Mortgage interest MYTH- it's a rip off!

[SlightlyGoofy]

This Hoosier pays only $700 a year on an 18 room home in a small town but nearby 3 large cities.

Slightly Goofy

 

[brandip22]

The only other thing I will add is this: If you own your home outright, make sure you have TONS of insurance. Say you hit someone and hurt them bad, or even kill them- it's an accident, but they sue. If you own your home outright, they can sue for what it's worth and you could lose your home to pay them off. If you have even just a line of credit on it, you won't have the equity for them to get, thus saving your home. There's more to this senario as well, but it's a thought.

 

[GoofItUp]

I don't think this has to be an either-or scenario. DH and I make extra payments annually on our mortgage and still have investments in long-term retirement accounts, stocks, and savings bonds. (Yes, savings bonds! We use these as a sort of savings account that isn't so accessible.) At some point, we will probably cash in some stocks and bonds to pay off our mortgage. Then we can use the monthly morgage payment to replace our stocks and bonds, still have our 401k's, and if we should need a loan, we can always borrow against the 401k. For me, being rid of the monthly obligation is worth a lot. After all, if I HAVE to miss a month of investing, I'll get by. If I can't make a mortgage payment, it's a little more complicated.

 

[disneymom3]

Yikers,
Me and my husband make about the same amount, but we have our taxes taken out of our checks right away. I guess I was sort of shell shocked when I saw how much you pay in taxes. I went and looked up my 1040's and we also paid that to Federal, but we also Paid to the State of Wisconsin $10,000 in income. Plus our property taxes of $2800 to Wisconsin. Wisconsin is a very high taxed state to live in, I don't know why we live here and put up with it.

Don't move west across the river then cause we paid more in property taxes than that!

I know you guys are high though. We are too, unfortunately. (When it comes to income tax anyway.)

 

[peacefulgirl]

This Hoosier pays only $700 a year on an 18 room home in a small town but nearby 3 large cities.

Slightly Goofy

AWESOME !!! Glad you were one of the smart money people. Gosh it must feel GOOD!!

 

[lbgraves]

I am amazed at the property taxes that I have seen posted on this & other boards this month. Ours went up to 750 for the county & 540 for the city. I guess that we are pretty lucky.

 

[undertheradar]

Here in Southern California, our "starter" home is "budget" $635,00.00. Due to state law, our property tax is 1% + added fees( $7200.00 year). I don't know how one could afford to pay cash for a home here. Rental housing for 3 bedroom homes and apartments averages $2400.00 per month. Based upon these costs, my $3500.00 per month mortgage lowers my taxable income, something my rent of $2300.00 per month couldn't do. Perhaps in areas of lower priced housing the cash option is a way to go, but we would have had to banked every extra penny and all second income for 12-13 years to be able to do it. Assuming that prices didn't continue to skyrocket out of reach during the time we were saving. I'm sure that the scenario is different for everyone.

 

[dvcgirl]

Here in Southern California, our "starter" home is "budget" $635,00.00. Due to state law, our property tax is 1% + added fees( $7200.00 year). I don't know how one could afford to pay cash for a home here. Rental housing for 3 bedroom homes and apartments averages $2400.00 per month. Based upon these costs, my $3500.00 per month mortgage lowers my taxable income, something my rent of $2300.00 per month couldn't do. Perhaps in areas of lower priced housing the cash option is a way to go, but we would have had to banked every extra penny and all second income for 12-13 years to be able to do it. Assuming that prices didn't continue to skyrocket out of reach during the time we were saving. I'm sure that the scenario is different for everyone.

California is just off the charts....amazing. But even here in Orlando Florida your buck doesn't buy you nearly what it got you just one year ago. We paid 370,000 for a 5 bed/3 bath 3,000 sq ft house with a pool just one year ago. Now, I'm confident that if I desired, I could sell my home within a few days for $550,000.....a 48% increase...in one year. Orlando and Central Florida in general is an area with lots of jobs, but most of them are low paying jobs in the service/hospitality industry....catering to tourists. I really feel for folks who work in that industry who didn't already buy. Because, there's no way that many of those people will be able to get in now. And on top of that, many of the apartment buildings that service industry employees live in are being converted into Condos and sold. In MetroWest, where I live, 2 bedroom 2 bath condos (about 1100 sq ft) are going for over 250K. This is causing a big apartment shortage here, and consequently, rents are being driven up. The American Dream of owning a home is slipping away for millions of people all over this nation....it's a real shame.

 

[fac]

My bil used to lecture me on the 'benefits' of owing money on mortgages and other things. I ignored him and here we sit, retired, in our fully paid for house (and everything else) with no need to work part time jobs or anything, making many trips to DW a year usually.

There he is in his fancy new condo, with big monthly fee, no money down, big payments, leased furniture, auto payments, working full time way past age 65.

Nuff said but might I add that he is also a retired IRS agent? (sigh)

SG

We can't really say that he is not enjoying what he is doing, can we? Can it be some people do like fancy condo, and love to work. (BTW, I like to work, but not a big fan of fancy condo).

 

[drakethib]

Not sure if this makes sense, but we live in a pretty nice neighborhood /Golf Community in Beaumont, Texas.

I bought the house for around 75% of the market value at the time. It has gone up since. I think these types of deals are not very hard to find, it just take some searching.


To rent a home or apartment of the same quality in the same area I could expect to easily pay $1000 - $1500 more above what my monthly house note is now.

At best case scenario, it I were to rent I would be paying $12K more per year and would not have any type of dedcutions whatsoever.


Maybe I am off base here, but just my 2 cents.

 

[minnie1928]

I loved what he says about FICO scores, he says something to the effect of your FICO score is:

A FICO SCORE is a:



I love debt score!

I love owing my bank score!

I love making banks profit score!

I think debt is awesome score!

I want to be in debt for the rest of my life score!

Oh ya that is an awesome way to put it!!!

FICO is being used more and more for purposes other than credit. For example: employment, starting new utilities, and insurance to name a few. So you do want to keep your score in the decent range if at all possible. With that being said, I don't think following DR's theory will throw your FICO in the trash. I just don't think it's something that should be ignored because you don't plan on utilizing credit. I hope that make sense ....

 

[peacefulgirl]

FICO is being used more and more for purposes other than credit. For example: employment, starting new utilities, and insurance to name a few. So you do want to keep your score in the decent range if at all possible. With that being said, I don't think following DR's theory will throw your FICO in the trash. I just don't think it's something that should be ignored because you don't plan on utilizing credit. I hope that make sense ....

Yes you need good "credit" for these reason. BUT you do not need credit by the credit companies out there. You can use any bill you pay to show you pay your bills. Your rent, your utilies, car ins anything like that. Cash talks as well LOL.

 

[minnie1928]

Yes you need good "credit" for these reason. BUT you do not need credit by the credit companies out there. You can use any bill you pay to show you pay your bills. Your rent, your utilies, car ins anything like that. Cash talks as well LOL.

I'd even say that cash talks VERY loudly!

 

[Gillian]

For a lot of people, without a mortgage they won't hit the point where its worth itemizing. So they won't be able to write off their real estate taxes or chartible contributions.

Yes, this is what goofyforlife was trying to get us to understand!

If you can't itemize, there is nothing you can do about the property taxes, except pay them!

Our taxes, on a smallish 3 BR home are around $5000 (although I've been trying not to pay attention).

Nothing against Dave Ramsey, but the numbers are different for different people.

 

[mickeyfan2]

Having a mortgage just to keep the tax write off is not smart math!
This keeping the mortgage for tax deduction is a myth the real estate people spread. Please don't fall for that.

This is 100% true. I have tried to explain it to people, but most seem to know I am wrong.

 

[crisi]

Its 100% true if you spend the money you would not be using paying down your mortgage.

Its 100% untrue if you invest it and make turn a profit from the interest differential and the tax writeoff.

If all you do is have a mortgage for the interest tax deduction, you pay the bank a $1 to get $.30 back from the IRS. Not smart.

If you have a mortgage to "leverage your assets" you pay the bank $1, another investment gives you $.90 (possibly another investment gives you $1.20 or more, but lets say you are conservative and get $.90), AND the government gives you $.30. That is smart.

Wealthy people almost always have mortgages for this reason, a secured home loan is usually the lowest interest rate you can get, plus the government gives you money back. Then you make more money using "someone else's money."

 

[CarolA]

Just becasue Dave Ramsey says it's so... does not make it a fact LOL!

Dave of course owns a MILLION dollar house, paid for by YOUR books! Keep in mind that Dave is going to preach the "gospel according to Dave" with NO exceptions for anything..... It's up to you to decide if he is right for you. Personally I am not willing to go without everything so that I can pay off the mortgage as Dave would like.... Dave is not living my life!

 

[CarolA]

Yes you need good "credit" for these reason. BUT you do not need credit by the credit companies out there. You can use any bill you pay to show you pay your bills. Your rent, your utilies, car ins anything like that. Cash talks as well LOL.

This is not always true... Let me guess Dave said it... If I had not had a CREDIT score when I moved to Atlanta I would have been required to pay a deposit to get utlilites... However, the utlilty companies in TN don't credit report so.... it's a catch 22 which they love. Now they have YOUR money and they are making money off of it, but DAVE is happy LOL! None of the places you mention credit report.

I have worked for places that did credit checks... no credit score, probably no job.

I have read on these very boards of folks with no credit score who could not get an apartment to rent... no deposit option was offered....

And then there is the crisis I wrote about on another post. A friend of mine had a child who needed a heart transplant. They were VERY proud that they had no debt, never had a credit card, never had a loan etc.... They then had to get someone to cosign a personal loan for them at a higher interset to tide them over through this period. The banks turned them down... no credit history.

 

[peacefulgirl]

Just becasue Dave Ramsey says it's so... does not make it a fact LOL!

Dave of course owns a MILLION dollar house, paid for by YOUR books! Keep in mind that Dave is going to preach the "gospel according to Dave" with NO exceptions for anything..... It's up to you to decide if he is right for you. Personally I am not willing to go without everything so that I can pay off the mortgage as Dave would like.... Dave is not living my life!

No one who says it's so makes it fact.... except God

Like anything, you pick what works for you... I can tell ya, being debt DOESN'T work for me!

 

[minnie1928]

Like anything, you pick what works for you... I can tell ya, being debt DOESN'T work for me!

That makes 2 of us!