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Well, pardon me, but I've got other things to do besides just trying to remember everything you've ever written. That would be one hell of a task, even for me.
But the thing is, this thread isn't about what YOU would do. Nor is it about what "I" would do. Instead (for about the 10th time), it's about the OP and people in a similar situation. I think that everyone who cares to hear your opinion of it and my opinion of it have already heard all they care to hear about the subject from either of us.
Soooo, unless this thread takes some wildly different twist, I'll just bow out of it. Now it's all urine... uh, I mean "yours".
Well no where did I state what you suggested I said , so why would you say I recommended that people should take a mortgage and stick it in a bank in your post then ?
Quote:
Originally Posted by Chas863
So, instead, you recommend that they borrow money on their house and car and pay interest (as the OP inquired about) just so they could have some money in a savings account?????? Bad idea to pay interest on borrowed money when a person doesn't even have a need/use for the borrowed money. But I guess we've already plowed this ground, so I'll just say we agree to disagree.
So to mortgage or have no mortgage. Mortgage and money in the bank or mortgage and less money in the bank.
Here's something to think about:
What if it burns down?
Do or don't you want a mortgage?
It does happen!
If you have a legitimate claim on your homeowner's policy, the insurance company will pay as stated in the policy regardless of whether you have a mortgage on the property or not. The company holding the mortgage note will have first priority on the money paid by the insurance company. You'll get what's left over (if any). If no mortgage, then all the money goes straight to you.
If you have a legitimate claim on your homeowner's policy, the insurance company will pay as stated in the policy regardless of whether you have a mortgage on the property or not. The company holding the mortgage note will have first priority on the money paid by the insurance company. You'll get what's left over (if any). If no mortgage, then all the money goes straight to you.
Couple of things to dig down on.
A. What if it is a condo and you have shared ownership and the association has the major structural insurance?
B. What is the cash flow situation that enables you to find housing and restarting one way or the other while things are playing out. That can be weeks and months.
Do you have liquidity to do what you need to do while you reestablish your life.
It is a real life scenario, that plays out differently for different people when it happens and it does happen.
Just look at what happens in a Co-op if the building defaults on their mortgage….you as the coop owner may have a paid for apartment and it can be ups for grabs by the buildings bank .
Just look at what happens if a Co-op if the building defaults on their mortgage….you as the coop owner may have a paid for apartment and it can be ups for grabs by the buildings bank .
It has happened
All of these scenarios do happen and that's why now even more than ever I swear by financial overkill in retirement.
I get all sorts of junk mail in my inbox, and here are two different pieces of free advice that landed there recently. The financial institution where I have my Roth (a managed mutual fund, I converted it last year, and have very rarely even looked at it since then - only to avoid the online access being inactivated, otherwise have no plans to do anything with that account until I am 80-85, ie, 20+ years from now), so, the financial institution sent an e-mail that says the best fixed asset to have right now would be a loan. I don't know how a loan is an asset, but anyway, a mortgage is a form of loan, and I suppose there is some logic in what they say, if you have a low-interest loan (which is decreasing in real value with inflation, so you in fact owe less) rather than savings in the bank (which are likewise decreasing in real value, so you in fact own less).
But then I also got some mail aimed at retired medical professionals, advising them to keep owning their home until their 90s, as an inflation-resistant asset. Okay, I know about that, and am doing that x3 :-). But to maximize the benefit (since I bought my condos with cash, no mortgages), according to the first advice, I should try to get a HELOC on the main home condo. But I don't need it, I don't know what I would do with it.
So, it goes back to the peace of mind without mortgages, loans, or any other unnecessary financial maneuvers. If I ever need a HELOC, I'll apply for it, but should anyone worry themselves wondering whether they should have a debt they don't need, or don't reasonably expect needing?
Rather than borrow money to buy a car and borrow money to buy a house just so that you can have some money in the bank in case you need it, why not just pay cash for both the house and car and then, after the closing, take out a HELOC loan?
You could have hundreds of thousands of dollars available to you instantly with a HELOC loan without paying any interest until you actually use the loan. Otherwise, you're paying interest on the car and on the house even though you may never need the money that you stashed in the bank. With a HELOC loan, the money is available IF YOU NEED IT, but you pay no interest unless/until you actually withdraw it. Why pay interest for money that's on standby when you can have standby money available for free????
Ah, I just saw this. Right, that is my thinking too. The only problem might be getting a HELOC as a retiree with low taxable income (I don't know if it would be a problem, never tried to get a HELOC). Keeping a lot of cash is probably wasteful, and (since I was a victim of identity theft at not even the particularly old age of 58) my main issue with it is actually easy accessibility. I intentionally do not want to own an accessible large amount of cash, it is better if it is tied in something where the proof of ownership, and the procedure of making it liquid, takes various steps where the ID has to be firmly proven (eg, after the ID theft, withdrawal of anything from any of my accounts that contain any real value requires a medallion signature guarantee, not even a notarized signature. Getting a MSG is a huge production, and pretty firmly theft-proof).
It's a personal decision depending on individual financial circumstances.
For us, when we were doing a refinance of our home we faced the similar decision. We had enough savings to significantly pay down the mortgage but we would be emptying out our rainy day funds.
What we had to figure out was
1. Our future projected income
2. Economic uncertainty during COVID
3. Our plan for the future.
At the end, we decided to refinance the mortgage but keeping our savings for rainy days fund. Also, we used a part of that savings to purchase additional rental properties to increase our future income. We also made sure if I loss my job as primary source of income, we have enough in the savings to cover both mortgage payments & expenses for at least a year.
In the final analysis, it was our calculations what is the best way to use our cash to meet out future financial objectives. For some, the financial security is having no debt. For us, it was making sure our future projected income minus financial obligations = good cash flow. If we have additional savings, we will pay down the mortgage but that's not the first priority right now. Perhaps it's a different mindset, but sitting on a fully paid off house with no income is not the best way for your money working for you.
But then I also got some mail aimed at retired medical professionals, advising them to keep owning their home until their 90s, as an inflation-resistant asset. Okay, I know about that, and am doing that x3 :-). But to maximize the benefit (since I bought my condos with cash, no mortgages), according to the first advice, I should try to get a HELOC on the main home condo. But I don't need it, I don't know what I would do with it.
So, it goes back to the peace of mind without mortgages, loans, or any other unnecessary financial maneuvers. If I ever need a HELOC, I'll apply for it, but should anyone worry themselves wondering whether they should have a debt they don't need, or don't reasonably expect needing?
A HELOC is not a debt.
Just to be clear, the advice most likely is not to incur a debt, it's to acquire a line of credit. That's all a HELOC is. It doesn't become a debt until you have a need for the money and actually access your LOC. Ergo, you would never "have a debt (you) don't need."
I have two Visa cards, each with credit access lines of over $50k. That doesn't mean that I have incurred a $100k debt that I don't need.
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