in good shape after 5 years, OK to finance, but
30 years? did you calculate total interest paid relative to costs of
counter tops?
paint will need to be redone in 5 years- do not finance
new floors should last 5+ years, OK to finance, but again 30 years
appears steep.

Richard Wakeman wrote:
- quote -

Sounds like a plan..................
Cal

I would only finance with the home the home improvements. If you are not
going to be in the house for 30 years, don't finance it that long.

For an auto, look at the 0 percentage deals.

For furniture, if you are going to move to a mobile home, will it make
sense?

"Richard Wakeman" <jrw16[at]adelphia.net> wrote in message
news:nNednfaYxt6o_NTfRVn-gg[at]adelphia.com...
- quote -

Hi,
I'm really dumb when it comes to financial planning. So don't laugh at my
question!

We have a home that has quite a bit of equity in it and is nearly paid off.
However, it needs a lot of work, like new carpets, floors, painting inside
and out, new roof, fence, etc. Also, we need new furniture and a couple of
new vehicles. We have adequte income but not abundant.

My question is, does it make any sense to say get a large home improvement
loan of about $150,000 and finance it for 30 years? I've figured roughly
the montly payment (with changing interest rates, I realize), which would
not be much more than we are already paying monthly. The difference there
is that we will have the house paid off in 5 years if we continue as we are
now, as opposed to another 30 years. Of course, we probably wouldn't
actually do that for 30 years and would sell the house long before that and
retire to a mobile in Arizona or something. Butl, at least the house would
be fixed up and be more sellabel? Anyway, is this really a good idea? Is
it also a good idea to include buying vehicles and furniture with a home
improvement loan too?

Thanks!


Richard