All Forum Posts by: Chris May

Let's say I invest in my daughter's lemonade stand and she's really kick *** at lemonade, so I put in $10,000 per year for ten years. She makes $10,000 back each year. So, all total I put in $100,000 and since I got the same amount back my total ROI was 100%, right?

Oh, hi, Chris. Pretty audacious of you to see that I'm using financial calculators to back up what I'm saying and ask for written proof as if I'm quoting from the fairy bible of finance or something. LOL You're right, my lack of Excel knowledge really proves something...... MY LACK OF EXCEL KNOWLEDGE. :-D

Take care and good luck with the trolling elsewhere.

Originally posted by @Chris May:

 This thread is completely exhausting. Amazing how many people jump in here to argue that using debt to pay your debt is a "system", yet clearly have no expertise and repeatedly tell people who do this for a living that they're wrong. Truly incredible. I actually suspect some are the same people on different accounts, but I digress.

Josh - I'll give you the same challenge we've given we've given everyone else: post an Excel workbook where you model out 1) the full lifecycle of a 30 year fixed amortizing loan 2) the same loan and HELOC over the lifecycle of both loans.

Every person who had attempted has either finally conceded they were wrong or disappeared after we pointed out holes in their model. Every. Single. One.

Show your work. I'm confident you will see where you're going wrong.

Scott, I understand why a person would say that. It makes sense. If you borrowed money at a 4% rate then if you pay it back early that's all you're saving. But you're just regurgitating that instead of working it out for yourself. Go to any amortization calculator and plug your own numbers in and then put in $10,000 annual prepayments and look at the savings. Look, I've already done it for you with my numbers below. There is a total savings in my case of $107,000 after ten prepayments of $10,000 ($100,000 total). The TOTAL RETURN is just over 100%. 

Look, they say that you have a 4% annual rate, but it's really around 67% total interest over the 30 years. In my case on a $315,000 mortgage I'm scheduled to pay $210,000, which is more than enough to buy another smaller house. The simple act of paying some of the loan back early nets me a total ROI (not yearly, but total) of 100% and I'm showing you evidence of that fact.

Again, aside from just regurgitating what you think is correct. There is a screenshot below of an amortization calculator that contradicts what you are saying and supports me. How is it wrong exactly?

This does work ill break it down with real numbers. I made $18 an hour with out over time my monthly income 2,400.

My out going bills were just a little less then that. Getting a second job would have made this even easier. 

Let me start by the bank was willing to give me way way way more then I needed. My mortgage balance was 120,000 and the equity was almost 100,000. My plan was to start a manageable snowball. 

So 120,000, my mortgage payment was 1,056.72, 531 to interest 209 to principal and the remaining between taxes and pmi. So every month i was paying 1000 dollars and my mortgage would go down 200 dollars. I.e. getting no where. I had saved 3,000 dollars.

No introduce HELOC I borrowed 10,000 dollars and paid it directly too my principal. At 200 a month in principle it would have taken 5 years to do that. So back to the point I now have a 110,000 dollar home loan with the a 1,056 payment but more going to principal because I'm not being charged 10,000 worth of interest. As I said my monthly out going bills is a little less then 2,200.

So my bills expenses without my mortgage for car insurance a car payment electric oil etc food was right around 1000 a month.  So each pay check depending on overtime of 600-800 went right into the heloc. The first month 3600 went into my heloc. So it went from a 10,000 dollar balance too just under 7,000. I used the part of the 3000 I had in savings to pay my mortgage for that month and my bills I now had about 700 in savings. The following month I did the same thing this time I was only able to put 2,200 to the heloc the 700 from savings paid my bills and the extra I made in overtime paid my mortgage. My Heloc is now just over 5,000 and my mortgage is 10,000 dollars less and it has been 60 days. With out the saving buffer this process slows down a lot, at this point I would pay all my bills and throw extra at the heloc. It took me 2 more months to get the heloc down to 0. 

Some people will say well you had 10,000 dollars to pay off the heloc you could have just paid that too your mortgage. Although true it isn't. A sudden 10,000 lump sum to my mortgage saved me 30,000 in interest and took 5 years off of my loan. If I every time I had 400 left over and threw it at the mortgage you cut it down a little bit but you are still paying hard interest. The Heloc also gave me some financial stability, if I suddenly had a major expense or problem even though 10,000 was off my mortgage I could still spend money to fix a problem. If I had put every cent for 4 months into my mortgage amd something went wrong I would have had too take a loan or panic. 

So again in 4 months I took 10,000 of of my mortgage. Now it was close to November, so I used the Heloc to pay my oil while I paid my bills and put money into savings again. When tax time came around and I got my refund. I took an immediate 10,000 off of my mortgage bring my mortgage down to 97,000. I had my tax returns and saving of about 5,000. Work was slower as the ground was frozen in April in Maine. I was getting 40 hours and seeing about 600 a week. The first month I out 2400 in to the heloc, and paid my bills out of savings. The following month I did the same thing, going into may the season was full swing and I was right back up to 60 hour weeks seeing 800 a week. So at the end of june I paid my heloc of again. So in 1 year I took 25,000 of principle of my mortgage. Again making large amounts of overtime I started paying my bills and saving money so I could refinance my loan as it was now 50,000 less then it was 4 years prior. This saved me as my monthly payment went down. For 4 years of making payments I had paid 48,000 to my mortgage not including the extra payments I made to the principle when I could. I'm 4 years of paying monthly mortgage payment I paid 48,000 dollars and only 8000 had gone to the principal. So in 4 years I paid 12000 less in principal then I did in 1 year using a heloc. I also saved my self 100,000 in interest. It would have taken another 6+ years to get my mortgage to where it currently was. Having a smaller mortgage payment and using the heloc method over another year my mortgage is down to 50,000 dollars. So I 6 years I turned 150,000 into 50,000 unfortunately had I known about this sooner I could have paid my house off sooner. I expect that I will have my house paid off in the next two years. At which point I will be 30 and I can start funneling every cent into savings or invest in money making properties etc. 

Had I stuck to just making mortgage payment for 30 years I would have paid almost 400,000 dollars for my 150,000 dollar home and it would have taken a large piece of my finances for 30 years instead it will have been 8 years and 20 of the years I would be struggling I will now be saving.

So guys I have read both arguments  in excess and I kinda see where both sides are coming from and it makes sense. I guess one big factor that swirls in my head regarding the arguments is how to me, it seem like one of the big differences is TIME. However, putting a dollar value to it may be a whole other discussion.  I am however trying to adopt the heloc strategy, at least just one time, because I really think it will help with my personal situation and wanted to get insight from the 'against camp' if my thinking is flawed. 

The thing is I currently have a PMI on my mortgage. I know the ideal is always for all to put 20% down, but I never had that luxury. The PMI component adds around $200 to my mortgage. I believe if I get a heloc to knock down my principal down to 80 LTV , it will wipe off the PMI right off the bat, saving me roughly 5 years of PMI payments, and approx 12k, which would have been all premium and not benefit me in anyway. At least I see the heloc as a replacement of the mortgage portion subject to PMI. All payments/extra payments will now go to the actual mortgage (aka $200 now goes to actual mortgage, not PMI). Am I flawed in adopting this strategy in this manner? Its seems intuitive to me.

Maybe you didn't see the post where I came up with $1,800,000 in stock returns, too. Saying my math is wrong without showing where actually just makes you sound weak and afraid of my conclusions. What, specifically, did I calculate incorrectly? I've been asking that at EVERY SINGLE STEP because I want to be corrected if I really am doing anything wrong and your answers are excuses. You're too busy, the calculators are not meant to be exact and your personal math is better, I have a lack of understanding about basics, etc. I understand literally every calculation you've shown, I just think you're cherry picking what you want to calculate instead of looking at the big picture. I worked out and apples to apples ten year comparison and that was "wrong" because your theory is that once you stop the interest from accruing you have to wait to actually earn the savings. I think that's a stretch, personally, but I'm entertaining it, because I can at least understand that viewpoint.

Anyway, I'm just being honest, Chris, you look weak and ineffectual saying I'm wrong and not being willing or able to show your work. You might as well stick your fingers in your ears and sing LALALALA while you're at it. Meanwhile, I'm showing my work and you haven't shown where a single digit was incorrect other than saying that my theory is off and I'm stupid. if anything is actually wrong you should be able to show it with your hands tied because you're such a math god.

 I won't get in to the "paying down your mortgage vs. investing the money" debate, because I think that is a separate discussion from the purpose of this thread. But you are 100% right about @Joshua S. needing to compare apples to apples in his comparisons. His comparisons are apples and oranges.

Not exactly, JZ.  The real reason a mortgage has such a large initial interest amount compared to your other loan examples is the TIME it takes to pay it down....thirty *%^$#* years!!!  (otherwise known as the amortization schedule).