wrote in message
...
On Mon, 19 Sep 2005 12:37:26 GMT, "NOYB" wrote:

Or they could do a reverse mortgage and retire off the 1000% increase in
equity that they accumulate over the the next 25 years.

That's not how a reverse mortgage works. The mortgage company pays a
fixed amount per month (usually based on a fraction of the current
appraised worth plotted against an optimistic guess on how long the
person wil live) and hopes to pocket the appreciation.

They only hope to pocket the appreciation beginning from the initial
starting point of the reverse mortgage. Any appreciation that occurs
between now and when the reverse mortgage starts belongs to the home owner.
The homeowner's equity in the house drops as the bank continues to make
payments. But the homeowners reaps the benefits of the appreciation that
occurred before the payments begin.


They also won't
write a reverse mortage unless the owner is pretty old.

In other words...most retirees would qualify.

It is really just a scam that the banks foist off on old folks without
anyone to look out for them.

It's not a scam. It's a process that allows the homeowner to take out the
equity of the home without having to pay monthly payments on the equity
line.

Here's another way to look at it:

Suppose you live in a million dollar home, but have zero equity in that home
(ie--you owe 1 million dollars). In 30 years, that home is worth $4
million, and you owe still owe $1 million on it (ie--you had an
interest-only loan). You have $3 million in equity on the home. You decide
to take out $2 million of that equity, and put it in an investment that pays
a rate equal to what the monthly payment would be on the loan (ie--you end
up with a net monthly outlay of cash of zero). You can then use the $2
million to live on.

A reverse mortgage does the same thing. It gives you the $2 million, but
amortizes it out over the life of the reverse mortgage. You're simply
taking the money in payments instead of a lump sum.

"Harry Krause" wrote in message
...
NOYB wrote:

Here's another way to look at it:

Suppose you live in a million dollar home, but have zero equity in that
home (ie--you owe 1 million dollars). In 30 years, that home is worth $4
million, and you owe still owe $1 million on it (ie--you had an
interest-only loan). You have $3 million in equity on the home. You
decide to take out $2 million of that equity, and put it in an investment
that pays a rate equal to what the monthly payment would be on the loan
(ie--you end up with a net monthly outlay of cash of zero). You can then
use the $2 million to live on.

A reverse mortgage does the same thing. It gives you the $2 million, but
amortizes it out over the life of the reverse mortgage. You're simply
taking the money in payments instead of a lump sum.


The older you get, the bigger the lever you're going to need.


That's true. But considering I'm only 34, I have plenty of time to begin
working towards debt reduction. I have just under 4 years before my
practice is paid off. Once that occurs, I'll have another $6k available in
pre-tax dollars each month that I can use to pay off the mortgage. I intend
to use $3k of that money to go strictly towards principle on the
loan...which means that I will have paid off the house in just under 27
years from now...or when I'm 61 years old.

And that still leaves another $1-2k/month for payments on my next boat.

NOYB wrote:
Here's another way to look at it:

Suppose you live in a million dollar home, but have zero equity in that home
(ie--you owe 1 million dollars). In 30 years, that home is worth $4
million, and you owe still owe $1 million on it (ie--you had an
interest-only loan). You have $3 million in equity on the home. You decide
to take out $2 million of that equity, and put it in an investment that pays
a rate equal to what the monthly payment would be on the loan (ie--you end
up with a net monthly outlay of cash of zero). You can then use the $2
million to live on.

The problem here is that you've already made payments on that
interest-only loan that far far exceed your imaginary equity.

Untill you sell it an pocket the cash, equity is nothing but a bubble.
just like the stock market.

BTW back in the late 1990s, there were plenty of articles in newspapers
& investment magazines about how the stock market could never possibly
go down.

I'm still wishing you luck, NOBBY, apparently you have no clue you need it.

DSK

"DSK" wrote in message
...
NOYB wrote:
Here's another way to look at it:

Suppose you live in a million dollar home, but have zero equity in that
home (ie--you owe 1 million dollars). In 30 years, that home is worth $4
million, and you owe still owe $1 million on it (ie--you had an
interest-only loan). You have $3 million in equity on the home. You
decide to take out $2 million of that equity, and put it in an investment
that pays a rate equal to what the monthly payment would be on the loan
(ie--you end up with a net monthly outlay of cash of zero). You can then
use the $2 million to live on.

The problem here is that you've already made payments on that
interest-only loan that far far exceed your imaginary equity.

Nope. Try again. An interest-only loan on $1 million at 6% interest gives
you a monthly payment of $5000. Over 30 years, those payments total $1.8
million. If you have $3 million in equity in the place at the end of 30
years, and only spent $1.8 million in payments, you're $1.2 million ahead of
the game...and you essentially lived for free for all of those years. Even
if you include taxes and insurance, you still lived for free.

Your monthly payments over all of those years essentially equates to a
forced savings plan.






Untill you sell it an pocket the cash, equity is nothing but a bubble.
just like the stock market.

BTW back in the late 1990s, there were plenty of articles in newspapers &
investment magazines about how the stock market could never possibly go
down.

That's BS. A company could go out of business or bankrupt (Enron, WorldCom,
etc), forcing the premature liquidation of that asset at a loss. Property
is always there. I have 28 years before I plan on retiring. Any possible
correction in the market will have more than re-corrected itself by then.

Suppose you live in a million dollar home, but have zero equity in that
home (ie--you owe 1 million dollars). In 30 years, that home is worth $4
million, and you owe still owe $1 million on it (ie--you had an
interest-only loan). You have $3 million in equity on the home. You
decide to take out $2 million of that equity, and put it in an investment
that pays a rate equal to what the monthly payment would be on the loan
(ie--you end up with a net monthly outlay of cash of zero). You can then
use the $2 million to live on.

The problem here is that you've already made payments on that
interest-only loan that far far exceed your imaginary equity.


NOYB wrote:
Nope. Try again. An interest-only loan on $1 million at 6% interest gives
you a monthly payment of $5000.

And you have a fixed rate for that 30 years, right? It'll never never
never go above 6%, right? And you don't have to pay taxes on that
"appreciated" property, right? And your monthly bills aren't any higher
in proportion to the size of that 'million dollar house' right?

The bottom line here is that you're living on credit and trying to
convince yourself it's sound fiscal policy.

You probably feel a little guilty because you really know it ain't and
you're risking your family's future. Otherwise you wouldn't even have
posted that feel-good article about how market bubbles never ever collapse.

DSK

"DSK" wrote in message
...
Suppose you live in a million dollar home, but have zero equity in that
home (ie--you owe 1 million dollars). In 30 years, that home is worth
$4 million, and you owe still owe $1 million on it (ie--you had an
interest-only loan). You have $3 million in equity on the home. You
decide to take out $2 million of that equity, and put it in an
investment that pays a rate equal to what the monthly payment would be
on the loan (ie--you end up with a net monthly outlay of cash of zero).
You can then use the $2 million to live on.

The problem here is that you've already made payments on that
interest-only loan that far far exceed your imaginary equity.


NOYB wrote:
Nope. Try again. An interest-only loan on $1 million at 6% interest
gives you a monthly payment of $5000.

And you have a fixed rate for that 30 years, right? It'll never never
never go above 6%, right?

Yes. Wells Fargo is now offering a 30 year fixed rate interest only loan.
The rate that they quoted me was in the mid 6% range.

And you don't have to pay taxes on that "appreciated" property, right?

Can't go up more than 3% every year thanks to Save Our Homes Act.


And your monthly bills aren't any higher in proportion to the size of that
'million dollar house' right?


No. My house is only worth a million plus dollars because of its
location...not its size.

The bottom line here is that you're living on credit and trying to
convince yourself it's sound fiscal policy.


The only debts that I have right now are my house and my business loan.
Both cars, both boats, and any of my other assets are paid for. Credit
cards get paid in full monthly.


You probably feel a little guilty because you really know it ain't and
you're risking your family's future. Otherwise you wouldn't even have
posted that feel-good article about how market bubbles never ever
collapse.

I posted it because I like to argue. ;-) I knew you'd bite.

NOYB wrote:
And you have a fixed rate for that 30 years, right? It'll never never
never go above 6%, right?


Yes. Wells Fargo is now offering a 30 year fixed rate interest only loan.
The rate that they quoted me was in the mid 6% range.



Tell you what.
Spreadsheet the difference between 6% and 6.5% over 30 years, then get
back to me.

And you don't have to pay taxes on that "appreciated" property, right?


Can't go up more than 3% every year thanks to Save Our Homes Act.

And do the math on 3% compounded over 30 years too.


The bottom line here is that you're living on credit and trying to
convince yourself it's sound fiscal policy.



The only debts that I have right now are my house and my business loan.

And your house appreciation is something that you're gambling your
future for, staked to the value of waterfront property in an area of
frequent hurricanes. Add that to the fact that you like to plunder the
environment, and you have a real problem with facts & logic here (but we
already knew that).

If Bush & Cheney's environmental policies are carried out for the next
30 years, nobody is going to want to live with miles of the filthy
cesspool that our coastal waters are becoming with increasing rapidity.
And that's not counting the rising ocean level which may put your home
under water (or behind a levee... hmmm, where have we heard that before)
within 30 years.

I posted it because I like to argue. ;-) I knew you'd bite.


In other words, your 'million dollar' house is fiction? Thought so. I
also still think you're a closet Communists trying to discredit the right.

"NOYB" wrote in message
.net...

"DSK" wrote in message
...
Suppose you live in a million dollar home, but have zero equity in
that
home (ie--you owe 1 million dollars). In 30 years, that home is worth
$4 million, and you owe still owe $1 million on it (ie--you had an
interest-only loan). You have $3 million in equity on the home. You
decide to take out $2 million of that equity, and put it in an
investment that pays a rate equal to what the monthly payment would be
on the loan (ie--you end up with a net monthly outlay of cash of
zero).
You can then use the $2 million to live on.

The problem here is that you've already made payments on that
interest-only loan that far far exceed your imaginary equity.


NOYB wrote:
Nope. Try again. An interest-only loan on $1 million at 6% interest
gives you a monthly payment of $5000.

And you have a fixed rate for that 30 years, right? It'll never never
never go above 6%, right?

Yes. Wells Fargo is now offering a 30 year fixed rate interest only loan.
The rate that they quoted me was in the mid 6% range.

And you don't have to pay taxes on that "appreciated" property, right?

Can't go up more than 3% every year thanks to Save Our Homes Act.


And your monthly bills aren't any higher in proportion to the size of
that
'million dollar house' right?


No. My house is only worth a million plus dollars because of its
location...not its size.

The bottom line here is that you're living on credit and trying to
convince yourself it's sound fiscal policy.


The only debts that I have right now are my house and my business loan.
Both cars, both boats, and any of my other assets are paid for. Credit
cards get paid in full monthly.

Why is it liebral types cannot understand the "cost" of money. If you can
borrow at a net cost of 3-1/2%, and you can invest at a average return of
6-7%, you should ALWAYS have a max. mortgage.




You probably feel a little guilty because you really know it ain't and
you're risking your family's future. Otherwise you wouldn't even have
posted that feel-good article about how market bubbles never ever
collapse.

I posted it because I like to argue. ;-) I knew you'd bite.

"DSK" wrote in message
...
NOYB wrote:
And you have a fixed rate for that 30 years, right? It'll never never
never go above 6%, right?


Yes. Wells Fargo is now offering a 30 year fixed rate interest only
loan. The rate that they quoted me was in the mid 6% range.



Tell you what.
Spreadsheet the difference between 6% and 6.5% over 30 years, then get
back to me.


It's interest only. Even *you* can figure out the monthly payment without a
spreadsheet:

Loan value * interest rate/12=monthly payment

At 6.5%, the payment is $5416.67/month. The total of the payments for 30
years is $1.95 million...which is still less than the 3 million in
equity...leaving you with a net gain of $1.05 million.


And you don't have to pay taxes on that "appreciated" property, right?


Can't go up more than 3% every year thanks to Save Our Homes Act.

And do the math on 3% compounded over 30 years too.

The increase is peanuts compared to the figures that we're talking about.
Remember that you're still $1.05 million ahead of the game before you start
counting taxes. Even in the worst case scenario, the taxes eat up less than
half of that amount.

P Fritz wrote:
Why is it liebral types cannot understand the "cost" of money.

Why is it that you never post anything about BOATS?

Why is it that you only post "me too" crap to your far-right-wing wahcko
buddies? Do they need your emotional support? Does being a lap dog make
you feel safe?


.... If you can
borrow at a net cost of 3-1/2%,

Please explain how a 6 1/2% mortgage is a "net cost" of 3 1/2%?


... and you can invest at a average return of
6-7%, you should ALWAYS have a max. mortgage.


So, did you take a cash-out refi to invest in the stock market?

BTW an "average return" of 6 ~ 7% isn't very good for the stock market,
historically; and it still leaves open the possibility that you may need
the cash coming out of a bust year... which leaves you broke in the ditch.

So, who is actually the smart one here? Nobby with his 'million dollar
home' which he can't really afford but hopes the housing market bubble
will pay for, or your 'me-too' BS?

DSK