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Xenocides posted:A house should not be primarily an investment. A lot of people buy houses as an investment, highly leveraged. Virtually no home purchaser goes in expecting that the value of their home will hold steady against inflation, let alone decrease. They expect return, in addition to shelter. But does it not being primarily an investment change the leverage risk? I'm not sure the math cares about your intent. (We can "should" at each other all day, but at some point it'll get too cute and I'll just have to kiss your forehead.)
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Sep 30, 2017 21:22
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I'm gonna go ahead and take the other angle and say that most people who buy houses can't afford houses 
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Sep 30, 2017 21:28
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Subjunctive posted:But does it not being primarily an investment change the leverage risk? I'm not sure the math cares about your intent. In the case of a primary home.....doesn't it? It's not a line on a ledger that has no other utility then to be an investment. It's a place to live. Then again, I'm one of those people who doesn't think a primary home counts as an investment to begin with. It is clearly a liability.
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Sep 30, 2017 21:37
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ate all the Oreos posted:I'm gonna go ahead and take the other angle and say that most people who buy houses can't afford houses But nobody can afford to be throwing money away on renting!
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Sep 30, 2017 21:37
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Motronic posted:In the case of a primary home.....doesn't it? It's not a line on a ledger that has no other utility then to be an investment. It's a place to live. That it has other utility doesn't mean that the risk profile of a leveraged investment (if the value goes to zero, you lose more than you started with) goes away. Leveraged investments in AAPL don't magically become financially safer because I get certificates and use them as insulation. If I borrow $300K on $100K to buy a house and the house goes to zero, I'm at negative $300K, exactly as if I'd bought bitcoins. People treat home mortgages differently from other leveraged investments not because of a difference in utility, but because they're typically different asset classes and home prices have historically been believed to be bulletproof (except when they're not, but this time for sure). It's a change in the perceived odds, but not how leveraged investing fundamentally works.
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Sep 30, 2017 21:42
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Subjunctive posted:That it has other utility doesn't mean that the risk profile of a leveraged investment (if the value goes to zero, you lose more than you started with) goes away. Leveraged investments in AAPL don't magically become financially safer because I get certificates and use them as insulation. If I borrow $300K on $100K to buy a house and the house goes to zero, I'm at negative $300K, exactly as if I'd bought bitcoins. I agree with some of what you're saying, but in your "If I borrow $300K on $100K to buy a house and the house goes to zero, I'm at negative $300K".......the way I see it is "not entirely" because you still have a useful piece of property that is fit for it's primary purpose (living in). It may not be "worth anything" to sell, but still performs its primary function, a thing that most everyone requires. I hope I'm making myself clear on what I mean in regards to the distinction between an asset with use beyond investment vs. an asset with no other tangible value (like a share of a company that has gone out of business).
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Sep 30, 2017 21:55
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But isn't it in a sense safer because the one thing people all need is housing? A durable good that a large portion of the population is going to, by choice or otherwise, spend a very large portion of their income to acquire so they don't die of exposure already puts it in a different class than a simple equity position. That's no guarantee it'll fully maintain its value or that we should treat it as a bulletproof investment that will definitely rise forever, but no one here is arguing that. Most people will keep paying their mortgage because they still need to live somewhere even if they're underwater on the loan (and unlike a margin position on stocks, if I have negative equity on a mortgage I suddenly don't get a margin call from the bank!). Strictly speaking, yeah, if you live in a no-recourse state it'd be better to mail the keys to the mortgagee and walkout to rent someplace cheaper, but there's so much transactional friction that for most people this is the final act of desperation after the sheriff has taped the judgment to the front door. Yes, beep boop, I'm a homo economicus and housing is a constant expense that for efficiency should be kept minimal on an ongoing basis to maximize value of resources, but the reality is that it's a fraught situation, for better or worse.
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Sep 30, 2017 22:20
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Motronic posted:I agree with some of what you're saying, but in your "If I borrow $300K on $100K to buy a house and the house goes to zero, I'm at negative $300K".......the way I see it is "not entirely" because you still have a useful piece of property that is fit for it's primary purpose (living in). It may not be "worth anything" to sell, but still performs its primary function, a thing that most everyone requires. Right, but you also have a $300K debt that is now unsecured, just like if you'd insulated with share certificates. Up here at least that puts you on a few-year clock until mortgage renewal, which is effectively a margin call, so you won't have that piece of property for long. I don't know how mortgages work in that sense in the US. If you're on a 30 year term and your LTV skyrockets over 1.0 because of a drop in the market, does the bank come knocking? I mean, I totally understand the utility of housing, and I don't care if I sell my house for a loss in the future. I would care if it were possible for me to go underwater, because then I can end up with both no house and a large debt. I'm very debt averse, so I may over-index on that possible outcome. E: kw0134 posted:But isn't it in a sense safer because the one thing people all need is housing? A durable good that a large portion of the population is going to, by choice or otherwise, spend a very large portion of their income to acquire so they don't die of exposure already puts it in a different class than a simple equity position. What people need are the buildings, but in many places the dominant cost is the land (and how desirably placed that land is). My insurers and I believe that my house can be replaced, including contents, for less than half of what I purchased it for a year ago. People will not always be willing to pay hundreds of thousands more to live on a dead end street near a good school, nor will they always be willing to pay extra for the appliances the builder put in here. So my house might well be worth a quarter of what I paid, in that there's no value placed on many of the things that drive current pricing. Subjunctive fucked around with this message at 22:31 on Sep 30, 2017 |
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Sep 30, 2017 22:24
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American banks don't regularly appraise residential property, so as long as you are current it usually doesn't come up.
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Sep 30, 2017 22:28
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crazypeltast52 posted:American banks don't regularly appraise residential property, so as long as you are current it usually doesn't come up. Would you be screwed if your mortgage term came up, or would they just hold their nose and roll it over?
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Sep 30, 2017 22:32
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Subjunctive posted:Would you be screwed if your mortgage term came up, or would they just hold their nose and roll it over? They do 30 year, fully amortizing terms, so the refinance risk is only there if you did an adjustable rate product or non-standard mortgage. Conforming or agency mortgages will be for the full amortization, so unless you want to do something out of the ordinary, your mortgage will have a 30 year term and amortization, fixed rate loan.
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Sep 30, 2017 22:37
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Well that's lovely! Here the most common term is still 5yr on a 25yr amortization I think.
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Sep 30, 2017 22:43
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Yeah, if you live in the rest of the world I can definitely see why you'd consider a mortgage a far riskier instrument. The US model of a fixed rate 30 year mortgage is an anomaly that changes the financial calculus enormously.
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Sep 30, 2017 22:48
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crazypeltast52 posted:They do 30 year, fully amortizing terms, so the refinance risk is only there if you did an adjustable rate product or non-standard mortgage. Conforming or agency mortgages will be for the full amortization, so unless you want to do something out of the ordinary, your mortgage will have a 30 year term and amortization, fixed rate loan. You're talking to a Canadian where 30 year mortgages don't exist and terms are usually 5 years (occasionally 10) unless you also take rather hefty rates as well.
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Sep 30, 2017 22:50
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Homes are hedges for retirement. If you're doing it right you should end up with a paid off or nearly paid off domicile by the time you retire. So your single biggest expense besides horses is mostly scratched off your ledger and you can use the rest of your retirement buying drinks down at the lodge. If you buy a dilapidated rowhouse in a rapidly gentrifying urban area you can maybe make a killing. But otherwise your home will only look like a great investment because you're ignoring 30 years of inflation. So yeah, it's not so much because it'll make you money. It's because otherwise you end up living in your kid's garage.
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Sep 30, 2017 22:54
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Krispy Wafer posted:Homes are hedges for retirement.
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Sep 30, 2017 23:20
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Subjunctive posted:Well that's lovely! Here the most common term is still 5yr on a 25yr amortization I think. Does the typical mortgage refinance to a new fixed rate every 5 years, or does it just convert to adjustable rate after the initial 5 years?
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Sep 30, 2017 23:27
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AreWeDrunkYet posted:Does the typical mortgage refinance to a new fixed rate every 5 years, or does it just convert to adjustable rate after the initial 5 years? Former. I'm very curious to see what happens when they start ticking over and people are simultaneously underwater and also stretched financially at their earlier ridiculously low interest rate. I think banks require top up payments to get back to 80% ltv.
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Sep 30, 2017 23:31
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Haifisch posted:Not to be confused with "your primary/only retirement savings." An alarming number of people treat them that way. Better hope the market's hot when you retire if you go that path! That's just it, the market doesn't need to be hot if you plan to continue living there. As long as your fixed income covers all the other bills you're golden. And everyone has at least SOME fixed income. Obviously it doesn't always work out that way. You're supposed to retire in good financial shape with little debt and a paid off home. This thread has taught me you're just as likely to have two underwater car payments and a financed dead horse worth its weight in glue and dog food. Oh, and some co-signed loans with that sweet grandbaby of yours whose going to art school.
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Sep 30, 2017 23:56
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Semi-related is the fact that in order to help banks and government deleverage themselves from the real estate bubble (Canadian mortgage insurance is nationalized and taxpayer backed for extra moral hazard), a stress test is being introduced in which borrowers must be able to show they can service debt at 2% higher. There have been two rate increases already this year and the BoC is signalling their intent to raise it another 4 times in the next 15 months. People who overextended themselves on sub 2.5% or short term interest only mortgages are gonna get turbofucked between having effectively renew at 6% and the drop of equity that will inevitably result when cheap credit gets curtailed. Something like half of Canadians would be in trouble if a paycheck were delayed by a week, or would not be able to come up with a thousand bucks in a month for an emergency, so it's prime time for a deep dickin'. Also, almost all mortgages are non recourse so short of bankruptcy there's no way to clear that debt. Most things in Canada are about a decade behind the US and it seems finances are no exception 
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Sep 30, 2017 23:59
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[quote="“Guest2553”" post="“476927597”"] Also, almost all mortgages are non recourse so short of bankruptcy there’s no way to clear that debt. [/quote] Yeah, outside of Alberta you have to get the mortgage drafted differently and I can't *imagine* the look you get if you ask your lender for that change.
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Oct 1, 2017 04:30
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"We have roughly 5x our annual income in debt, but I want to get an RV and travel the country..." https://www.reddit.com/r/personalfinance/comments/73hd3p/i_need_help_getting_my_financial_life_under/?st=j88q03xc&sh=afdb412e quote:Hello all, I have looked over this sub for about a month now and really want to become financially independent . I am 27 years old , married, and have two children (2 under 2...oops). I currently have two jobs and my wife has one. Between the three jobs we make about 47k a year. On top of that we currently have about 130k in student loan debts and have bought a house at 60k. I know people ask this sort of thing on here all the time but I was just wondering what advice you could give based on my numbers . At this point I fee in over my head with debt and don't have any idea how to get out . And if rough making 47k a year between three job, especially since we both absolutely love what we do. I would love to retire early and travel the country in a RV. Is retiring early , as well as getting out of debt , possible at this point? So wait, what kind of degree required 130k in student loans, but resulted in so little income? I would've guessed something in the arts, but.... quote:Yeah, I figured that would be the case . I'll try and provide answers to the questions you provided . My degrees are in the ministry . The problem with that is triplefold. First ministers are not retiring like they used to, so jobs are not opening up. Second , they many churches are demoting jobs from full time to part time when a minister leaves . And third , it's very much a "you have to have experience as well as a masters degree to even be considered ". I have the masters and am currently getting the experience . After applying to probably 500 churches nation wide I got a part time job, which I'm at now . My wife's degree is family ministries, which she is also using working with pre-k.
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Oct 1, 2017 13:50
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April posted:"We have roughly 5x our annual income in debt, but I want to get an RV and travel the country..." Traditionally, you often get poorly paid as a priest and you are fine with it as your service to God. No inherent financial discrepancy here. Problem isn't his income, problem is him wanting FI.
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Oct 1, 2017 13:58
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John Smith posted:His choice isn't really an issue, except for that his goal is FI despite claiming to be very happy with his job. Borrowing 130k that you can't pay back because God is idiotic.
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Oct 1, 2017 14:05
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Why doesn't he just pray for wealth?
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Oct 1, 2017 14:05
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Moneyball posted:Why doesn't he just pray for wealth? This guy is totally going to be the next Joel Osteen.
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Oct 1, 2017 14:08
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April posted:Borrowing 130k that you can't pay back because God is idiotic. My treasure is in heaven. It sounds like he needs to either find a really big church or a really small one. There isn't much room in the middle for someone with his experience and education. Neither option is going to make him much money (as the big fish in a tiny parish or a cog in the wheel of some megachurch). Maybe traveling ministry in that RV. Teach the kids to sing and dance. Bounce around from town to town.
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Oct 1, 2017 14:14
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I unironically think he could become FI if he made a traveling ministry. There's just something about "next week, they're coming to my town!" that plays so well to people. Fill up a trailer with shirts, mugs, sell some ice cream, solicit some donations/indulgences, and you're set.
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Oct 1, 2017 14:22
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Just do a modern day version of the snake oil scam. Sell 4oz bottles of blessed water and lay hands on people for $200 each and be out of town the next day. The classics never die.
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Oct 1, 2017 14:27
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My boneheaded financial mistakes https://www.bogleheads.org/forum/viewtopic.php?f=2&t=228527 Some Choice quotes: quote:5. I once invested in a mutual fund solely because they advertised on a radio show I frequently listened to. quote:Too many to count, but included cashing out 401(k)s and a SEP IRA or three before 35. quote:Snowmobile... that was about a $8000 loss in three years. Ouch for this pensioner quote:One that stands out was when I left a govt job in NC in my 30s. I was vested in their retirement system, but had no plans to return so I withdrew my contributions of $10k. Five years later I returned to replace my former boss and stayed 22 years until retirement. I was allowed to re-purchase my years in the system after 10 years, at a cost of $63k. Ouch! I did that. It was worthwhile despite the cost. Oh, and one more thing. A NC supreme court case ruled that govt workers pensions were not subject to taxes for those vested in the system prior to 1989. Had I kept my money in the system, my pension would not be subject to NC income tax, but since I took it out, my pension is taxable. I keep on paying for that mistake! quote:My list is also long and I will take the time to post it to hopefully help others from making the same mistakes: uhg this guy quote:1. During college, I charged everything and only made minimum payments on my credit cards. Now, I still charge everything but only if I can pay it off every month. let's buy a car we don't think is mechanically sound! quote:Bought a used 2014 Honda Odyssey even after test-driving it and having some reservations about it's condition. I took it to my mechanic (after purchasing it) and he kindly informed me that I had made a mistake. We traded it in for a new minivan, to the tune of a $4k loss. We don't talk about that one too much in my house. HAHAHAHA quote:Invested in sports cards and comic books in the 1990s instead of the stock market (to be fair, I didn't even know "ordinary people" could buy stocks-- I thought you had to wear a suit and tie.) There's some salt in this one. quote:Panicking and selling and missing out on some great gains following the last recession. quote:My first investing experience was a penny stock recommended by my roommate. I put in $500 hard earned dollars during the same time I was wrestling with CC debt in my 20's. I thought "this will pay off huge and I can get out of debt!" It didn't just tank, it was delisted and went to absolute zero. It was what I'll call a multifaceted learning experience It seems to be a pretty good thread on point with this one. There's more in it, a lot of folks talking about bad stock picks or mutual fund picks since it's the boglehead forum. However, for those of you really wanting to share your own personal horse wedding stories, that thread is still active.
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Oct 1, 2017 14:28
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I feel like it's the end of an era. The local radio station that has been running ads for the last 8-10 years about "GOLD! GOLD! GOLD! Invest in gold! It's the only thing that holds its value in these uncertain economic times! Call this number and invest in gold back by REAL gold bars and coins!" has stopped running those ads and is now running new ones for (I'm guessing) some kind of whole life insurance product. It goes: quote:Attention to all Americans with holdings in gold or precious metals! The price of gold has declined or stopped growing over the past year. You need a new way to save that has double digit returns and a guarantee of NO LOSSES. This is the method that people like Warren Buffet and Bill Gates use to keep their wealth WITHOUT risking it all in the stock market.
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Oct 1, 2017 14:39
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John Smith posted:His choice isn't really an issue, except for that his goal is FI despite claiming to be very happy with his job. He was just born in the wrong century, historically being a priest was GWM. Especially if you were effectively a feudal landlord on the side.
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Oct 1, 2017 14:55
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Wait, so his wife was the complete disaster of a partner? Because I'm sensing this is a many sides kind of argument. Leon Trotsky 2012 posted:I feel like it's the end of an era. Yeah, it's silver now. I know this because Fox News runs SILVER IS THE NEW HOTNESS commercials all the time. I'm a little amazed Fox News viewers tolerate scams and predatory financial ads. I remember doing customer support for a large ISP's portal page and people would legit think we ripped them off because the scammy ad was on our website. Which, honestly I kind of agree with - but that was a whole other matter. Fox News runs all of the terrible financial commercials. You've got silver and you've also got gold - which I particularly like because it shows a 50-something year old man lovingly looking at all his gold coins. He then puts them in a safe on top of his desk with the name of the gold coin company emblazoned on the side so his druggie grandkids know exactly what to steal for their next hit. I really wish I could find the commercial on YouTube because this guy is seriously eyefucking those coins. There's also a cute redheaded veteran who tells me how I can refinance my VA home loan for 100% of the its value. Support the troops, people.
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Oct 1, 2017 15:12
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I think advertising on Fox News has to be GWM. So many companies don't want to be associated with it, so you see real companies on the other channels, but "buy our bathtub and we'll give you a free toilet!" advertisements on Fox. Has to be a steep discount. Yet it still remains at the top of the ratings. Someone's got to make a figurine of Jesus draped in an American flag on a cross made of AR-15s and see how that sells.
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Oct 1, 2017 15:54
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Krispy Wafer posted:Yeah, it's silver now. I know this because Fox News runs SILVER IS THE NEW HOTNESS commercials all the time. I'm a little amazed Fox News viewers tolerate scams and predatory financial ads. Welcome to the republican party! Moneyball posted:Someone's got to make a figurine of Jesus draped in an American flag on a cross made of AR-15s and see how that sells. This will be a feature of my future bathtub madonna business.
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Oct 1, 2017 16:13
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Guest2553 posted:Welcome to the republican party! Identify politics means you're never alone and there's always someone there to validate/scam you. Bill O'Riley isn't just slapping anyone's rear end, he's slapping mine.
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Oct 1, 2017 16:27
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Manicpost incoming: Trying to afford attending my DREAM school, the University of Miami. Any thoughts, suggestions and opinions would be greatly appreciated. quote:I know I sound like a young and dumb college kid sold on a dream he can't afford but this is the first time in my life where I've actually seen the importance of college and how hard life is to live on 18k/year. I really don't want to be that kid that never pushed himself towards his dream. 95 out of 100 of you might think this is impossible, and while it seems so, there's always a chance. I don't want to enroll in UCONN/SCSU (CT Resident) and go there never knowing what would have happened if I seriously applied myself, conquered and crushed poo poo.
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Oct 1, 2017 17:30
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SweetSassyMolassy posted:My boneheaded financial mistakes On the plus side, at least the people posting that realize that they were mistakes. Moneyball posted:Someone's got to make a figurine of Jesus draped in an American flag on a cross made of AR-15s and see how that sells. I'd be surprised if this weren't already a thing. Motronic posted:Manicpost incoming: OK well that sounds optimistic and maybe they're a little naive, but on the plus side they realized that they were loving around and it sounds like they want to get seriou- quote:Anyways -- Tuition is approx. $69k./yr living on campus. 
Volmarias fucked around with this message at 18:10 on Oct 1, 2017 |
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Oct 1, 2017 18:04
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Edit: Sorry, double posted
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Oct 1, 2017 18:09
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Where is the link to that post god drat it I want to read the comments and his responses to each and every comment He's like a mythical compilation of every stupid pitfall a young dumb "college bound" American could fall for and romanticize "I too deserve to be shackled by stupidly unreasonable debt drat it!!! I'm a person too  "E: I also love that his mentor told him that as long as his efforts and dedication match his intellect, then A N Y T H I N G is possible In other words he's probably lazy and unmotivated despite his word soup (for inspired kids only) newsflash fucksticks there's no such thing as smart lazy people!! Being lazy is in fact being not very smart with your time on this earth and having a 2.5 or less in high school is laziness supreme He could certainly turn his work ethic around but dear God don't borrow 60k a year to work on your discipline (well good luck finding that loan provider first and foremost) KingSlime fucked around with this message at 18:29 on Oct 1, 2017 |
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Oct 1, 2017 18:22
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