Talk of The Villages Florida
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Talk of The Villages Florida (https://www.talkofthevillages.com/forums/)
-   Investment Talk (https://www.talkofthevillages.com/forums/investment-talk-158/)
-   -   Pay cash or keep loan? Sorry, kinda wordy (https://www.talkofthevillages.com/forums/investment-talk-158/pay-cash-keep-loan-sorry-kinda-wordy-351510/)

thelegges 07-19-2024 02:14 PM
OPM (other people’s money) our percentage in investment makes us double and more than any interest rate today.

If you have interest at 2% and investment brings in 9%, is not hard to figure. However some freak out over any loan, worried about what’s can go wrong. So you will find cash poor, but paid debt.

You really need an investment guy to guide you. None of can gage your comfort zone.

Stu from NYC 07-19-2024 03:01 PM
I find it comforting to have no loans. Only exception is remainder of the bond which is at a lower interest rate. However when we add in the service charge to the interest rate at some point figure the bond will be paid off early.

jimbomaybe 07-19-2024 06:28 PM
Quote:
Originally Posted by thelegges (Post 2351185)
OPM (other people’s money) our percentage in investment makes us double and more than any interest rate today.

If you have interest at 2% and investment brings in 9%, is not hard to figure. However some freak out over any loan, worried about what’s can go wrong. So you will find cash poor, but paid debt.

You really need an investment guy to guide you. None of can gage your comfort zone.
I agree totally , when mortgage rates tanked I took a large mortgage rather than paying cash and added the money that was to pay off a housing purchase to the investment plan, investment counselor/ tax planer smiled and nodded, but I am comfortable with that, if a person isn't go another way, your comfort level is very important

Papa_lecki 07-19-2024 06:58 PM
In general, my opinion is don’t go to the internet for financial advice.

manaboutown 07-19-2024 07:30 PM
Leverage (debt) is what got me where I am today. During my twenties, thirties and early forties I bought for no or little down and have since managed several rental income producing properties. Over the years rental income has amortized all but a now relatively insignificant amount of remaining debt in the 3% range. In 2022 and 2023 I sold two significant partnership properties and put 40% of the aftertax proceeds into T bills paying 5%+, the remainder into common stocks and ETFs. That being said leverage works both ways. My working adult life has spanned an extended period of inflation so it worked out in my favor. All my life I have avoided incurring personal debt. I have always paid my credit cards off every month. With a couple exceptions I paid cash for cars throughout my life.

Topspinmo 07-19-2024 07:57 PM
Quote:
Originally Posted by ElDiabloJoe (Post 2351135)
So, I am curious as to the prevailing conventional wisdom. Is it better to pay off a low interest loan or to invest that cash for growth and pay off the loan monthly? The idea being that while the amount is growing at approximately 7% interest (standard over time, S&P assumption) and the loan is at less interest, when the loan is paid off, there is still some cash growth earnings remaining that would not be there had one paid the loan off in cash up front.

Example:

15 year mortgage at 2.5% (fixed) with a balance of $130,000. If one had the payoff amount in cash is it best to pay it off or set $130,000 aside in a stock market index fund that auto pays the note each month?



Example 2:

Auto loan at 5% (fixed) with a balance of $53,000.

Example 3:

Boat loan at 1.75% (fixed) and a balance of $21,000
Well I have no loans and reason I don’t.


I don’t like paying any interest. I rather receive interest. For me if I pay off my loan it’s gone, if I don’t and invest money and lose it now I’m really stuck trying to pay off high interest plus the payment. But, that’s me. They’re no debt like no debt.

CarlR33 07-19-2024 08:14 PM
Quote:
Originally Posted by Topspinmo (Post 2351250)
Well I have no loans and reason I don’t.


I don’t like paying any interest. I rather receive interest. For me if I pay off my loan it’s gone, if I don’t and invest money and lose it now I’m really stuck trying to pay off high interest plus the payment. But, that’s me. They’re no debt like no debt.
Yes, till now no one mentioned the interest paid over the loan on say a 30 year mortgage for example?

thelegges 07-20-2024 04:47 AM
Quote:
Originally Posted by CarlR33 (Post 2351255)
Yes, till now no one mentioned the interest paid over the loan on say a 30 year mortgage for example?
Today’s rates a fair to good investment guy will tell you to take the largest loan. Then 30 days take cash towards principal to basically bring loan down to 7-15 years. Your yearly interest becomes minimal, we have never kept a 30 year mortgage for more than 10 years.

I can’t remember the last time our cars didn’t have zero interest, and never carry balance on CC’s.

jimbomaybe 07-20-2024 06:07 AM
Quote:
Originally Posted by thelegges (Post 2351276)
Today’s rates a fair to good investment guy will tell you to take the largest loan. Then 30 days take cash towards principal to basically bring loan down to 7-15 years. Your yearly interest becomes minimal, we have never kept a 30 year mortgage for more than 10 years.

I can’t remember the last time our cars didn’t have zero interest, and never carry balance on CC’s.
This discussion like all such discussion here demonstrate the emotional/ psychological relationship people have with money, some are much more risk sensitive no matter what the numbers and statistics say. I have talked to people who would never think of investing in any form of stock equites , "you can lose money! "never considering the whole universe of risk and that not being so invested is in itself a risk , your money , your comfort level, your decision

dewilson58 07-20-2024 06:24 AM
23 responses..............probably will get another 23.

As you can see, THERE IS NO ONE CORRECT ANSWER.

Leveraging investments with debt is a personal preference, period.

Stu from NYC 07-20-2024 08:01 AM
Quote:
Originally Posted by Papa_lecki (Post 2351244)
In general, my opinion is don’t go to the internet for financial advice.
OK but this has been an interesting and thought provoking thread

retiredguy123 07-20-2024 08:15 AM
Quote:
Originally Posted by Caymus (Post 2351155)
Don't pay off the mortgage or boat as long as US Treasuries are yielding more. Pay off the car. Personally, at my age I base my decisions on safe fixed income rates and not market returns, even though I'm about 70/30 equities/fixed income.

If investment rates drop you can always pay off the other loans.
The OP is assuming that he can make 7 percent on the money not being used to pay off the loans. This is based on the S&P stock index, not Treasuries. So, since all 3 loans have an interest rate that is less than 7 percent, the logical thing to do is to not pay off any of the loans. Personally, I don't agree with the 7 percent assumption, but that is the OP's assumption.

Topspinmo 07-20-2024 11:18 PM
Quote:
Originally Posted by dewilson58 (Post 2351287)
23 responses..............probably will get another 23.

As you can see, THERE IS NO ONE CORRECT ANSWER.

Leveraging investments with debt is a personal preference, period.

IMO there is? Don’t get loan it you don’t have:coolsmiley:

Topspinmo 07-20-2024 11:21 PM
Quote:
Originally Posted by jimbomaybe (Post 2351284)
This discussion like all such discussion here demonstrate the emotional/ psychological relationship people have with money, some are much more risk sensitive no matter what the numbers and statistics say. I have talked to people who would never think of investing in any form of stock equites , "you can lose money! "never considering the whole universe of risk and that not being so invested is in itself a risk , your money , your comfort level, your decision

agree, but don’t cry when get shaft by some financial shyter. Plenty of examples that for sure.

jimbomaybe 07-21-2024 04:44 AM
Quote:
Originally Posted by Topspinmo (Post 2351470)
agree, but don’t cry when get shaft by some financial shyter. Plenty of examples that for sure.
You have to do your own due diligence as well, the professional credentials of the person you deal with, who is part of a established financial firm, a free dinner is not going to attract me, in fact the opposite. Credit/ leverage can be your master or servant, your portfolio should have a mix of different assets. What percent of leverage you have is part of that, when 30 yr mortgage interest rates were in 2-3 % range that was below the historical averages of return of the indexes , corporate America took advantage of that and bought back its own stock, buying a home has demonstrated over many decades to be a stable investment. So if looking to buy at a time like that it makes sense to me to use OPM, without changing my cash flow


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