Let's talk personal debt

[shotty]

Plan A has alot of up side but plan B does as well. How much money is on the note? Let's say 90 K on a 150 k home. So I have 90K at my disposal. I first would have to love the home and location and would have to look at neighborhood. Will your home retain value or are rental properties showing up there. Lot's of ifs, whats, what ifs come into play. I would probably go with B, refi the house at a much lower rate, pull the equity out, combine with 90k, build new home just the way I wanted financed at these low rates with that much down payment would be very low and short term. Rent the other home, with the refinanced rate, rent could double or triple loan payment. 2 morg interest deductions now, 1 earning income and will help pay the new one off. If money gets tight, you can pull equity from the rent home or frome the new home or sell the rent home, lots of options. I just got quoted 2.75% money to cheap not to use.

 

[JB Books]

2.75% money is damn cheap. However, borrowing to invest is typically not a good idea. Do you have a 401k or SEP plan?

 

[AKguy1985]

Debt free is nice.

 

[tntrex]

When you are debt free you will feel a huge weight lifted.

 

[FullAuto]

2.75% money is damn cheap. However, borrowing to invest is typically not a good idea. Do you have a 401k or SEP plan?

Is this to me or shotty? If me, I have a small 401k. It's small because I've only been at my job 2.5 years and was off 7 months of that from an accident. I haven't had much time to contribute. Prior to this job I had nothing. They do match, although a small amount. They match a small amount because I also get a pension. Again, not a great pension, but still...

My wife is the bigger problem. She has a Roth that is currently not receiving any contributions. Her job offers nothing. Combined, we have about 40% of what we should in retirement for our age. The positive is we have 30 years to catch up as along as we start now.

 

[kd5rjz]

With pickups now costing more than the combined total cost of my first two homes here's a very old blurb from Dave Ramsey on how to save money:
http://www.daveramsey.com/media/flash/elearning/drive-free/player.html

THIS is possibly the best piece of advice you will ever see.

I do not understand how people making $25-50K are dumb enough to buy a brand new car! Why would ANYONE buy a car they can't pay cash for???

 

[okiemaggie]

My BFF will lose the home she has paid on for 15 years (half the original note) because she got talked into taking the inflated equity out of the home in 2007. The new loan had a "low introductory rate" that is now expiring. She will begin to default next year because there is no way she can make two mortgage payments every month. Her home is still worth what she PAID for it, but it isn't worth half of what she OWES on it. And that money was long ago spent on this and that. Please do not make this mistake. It's so easy to look at the future with those rose-colored glasses and imagine only the best.

 

[inactive]

I do not understand how people making $25-50K are dumb enough to buy a brand new car! Why would ANYONE buy a car they can't pay cash for???

This. Though I admit, we went against my normal routine and financed my wife's car purchase because it was 0% money I can shuffle and make things work to pay it off cash if need be though.

I would never go out of my way to borrow money against an existing asset for the purpose of investing, but when faced with the choice of handing them a check, or them handing me the keys on a 0% note, I went with letting my money sit to make more. Mathematically it's the same, but yea... some of the markets are really doing well right now (some mainstream mutual funds though Vanguard, T.Rowe Price, and the like have made 30-40% in the last 12 months), and even guaranteed investments earn more than 0%.

I wouldn't pull money out against a house to invest though. Too big an asset and too much uncertainty there.

 

[BadgeBunny]

Maggie is right ... It is so easy to imagine all the good things that will come your way, because that is what you want. Not so easy to imagine the bad ...

 

[JB Books]

Maggie is right about what she posted. I've seen that scenario several times.

Think about this, what good is a fat retirement account if you have a lot of debt? It's like balancing on a razor with venomous snakes on one side and piranhas on the other.....you damn sure better not stumble. The problem is life often makes you stumble. No debt is best. Then what is yours is yours.