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would you pay cash or use a mortgage?

By Hysteresis   Follow   Mon, 11 Jul 2011, 3:11pm   1,899 views   22 comments
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let's say, hypothetically, liquid net worth of $1.5M. single family house is priced at $500k in the city of santa clara. it's a primary residence. the house would be lived in for 15 years at minimum.

would you pay all cash or use a 30 year fixed mortgage with 20% down?*
why?

* only these 2 options are available, there's no option to rent and no other mortgage options.

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1. E-man Follow Befriend (31) 34 threads 2,545 comments San Jose, CA Premium

   1   3:57pm Mon 11 Jul 2011   Share   Quote   Permalink   Like   Dislike   Protected   SF ace says mortgage, but definitely not 30 years fixed --- but 5 year arm. make everyday count +1. Paying cash now is financially retarded imho.

2. ¥ Follow Befriend 35 threads 5,700 comments Bellingham, WA

   2   5:28pm Mon 11 Jul 2011   Share   Quote   Permalink   Like   Dislike   yup, ARM is good. Check out the offering from Union Bank. They've got a pretty flexible ARM product if you've got 20% down. I don't think we're going to be seeing any interest rises for the foreseeable future. The debt is just growing too big too fast for the Fed to be able to do anything unless, somehow, wage-price spiral starts. And if a wage-price spiral starts, then buying now will be as golden as buying in 1971, 1981, or 1991, or 2001. Hmmm.

3. APOCALYPSEFUCK is Shostakovich Follow Befriend (28) 170 threads 4,181 comments Premium

   3   5:46pm Mon 11 Jul 2011   Share   Quote   Permalink   Like   Dislike   Protected   Pay cash and visit every bank and mortgage broker within a hundred miles and describe in glowing terms how much loot they didn't make on your need to live indoors - and how you want to see all of them stuffed into supermax prisons and ass raped to bloody pulps by HIV-positive neonazi serial killers for their crimes.

4. Patrick Follow Befriend (54) 5,185 threads 6,157 comments 46 male Menlo Park, CA Premium

   4   5:48pm Mon 11 Jul 2011   Share   Quote   Permalink   Like   Dislike   Protected   APOCALYPSEFUCK is Tony Manero says Pay cash and visit every bank and mortgage broker within a hundred miles and describe in glowing terms how much loot they didn't make on your need to live indoors - and how you want to see all of them stuffed into supermax prisons and ass raped to bloody pulps by HIV-positive neonazi serial killers for their crimes. +1

5. Hysteresis Follow Befriend (2) 14 threads 648 comments

   5   5:49pm Mon 11 Jul 2011   Share   Quote   Permalink   Like   Dislike   APOCALYPSEFUCK is Tony Manero says Pay cash and visit every bank and mortgage broker within a hundred miles and describe in glowing terms how much loot they didn't make on your need to live indoors - and how you want to see all of them stuffed into supermax prisons and ass raped to bloody pulps by HIV-positive neonazi serial killers for their crimes. it's really hard to argue against this position.

6. APOCALYPSEFUCK is Shostakovich Follow Befriend (28) 170 threads 4,181 comments Premium

   6   6:11pm Mon 11 Jul 2011   Share   Quote   Permalink   Like   Dislike   Protected   I forgot the part about concluding the conversation by taking a monster shit on their faces while singing "America, the Beautiful." For added badness, eat barbeque for a week before setting off on your bank vengeance excursions. The turds, they will burn.

7. APOCALYPSEFUCK is Shostakovich Follow Befriend (28) 170 threads 4,181 comments Premium

   7   6:52pm Mon 11 Jul 2011   Share   Quote   Permalink   Like   Dislike   Protected   Hahahahahaha! You mean the filter prevails! For beautiful, for spacious skies for, erk!, ergh! amber waves of, erk!, ergh! Good one for you, bankster! SMELL THE TRUTH, Bankster! FEEL the BURN, Bankster!

8. Hysteresis Follow Befriend (2) 14 threads 648 comments

   8   7:07pm Mon 11 Jul 2011   Share   Quote   Permalink   Like   Dislike   APOCALYPSEFUCK is Tony Manero says Hahahahahaha! You mean the filter prevails! For beautiful, for spacious skies for, erk!, ergh! amber waves of, erk!, ergh! Good one for you, bankster! SMELL THE TRUTH, Bankster! FEEL the BURN, Bankster! i have to invite you to my parties.

9. Robber Baron Elite Scum Follow Befriend (3) 48 threads 480 comments Roslyn, NY

   9   8:55pm Mon 11 Jul 2011   Share   Quote   Permalink   Like   Dislike   APOCALYPSEFUCK is Tony Manero says Pay cash and visit every bank and mortgage broker within a hundred miles and describe in glowing terms how much loot they didn't make on your need to live indoors - and how you want to see all of them stuffed into supermax prisons and ass raped to bloody pulps by HIV-positive neonazi serial killers for their crimes. I agree. It's either you should pay CASH or you might as well just go fuck yourself. Mortgages rates should rise to 25% with a minimum down-payment of 50% along with a 900+ credit score. This effectively will murder the entire market. Better yet outlaw mortgages.

10. APOCALYPSEFUCK is Shostakovich Follow Befriend (28) 170 threads 4,181 comments Premium

    10   9:02pm Mon 11 Jul 2011   Share   Quote   Permalink   Like   Dislike   Protected   Now you're talking! MCMSinger says Better yet outlaw mortgages.

11. C Boy Follow Befriend 1 threads 208 comments Arlington, TX

    11   10:13pm Mon 11 Jul 2011   Share   Quote   Permalink   Like   Dislike   I think you should buy gold and take out a 30 year mortgage if you think hyper-inflation is on the way.

12. FortWayne Follow Befriend (13) 102 threads 3,762 comments

    12   7:25am Tue 12 Jul 2011   Share   Quote   Permalink   Like   Dislike   APOCALYPSEFUCK is Tony Manero says Pay cash and visit every bank and mortgage broker within a hundred miles and describe in glowing terms how much loot they didn't make on your need to live indoors - and how you want to see all of them stuffed into supermax prisons and ass raped to bloody pulps by HIV-positive neonazi serial killers for their crimes. +1 likewise. I'm never in business of giving my money away to the bank in exchange for renting their money

13. UAVMX Follow Befriend 8 threads 62 comments

    13   8:57am Tue 12 Jul 2011   Share   Quote   Permalink   Like   Dislike   ptiemann says it's a little frustrating with the 'block' function. E.g. I block user 'apocalypsef***' because those comments are graphic/ violent and useless drivel on top. I don't want to subject myself to this junk. However, when other people quote him (as Patrick just did), the filter fails. It would be great if the block function could be extended to the point that quotes of blocked people are hidden as well. As a former code monkey, I do understand that it is a bit non-trivial, esp when one post quotes more than one user, and at the same time one still wants reasonable page load times. wow, take off your purse nancy...go figure you live in SC

14. PasadenaNative Follow Befriend (1) 28 threads 288 comments South Pasadena, CA

    14   9:12am Tue 12 Jul 2011   Share   Quote   Permalink   Like   Dislike   APOCALYPSEFUCK is Tony Manero says Pay cash and visit every bank and mortgage broker within a hundred miles and describe in glowing terms how much loot they didn't make on your need to live indoors - and how you want to see all of them stuffed into supermax prisons and ass raped to bloody pulps by HIV-positive neonazi serial killers for their crimes. This is way better than "Shit My Dad Says!"

15. PockyClipsNow Follow Befriend 19 threads 1,534 comments Los Angeles, CA

    15   10:14am Tue 12 Jul 2011   Share   Quote   Permalink   Like   Dislike   CD's in the bank pay 1.5% You get a mortgage and you pay lets say 5%. If you pay cash you will 'earn' the difference between these two rates - 3.5% return. Thats a REALLY good return on 500k ($17,500 gross per year). Or you could PAY the bank 5% for the mortgage and that would be $25,000 per year. The delta between earning 17.5k and paying 25k per year is $42,500 - a VERY BIG DEAL. Its a no brainer to pay cash unless you are a master day trading junkie and can earn more than 3.5% per year on your 500k RELIABLY every year on average. (these people are out there). Dont be conned into 'stock market goes up 10% per year' lol. If you have 1.5m net worth you probably already know thats BS. However there is a good reason to get a mortgage- insurance against future price declines/earthquake - you can walk away free with non recourse mortgage, for a person with 1.5m net worth this is a big concern as they cannot declare BK

16. ¥ Follow Befriend 35 threads 5,700 comments Bellingham, WA

    16   10:25am Tue 12 Jul 2011   Share   Quote   Permalink   Like   Dislike   PockyClipsNow says CD's in the bank pay 1.5% the flaw in your analysis is assuming interest rates remain dead. I think there's a very good chance this will be the case for the next 10-20 years, but the problem is I don't know anything and am entirely wrong always. The Fed WILL raise rates if we get wage inflation. Hell, the a-holes might even raise rates if we don't get wage inflation. The former is great for the mortgage, the latter will kill housing no matter what, so a mortgage is good so you can walk away.

17. Fitzclarence Follow Befriend 11 comments Boston, MA

    17   7:17am Wed 13 Jul 2011   Share   Quote   Permalink   Like   Dislike   E-man, why do you say that "paying cash now is financially retarded"? Why pay interest if you don't have to?

18. FortWayne Follow Befriend (13) 102 threads 3,762 comments

    18   7:47am Wed 13 Jul 2011   Share   Quote   Permalink   Like   Dislike   PockyClipsNow says Dont be conned into 'stock market goes up 10% per year' lol. If you have 1.5m net worth you probably already know thats BS. we have averaged about 4% a year gains. I always found it silly that if you walk into the bank they show you nice graphs making 20% returns on selected portfolios picked after the outcomes, when reality is completely different.

19. sf.irony Follow Befriend 4 threads 16 comments San Francisco, CA

    19   9:10am Wed 13 Jul 2011   Share   Quote   Permalink   Like   Dislike   Since I want an income producing unit, I'll borrow. These rates are so low!

20. corntrollio Follow Befriend (5) 27 threads 2,073 comments

    20   12:16pm Wed 13 Jul 2011   Share   Quote   Permalink   Like   Dislike   EMan says we have averaged about 4% a year gains. I always found it silly that if you walk into the bank they show you nice graphs making 20% returns on selected portfolios picked after the outcomes, when reality is completely different. I'm not sure what bank posts 20% returns, but they should probably be reported to the SEC if they do. However, it's still quite easy to get more than 4%/year gains if you are truly invested long term. As I've mentioned before, I currently have high quality mutual fund investments that have done far better since 1999, despite the 2 bubbles. However, you have to make sure the investment is appropriate. You may not want to incorporate that much risk for your down payment money, but if you are reasonably young, it's not inappropriate to do this with your 401(k) funds. Most people buy high and sell low. That doesn't produce high returns, as you might guess.

21. cranker Follow Befriend 31 comments

    21   2:22pm Wed 13 Jul 2011   Share   Quote   Permalink   Like   Dislike   APOCALYPSEFUCK is Tony Manero says Pay cash and visit every bank and mortgage broker within a hundred miles and describe in glowing terms how much loot they didn't make on your need to live indoors - and how you want to see all of them stuffed into supermax prisons and ass raped to bloody pulps by HIV-positive neonazi serial killers for their crimes. That seems very tempting, but why do that? Rates are 4.5% today If you are in the top tax bracket, (35% Fed + 10% CA) thats a 45% deduction. You are getting money at 2.5% effectively. Put that into a Intermediate CA Muni fund, and you get about 3.2%. That's 0.7% of tax-free returns. (3.2 - 2.5) There is of course risk, and there are riskier investments, but at 2.5% fixed rate for 30 years, you might want to consider other options.

22. E-man Follow Befriend (31) 34 threads 2,545 comments San Jose, CA Premium

    22   3:22pm Wed 13 Jul 2011   Share   Quote   Permalink   Like   Dislike   Protected   Fitzclarence says E-man, why do you say that "paying cash now is financially retarded"? Why pay interest if you don't have to? See cranker's response above. There are a lot of blue chip companies currently paying 5% to 6% in dividend annually. Preferred shares are paying 7% to 8%. Some REIT companies are paying as high as 19% dividend. Of course there are risks involved with any types of investment. You could pay-off that loan in 10 years if you can average 7% to 8% return on your money annually. Just my opinion of course. :)