Paying off mortgage

Sig · Feb 7, 2017

CET said:
I'd get the mortgage making sure to have a LTV ratio that allows you to avoid paying PMI, which will pay off the mortgage if you die. I think they changed the rules these days that if you get PMI initially you cannot drop it after getting the LTV below 80%. Instead get some term life insurance on you to cover the mortgage if you die and lower the coverage as you pay down the mortgage.

As far as dividends I'd focus on companies that have a history of increasing their dividend payout. AAII has a dividend investing newsletter you may want to check out. It's cheap. Also, some companies with great dividends are very pricey as people piled into them looking for yield in the low interest rate environment. Those cold be painful as interest rates climb.

At least in the U.S. PMI isn't at all what you think it is. It pays the bank when you default on your loan. You still lose the house. PMI provides no benefit whatsoever to the homeowner (and apparently after 2008 we learned it didn't do much for the banks either, the whole thing's a bit of a scam).

sle · Feb 7, 2017

algofy said:
IMO this is awful advice, might as well max out 12 month 0% credit card offers too.

Of course you should. In general, you should use leverage if you have an investment opportunity that has the similar tenor and where risk-adjusted expected return beats the cost of credit.

algofy · Feb 7, 2017

sle said:
First of all, bancruptcy is not as bad as many people think

Bankruptcy sticks with you for LIFE, not just 7 or 10 years. Loan applications often ask, have you ever filed bankruptcy, it's a black mark forever.

sle · Feb 7, 2017

algofy said:
Bankruptcy sticks with you for LIFE, not just 7 or 10 years. Loan applications often ask, have you ever filed bankruptcy, it's a black mark forever.

Wait, if you plan to never take on debt, why do you care about the black mark?

algofy · Feb 7, 2017

sle said:
Of course you should. In general, you should use leverage if you have an investment opportunity that has the similar tenor and where risk-adjusted expected return beats the cost of credit.

Because being "smart" often clouds good common sense and decisions based off of pulling one over and being smarter than the situation don't adjust for the risk factor if now having a huge mortgage if your investment activity doesn't pan out.

Plus to tell people "bankruptcy isn't that bad" is misleading at best.

Overnight · Feb 7, 2017

sle said:
First of all, bancruptcy is not as bad as many people think (not that I've been but I have a friend that had to declare PB, worked out OK for him)...

I cannot believe I just read that statement here. Are you out of your fucking mind? You have ZERO clue about what personal bankruptcy means in the USA.

Please have a steaming hearty cup of STFU.

algofy · Feb 7, 2017

sle said:
Wait, if you plan to never take on debt, why do you care about the black mark?

Never said anything about not taking on debt.

algofy · Feb 7, 2017

sle said:
Of course you should. In general, you should use leverage if you have an investment opportunity that has the similar tenor and where risk-adjusted expected return beats the cost of credit.

You must be on this topic for the lulz, no way someone as well respected as you can make that statement as advice for the majority.

algofy · Feb 7, 2017

Overnight said:
I cannot believe I just read that statement here. Are you out of your fucking mind? You have ZERO clue about what personal bankruptcy means in the USA.

Please have a steaming hearty cup of STFU.

Honestly I'm quite shocked on the HORRIBLE advice given in this thread. Basically people should mortgage everything, max out credit cards, cash out retirement, whatever it takes because credit is cheap and if it doesn't work out bankruptcy is no biggie. What is this 2008 again???....pure insanity. People thinking they are way smarter than they really are.

You guys go ahead and have fun with that.

sle · Feb 7, 2017

algofy said:
You must be on this topic for the lulz, no way someone as well respected as you can make that statement as advice for the majority.

Well, for lulz, also known as entertainment.

Majority of people would NOT have the problem that the OP has. Majority of people definitely would not have any misgivings about buying real estate for cash like I do. However, saying that carrying any debt is wrong is also a bad advice - there is certainly a time and a place for it. Most success stories have debt (real or implied) in them.

I understand that personal debt is an emotional issue for a lot of people. Owning a home is also an emotional issue. However, given that this is a trader forum, we should try to discuss things on a quantitative level. When I said PB was "not that bad" I did not imply that it's a walk on the beach with a pretty blond model. Rather, I mean that it's not an end-of-life-as-we-know-it and plenty of people survive it and move on. Also, my comment about non-recourse mortgages is definitely true, don't you agree?