1. Still the stupidiest financial advice I have heard anyone give, ever! This will be by far your defining moment, your legacy if and when you retire from the forum game. It's also in complete contradiction to your number 4. You've also given an example of accessing a line of credit which contradicts my OP where the home is not used as collateral for anything, which is the majority of home owners.
2. This is true but again contradicts your number 4. Another example of accessing a line of credit which contradicts my OP where the home is not used as collateral for anything, which is the majority of home owners.
3. You've left out the interest component paid over the life of the larger home, this is dead money once you downsize again and is an expense you need to account for.
4. Will not occur if you do any of the above.
You see high house prices do not make individuals who own a PPOR, who don't leverage off it or get any line of credit or reverse mortgage but just pay down the mortgage and live in it, wealthier. For these people, who are the vast majority, house price rises do not make them wealthier but they are lead to believe it does, some morons here believe it to be true also.
In fact as we've seen high house prices effectively make the majority poorer
First and foremost, Rat didn't say you HAVE to do every single one of those options, he was highlighting the benefit of increasing house prices. So to argue one option contradicts another is stupid, as he didn't say you have to do all 4. Nor did he say dilute your house until it's worth nothing and therefore make #4 redundant, however it certainly is an option.
1. I've addressed this in my other post.
2. Nothing to say there except read my above statement where Rat didn't say you have to do all these options.
3. $1m loan paid over 30 years with just standard principal and interest at today's interest rate (interest rate is redundant, the ratio of interest paid will stay the same), total interest paid = $790k. On a $500k loan = $395k interest paid.
If both houses double in value in 30 years, which let's agree is very damn conservative, the $1m makes $210k profit (after interest) and the $500k loan makes $105k (minus interest).
So your argument that the interest repayments makes buying the more expensive house pointless, is now a redundant statement. You could still downsize the $1m house and make more profit than if you did the exact same with a $500k house.
4. You completely missed the point that you don't have to do all options or exploit all options.
Learn some basic math Chris. My principal and interest repayments on my IP are less than the rent for the property, so if I bought my IP and lived in it, my payments would go down yearly as I'm paying off my house. If I personally rented that property, my rent is never going down. It might stay the same for years and dip here and there but it's certainly never going down overall long term.
So even if I don't use any of the 4 options but sit in my property, who is better off in 30 years time? Me who now owns 1 property, never sells it, but pays no rent or mortgage repayment versus you who owns nothing and still pays rent at probably a higher rate than today's prices. So even if you and I earned the exact same amount, my property makes me wealthier than you because after 30 years I pay no rent and you still pay rent.
Even if the rent was slightly less than my repayments, I'm still wealthier long term even if you exclude any value in my home because as I said, my payments go down, your rent goes up.
I don't know how to spell out basic math to you Chris, you need some common sense.
Option 1: You buy a car, get a car loan at 17% and pay it off in 5 years
Option 2: You buy a car, put it on the home loan at 4% and pay it off in 5 years
Please tell me how Option 2 is stupid Chris?
I guess this is why poor people stay poor.
That's the majority is it?
And because you are also a financial simpleton you fail to see that credit unions and smaller banks do new car loans at 6-10% compounded in the cost of the car over 5 yrs.
Your 'smarter' option compounds the cost of the vehicle and the mortgage amount at 4% you would still need to pay back considerably more than the stand alone new car loan over that 5yrs to counteract the higher interest payments.
You will struggle to understand this but I realise your ability to comprehend most things is limited at best.
4. You completely missed the point that you don't have to do all options or exploit all
I don't know how to spell out basic math to you Chris, you need some common sense.
Show me where I dated an individual uses all options? Again, nil comprehension of anything anyone is talking about, you just rant like Michael. I wonder why that is ?!
Hahaha, your banging on about my basic maths after you just claimed a car purchase added to you mortgage over 5yrs would be cheaper than a stand alone car loan bwahahahahaha
Rat
10 Jul 2017, 06:09 PM
LOL, so your new argument is that homeowners can't simultaneously take advantage of all their options at the same time.
You are truly clueless Chris. Keep renting forever. Home ownership is not for someone like you.
I never said that, read it again, get the socks together and let them all know so you don't all keep making the same mistake over and over again.
You see high house prices do not make individuals who own a PPOR, who don't leverage off it or get any line of credit or reverse mortgage but just pay down the mortgage and live in it, wealthier. For these people, who are the vast majority, house price rises do not make them wealthier but they are lead to believe it does, some morons here believe it to be true also.
In fact as we've seen high house prices effectively make the majority poorer
You are truly a moron.
Riddle me this:
Person A owns a house worth $500k. Person B owns a house worth $1M. In all other respects their assets are equal (super, car value, cash savings, nominal size of mortgage).
Is person B wealthier than person A? or not?
What if the value of person As house does not change in the next year, (because say they live in a regional area), and person Bs house goes up in value by $200k to be worth $1.2M.
Has the wealth of person A increased? Has the wealth of person B increased?
And because you are also a financial simpleton you fail to see that credit unions and smaller banks do new car loans at 6-10% compounded in the cost of the car over 5 yrs.
Your 'smarter' option compounds the cost of the vehicle and the mortgage amount at 4% you would still need to pay back considerably more than the stand alone new car loan over that 5yrs to counteract the higher interest payments.
You will struggle to understand this but I realise your ability to comprehend most things is limited at best.
Let's say a person buys a 50k car and they already have a 200k mortgage that they pay 4% on.
They've got two options:
Option 1: Get a 50k loan for 6% (yes I'll use your cheap car loan percentage) and keep their $200k mortgage separate at 4%
Option 2: Put the 50k on their existing mortgage, so now they pay back 250k at 4%
Let's assume in both scenarios, the person repays the 'car' portion of the loan within 5 years.
So option 1: 50k @ 6% paid off in 5 years while maintaining P&I on his 200k mortgage
Option 2: 250k @ 4% with the '50k' car loan portion paid off in 5 years on top of the standard P&I paid on his 200k mortgage.
Who pays more interest Chris?
Let's see who the real simpleton is. Here's your chance Chris, I've been calling myself a math guru on these forums so quick, prove me wrong and my whole persona can be unraveled.
Are you one of those idiots that think interest rates are exponential or that having 1 loan is any different to 2, 5 or 10 loans at the same interest rate for the same amount? If so, this will be a good laugh.
Matthew
10 Jul 2017, 06:03 PM
Actually if you are smart you buy the car in your home loan, pay it off at the car loan rate in 2 years and move on.
Option 2 isn't stupid, Chris is!
Haha I know exactly what you mean.
I think Chris is one of those people that don't understand how interest rates work.
I'm pretty sure he thinks because you have 1 big loan, you pay more interest on it than two separate loans of the same amount, hence why he thinks it'd be more viable to get a separate car loan.
I'm assuming he's the same people who don't understand how taxes work either. Probably thinks if he earns a little bit more, he'll earn less in the hand because he'll be in a higher tax bracket.
Chris
10 Jul 2017, 06:11 PM
Show me where I dated an individual uses all options? Again, nil comprehension of anything anyone is talking about, you just rant like Michael. I wonder why that is ?!
Hahaha, your banging on about my basic maths after you just claimed a car purchase added to you mortgage over 5yrs would be cheaper than a stand alone car loan bwahahahahaha
I never said that, read it again, get the socks together and let them all know so you don't all keep making the same mistake over and over again.
You said option 1 and 2 contradict option 4 and that option 4 is null if option 1 - 3 are used.
So right there, you are saying if an individual uses all options then they can't do option 4.
You seem to have no comprehension of how interest rates work Chris.
Btw DH Rats version involved putting consumables on the mortgage and letting the loan roll on to full term whilst you enjoy the ever ballooning 'equity'. You've come up with a different scenario, you are still wrong but I thought I'd point out you have changed the perimeters to try and find a win.
This is because your ability to comprehend the original argument is diminished by your child like mind.
Tyson
10 Jul 2017, 06:40 PM
Let's say a person buys a 50k car and they already have a 200k mortgage that they pay 4% on.
They've got two options:
Option 1: Get a 50k loan for 6% (yes I'll use your cheap car loan percentage) and keep their $200k mortgage separate at 4%
Option 2: Put the 50k on their existing mortgage, so now they pay back 250k at 4%
Let's assume in both scenarios, the person repays the 'car' portion of the loan within 5 years.
So option 1: 50k @ 6% paid off in 5 years while maintaining P&I on his 200k mortgage
Option 2: 250k @ 4% with the '50k' car loan portion paid off in 5 years on top of the standard P&I paid on his 200k mortgage.
Who pays more interest Chris?
Let's see who the real simpleton is. Here's your chance Chris, I've been calling myself a math guru on these forums so quick, prove me wrong and my whole persona can be unraveled.
Are you one of those idiots that think interest rates are exponential or that having 1 loan is any different to 2, 5 or 10 loans at the same interest rate for the same amount? If so, this will be a good laugh.
Haha I know exactly what you mean.
I think Chris is one of those people that don't understand how interest rates work.
I'm pretty sure he thinks because you have 1 big loan, you pay more interest on it than two separate loans of the same amount, hence why he thinks it'd be more viable to get a separate car loan.
I'm assuming he's the same people who don't understand how taxes work either. Probably thinks if he earns a little bit more, he'll earn less in the hand because he'll be in a higher tax bracket. You said option 1 and 2 contradict option 4 and that option 4 is null if option 1 - 3 are used.
So right there, you are saying if an individual uses all options then they can't do option 4.
You seem to have no comprehension of how interest rates work Chris.
That's not what I said it's what's you've deduced.
Again your child like mind has failed you
Sydneyite
10 Jul 2017, 06:17 PM
You are truly a moron.
I'm the moron? You can't even comprehend a very simple notion;
If person B doesn't leverage off the extra $200k, they don't undertake to draw off the extra $200k or get a form of credit from if it, they simple live in the house and pay the loan, how are they wealthier?
Sure people have the option to access that money by selling, borrowing off it or getting a reverse mortgage but the majority of house holds do none of this they simply live in their PPORs.
These people, who are the majority, see no material benefit from house price rises for them it's just an illusion of wealth.
The people who truly benefit are the investors who are the clear minority.
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