All Forum Posts by: Joshua S.

is it on a six year loan with a principal amount of $46,628? Is that where all of a sudden paying it back early costs you something?

Sorry, Scott, but you're not investing the money in early mortgage payoff, it's already owed there. You're simply changing the timing of the payoff. 

Go back to the scenario where you owed $100 to your buddy, its absurd to say that you invested or spent $100 (or any amount) to get the $50 savings. You didn't spend anything to get that savings. You didn't even spend time because you got out of debt SOONER. I assumed we could all agree on that, hopefully that's true because it's pretty simple and straightforward. So, basically what you're saying is that as you scale up the dollar amount or timeline at some point the idea that you're changing the TIMING to get the savings goes out the window and all of a sudden it's an investment. At what point does that happen? If someone owes $2000? $3000? $10,000? If the loan is for a month? A year? 15 years? 30? 

In other words, if you agree that you can change the timing on a $100 payback and get free money without an investment but somehow think that higher dollar amounts or longer terms don't work that way, then I'd like to know at what amount and timeline they start to behave differently.

To answer your question, Scott, the point is that Chris and Matthew among others have said that it makes no sense to put your extra cash toward your paying your mortgage early, because you "only" save 4% or whatever. According to all the naysayers when you only save 4% you are missing out on much greater returns elsewhere. Then I explained that I'm not spending or investing any money into this strategy and Chris replied that maybe the money fairy will reimburse me and so on and so forth, which shows that at the very least he doesn't understand and it seems like you don't, either. So, here's a little game to help everyone understand this idea. Suppose you owe your friend John $100 and it's 50% interest, so you really owe a total of $150. You would never skip out on John because he's your best friend and the kind of best friend that would break your kneecaps over any amount. But he's also a really nice guy and he offers to forgive the interest completely if you give him the money by the end of the month. Obviously, that's a great deal, so you jump at it and give him the $100 ASAP. So, here's the question. How much did you "invest" or "spend" to save that $50? Zero, correct? Since the money was going to him anyway it didn't cost you a cent to make $50. Of course, you really "saved" it, but we all know a penny saved is a penny earned and now that $50 can go toward something else.

If you spent nothing to get $50, it's free money, technically there are no "returns", but one calculator says the ROI is INFINITY. Or if you spent .50 in gas to drive over to his place to give him the money the ROI is almost 10,000%, if INFINITY is too Ron Burgundy for you. These are ridiculous returns, but not incorrect, it's because you didn't spend anything to get them. I'm sure everyone can agree at least in this scenario. Now scale it up to owing John $1000 and he'll forgive $500 in interest if you give him the money by the end of the month. Don't you bend over backwards to do it, because A) now it's $500 and B) it's free money just for paying him back early? Great. Absolutely. Now scale up to $10,000 and $100,000. Obviously, the time frame changes because you're not giving that back by the end of the month, but the premise is the same. You give it back early - which costs you absolutely nothing - and you get free money aka INFINITY % returns or 999,999,900% if you want to put a number on it. The problem that happens with some of these guys is that they say, "Well, if I have 30 years to pay it back I might as well invest it in the stock market in the meantime because I can do way better than 4% while I'm trying to pay it off......". Great, put it in the stock market or buy a property or whatever if you want, but I'll put free money and INFINITY returns against traditional investment returns any day. Imagine it, Matthew was trying to make fun of someone paying their mortgage early because he gets a whopping 16% on a rental or something. I get 71% annualized paying my mortgage early, because it costs me nothing. But you know, I'm supposed to be ashamed that I trust a calculator to give me results. Anyway, most of all I was just saying it's a shame to watch people who live and die by math turn around and make fun of it to save face because of a factor they never considered and/or the returns are in the bazillions. Free money aka INFINITY returns > investment returns hands down every time.

Haha. You might want to brush up on your reading comprehension, Scott. Or your trolling. Have a good one.

Judging by the silence I guess we're all on the same page now, so that's great. I just came back to say that I think it's pretty interesting that the same people who are exulting math over all the other "feel" / "user friendly" / "intangible" / "psychological" aspects of the strategy are the same ones to make fun of the use of calculators in figuring out a rate of return. It's as if you're all of a sudden anti-intellectuals because it suits your argument when you could just say that you're wrong about something. Craziness. I think that's because of fear, but more on that in a minute.

Chris, when someone buys a lottery ticket for a dollar and wins $10,000,000 their ROI is 999,999,900% according to an ROI calculator I'm looking at (you'll have to forgive me for using a calculator, but I'm not a professional mathematician or whatever, so I'm using a tool to get the right answer). That's a ridiculous, insane return, but it's not incorrect. It's true. This is math, your best friend in the universe, the one thing you never betray, remember? So when I tell you I'm not investing any money into this process, I'm just changing the timing of the payments - a true statement - the calculator says the returns are "infinity". In other words, it's free money and the returns are incalculable, but you wanted to compare "returns", so this is as close an answer as there is. It's not my fault that this strategy needs to be compared to any other thing you can do with money before people can see it's merits. You can make as much fun of INFINITY as you want - and I'll admit it sounds like something Ron Burgundy would say, so literally have at it, go nuts - but that doesn't make it any less true. It just makes you look weak and intellectually dishonest for not being able to admit you're wrong. And if one of the other professors ever caught you making fun of a math word like INFINITY I bet you'd be hot water over it.

But I found another calculator that might make you feel better and less like Ron Burgundy, so here are the results. I had to put in a penny to make this one work, because it wouldn't accept $0, but it says my ROI is 999,999,990% (might as well be INFINITY, huh?) and you'll notice I put in 30 years like you specified and there's an annualized return of 71%.

I think you're having a hard time wrapping your mind around the idea that this is my free money vs your investment returns and that's fine, but again, not any less true. It's a unique situation, so it's hard to think of some other comparison to confirm or contrast it against, but I owe a liability and I'm paying the same total amount toward principal as the day I closed on the loan, just changing the timing. You could try to say there are opportunity costs in the sense that I could be doing something else with the same money, but why on Earth would I make 9% or 16% on a traditional investment that incurs risk when I can make guaranteed free money while I get out of debt early? It makes no sense. And I won't be lectured about opportunity costs by people who have checking account balances when I'm the one putting my cash to work. :) Anyway, if you're still struggling with it, just try to make some more fun of it and that'll make the truth go away. I mean, the much better suggestion would be to reevaluate and change your mind based on the new information you hadn't realized, but you've demonstrated that you won't do that, so the only other thing I can suggest is to make fun of the truth and maybe it won't bother you anymore.

So, back to the fear thing. I think the reason you're all so willing to talk in circles, deliberately misrepresent, deflect, and ignore perfectly good points, be condescending, hostile, and inflexible is because you're afraid you are missing out. You're all very intelligent, so you know I'm right and your checking accounts are doing nothing for you. You might as well have the money under your mattress. So, you see an idea like the HELOC thing (or rubbing your money on pictures of Robert Downey Jr and then paying your principal early) and it's big time FOMO, so you have to wail and moan that there are better hypothetical ways to do everything and make better returns with the cash in your checking account.... none of which you are doing. I get it, but you shouldn't be afraid. You can get INFINITY / free money returns any time you want, you just have to stop lying to yourselves and change your behavior.

Anyway, someone reported one of my posts earlier, which is really sad. I'm so sorry I hurt someone's feelings, I didn't mean to do that. Let's hug it out sometime. Hopefully this is the end here and this can be goodbye for now. I'll buy you all a beer next time you're in town. Have a good weekend.

Duplicate

Me: "Hey, here is an easy way to save thousands on your mortgage if you have money sitting around in checking."

You: "Yeah, but instead of saving mortgage interest there are way better investments that I'm not doing with that money. Let's compare all the ways that I'm not doing anything with my extra cash to the way you ARE using your extra cash."

Me: "A bird in the hand is worth two in the bush."

You: "Yeah, but if I really wanted to get those two birds I could and you'd be totally sorry you ever compared yours to mine and my dad can pee further than yours and other hypothetical things".

Me: 🤪😂🙄

Well, Chris, you're the stickler for math. I'm not putting any money into paying it early, because it was already going there. Calculator says its infinity percent. Call it 1000% or whatever number suits you, it's free money, so there's no actual "returns", but you are intent on comparing the rate with everything else and that's the only way to get a "rate". It's your fault we're comparing it to every investment in the known universe, not mine. :)

Here let's try something. Forget the HELOC for a minute. I like to drive my money around in the car to show it around town before putting it on the mortgage early. It costs me a little gas money, but that's just how I like to do it. There are certain intangible benefits for me, call them psychological benefits if you want. I'm crazy and insane.

1. Am I saving money on mortgage interest or does the drive around in the car somehow negate the savings?
2. Am I saving money on mortgage interest vs paying maximum mortgage interest like you do?

Many of us, including detractors have posted the math to show that it works, the detractors' only point is that you dont "need" it, because you could just skip using the HELOC and pay extra principal. Which I have agreed to times over.

So, your argument is why pay a higher rate to the HELOC to do the same thing you could do without one. Great. Then we give the benefits you get with the HELOC that you can't quite grasp so you insist that it's not a magical formula (something we aren't claiming) and then we start over.

Your argument is why would you pay extra for the BMW when you could get there in a Toyota. And ours is - great, take the Toyota, I like certain things about the BMW.

But when you compare the HELOC strategy to doing nothing, the strategy absolutely saves thousands of dollars because ANY WAY OF PREPAYING MORTGAGE PRINCIPAL SAVES THOUSANDS OF DOLLARS. ANY WAY AT ALL. Burying it in the back yard and then paying it early will do it. Stalking Kate Winslet so you can rub $100 on her left breast and then paying early will do it. We're comparing paying early to not paying early when we say that it saves money and you're comparing paying early with a HELOC to paying early in another way when you say it doesn't. That's why neither side will give up - we are both right. But we have conceded your point and you refuse to concede ours. We could all just say, great, there are plenty of ways to skin a cat if you want to save on mortgage interest (that's what we are saying) but you are hellbent on discrediting one single way that can't be discredited. If I told you that I take my money to church and pray over it before paying it early, you couldn't discredit that, either. Because its still going on the mortgage early and that's just my preferred way to do it. One more time: ANY WAY OF PAYING EARLY WILL SAVE MONEY WHEN COMPARED TO NOT DOING IT. You get it?