![[original_title]](https://rawnews.com/wp-content/uploads/2024/09/Loan-or-cash-Bogleheadsorg.jpg)
Have a query about your private investments? Irrespective of how easy or advanced, you’ll be able to ask it right here.
Loan or cash
I do know there aren’t any ensures in life, however I consider the mathematics assuming averages, does assist this concept and was questioning about totally different views.
For example:
300k mortgage @7% for 30 years = $718,000
300k funding @7% for 30 years is $2,228,677
You’d be higher off taking the mortgage and Investing the money you’ve got. The distinction in these {dollars} is predicated on the amortization of the mortgage, and the compounding of the 300k funding.
Re: Loan or cash
Bigbmn wrote: ↑Solar Sep 01, 2024 8:40 am
I used to be discussing with a number of mates, and had watched a video of a contrarian advise. Take out a mortgage when buying a house, even in the event you can afford paying in money.I do know there aren’t any ensures in life, however I consider the mathematics assuming averages, does assist this concept and was questioning about totally different views.
For example:
300k mortgage @7% for 30 years = $718,000
300k funding @7% for 30 years is $2,228,677You’d be higher off taking the mortgage and Investing the money you’ve got. The distinction in these {dollars} is predicated on the amortization of the mortgage, and the compounding of the 300k funding.
The mortgage steadiness is reducing over time, whereas the funding steadiness is growing over time. That’s, the 2 steadiness curves diverge on the very starting itself, one going southwest and the opposite going northeast. This isn’t a good comparability.
There may be additionally the danger you identified, that the 7% just isn’t assured return however is a assured legal responsibility by way of the 30 years.
- Posts: 20832
- Joined: Sat Nov 26, 2016 5:32 pm
- Location: Hawaii No Ka Oi – white sandy seashores, N. Arizona 1 mile excessive.
Re: Loan or cash
Bigbmn wrote: ↑Solar Sep 01, 2024 8:40 am
I used to be discussing with a number of mates, and had watched a video of a contrarian advise. Take out a mortgage when buying a house, even in the event you can afford paying in money.I do know there aren’t any ensures in life, however I consider the mathematics assuming averages, does assist this concept and was questioning about totally different views.
For example:
300k mortgage @7% for 30 years = $718,000
300k funding @7% for 30 years is $2,228,677You’d be higher off taking the mortgage and Investing the money you’ve got. The distinction in these {dollars} is predicated on the amortization of the mortgage, and the compounding of the 300k funding.
to op:
1
What number of have the choice to pay 718k in money for a house with out adverse impact of their retirement glide path, or over all financials?
2
Given inflation, charges, taxes, SORR, and so forth, how assured is the 7 p.c funding return?
3
What number of have the choice to do each, mortgage mortgage for a 718k house, …and…make investments 300k (all of sudden or incrementally) in order that each segue earlier than or throughout a retirement transition?
j
Bogleheads Wiki: The whole lot You Have to Know- Posts: 585
- Joined: Mon Dec 14, 2015 4:59 pm
Re: Loan or cash
It took me in a single day to understand that in his numbers, the cash wanted to pay the mortgage was not being faraway from the financial savings account.
In your numbers, the place do the funds to pay the mortgage come from?
- Posts: 4240
- Joined: Fri Jan 29, 2016 11:40 am
Re: Loan or cash
In any case I do not disagree with the idea, I simply do not assume it is all that good with 7% mortgage charges and a watered-down curiosity deduction (given SALT limits). At 2.5-4% charges pre-2022 completely I am on board.
- Posts: 6111
- Joined: Wed Oct 08, 2014 7:27 pm
Re: Loan or cash
Bigbmn wrote: ↑Solar Sep 01, 2024 8:40 am
For example:
300k mortgage @7% for 30 years = $718,000
300k funding @7% for 30 years is $2,228,677You’d be higher off taking the mortgage and Investing the money you’ve got. The distinction in these {dollars} is predicated on the amortization of the mortgage, and the compounding of the 300k funding.
I agree with the above posters that this isn’t a good comparability.
When you pay money for the home, you may have about $2,000/month additional money move. Investing that additional money for 30 years @ 7% = ~ $2.4M.
Re: Loan or cash
Money
Be Accomplished
“One doesn’t accumulate however eradicate. It isn’t each day improve however each day lower. The peak of cultivation all the time runs to simplicity” –Bruce Lee
-
- Posts: 13643
- Joined: Thu Jan 21, 2016 10:11 pm
- Location: outdoors the echo chamber
Re: Loan or cash
That mentioned, I am nonetheless taking a mortgage. Not from a financial institution although.
Tax is a everlasting loss. One purpose I take advantage of loans after I purchase issues is that I do not wish to pay capital good points tax. I do not preserve vital money, as a result of that may be even worse from a tax viewpoint. Actually not sufficient to purchase a automotive or a home. If I wanted to give you 300k subsequent week, I’d use a brief box-spread after which begin accumulating money to cowl choices settlement, then roll something that’s left into one other brief box-spread. The brief box-spread would additionally generate a capital loss that I can use to offset capital good points or deduct regular revenue at 3k per yr.
