All Forum Posts by: Joshua S.
Joshua S. has started 2 posts and replied 293 times.
Originally posted by @Jeremy Z.:
"because all debt is exactly the same no matter what according to the detractors"
You just keep demonstrating your ignorance about what we are trying to convey to you here. Statement after statement, you keep showing that you still don't have a handle on some core principles of financial math. Your last post was riddled with them, but that one might take the cake.
My point is that the math everyone keeps stating is deliberately comparing $10,000 on the mortgage and $10,000 on the HELOC as the same exact thing, the "swapping one type of debt for another" argument.
What I'm getting at is that we live in the real world and what matters is the true real world cost of doing business. For example, when I got my first rental I thought it would be amazing and I'd be making tons of money. A bunch of maintenance calls and a couple bad tenants later and I realize it's as much about building equity as it is about cash flow and it's not all peachy in landlord land. I make money, but it's nowhere near what I thought because of the associated costs.
The REAL WORLD COST of $10,000 on the front end of a $200,000 / 4% mortgage is $21,000 in interest and 2.5 years. That's what the calculators say. It's what the amortization table says. There's no disputing it. It's not rocket science brain surgery. It's because as you pay it you are also paying these massive interest charges that get in the way of paying it down quickly. Slapping 4% on it and defending it because that's what the bank told you is ridiculous. Imagine that instead of paying interest, you just pay your principal portion for every payment, but you have to fly it to the lender and personally deliver checks. Your plane tickets are about $660/month. Is that real world enough for you? The interest you pay - whether or not it's 4% annual interest divided by 12 months amortized over 30 years blah blah blah - 1) stops you from paying down your principal and 2) is a non-refundable fee you're paying to the lender to have their money out. The real world cost to pay that money back on their schedule is $21,000 in interest and 2.5 years and that's a waste compared to having more of your money go toward principal where you can get it back later.
The REAL WORLD COST of $10,000 on a HELOC is $370 in interest and 10 months because you are putting all of your income squarely up against it instead of letting your money rot in a checking account. People keep talking about "making payments on a HELOC", but your income is going in every two weeks - what payments? It's like if you have a minimum payment on a credit card and you put a $3000 payment on there. Are they still looking for the $35 from you? You pay off the HELOC in your normal day to day life because all of your money goes toward it. Therefore, when you calculate the real world cost of one vs the other, there's no comparison. It's way better and more efficient to have the money on the HELOC where you can pay it down quickly and painlessly. But you guys are too focused on the math to see the reality of the situation, that's all I was saying. I've been asking you guys to come up with the calculations that account for the difference in speed and ones that address how interest is saved when you prepay principal, but it went from a calculation flood to a calculation drought. I AM interested in the math, but I'm interested in the math as it pertains to the differences between the two approaches, not the strict, regimented, all debts must be paid on the same time table, let's ignore any real world differences math.
Originally posted by @Nick Moriwaki:
Originally posted by @Jeremy Z.:
"In addition, by keeping the mortgage, you lock away those extra payments. If an opportunity presents itself you need to refinance to get access to that money again."
Or just get a HELOC. I know you have many arguments for why you might not be able to get one when needed or why that might not be ideal, but I'm not so sure that isn't offset by the adjustable rate of your original HELOC, etc.
Others came on here talking about getting a $20,000 HELOC but only using $10,000 for "chunks". Doing that is a recipe for worse financial management for many of the people who fall for this sales pitch, people's with finances that don't even afford for them to see the benefits being pitched anyway.
I can see we are in a stalemate now. I should have recognized that a long time ago.
Exactly, getting a HELOC would be refinancing at that point. Probably at a cost of a few weeks and $1000 - $1500. That's not even getting into potential hurdles in DTI and reserves if you tried to keep up with the first position HELOC strategy by paying additional to your mortgage.
So you're suggesting a potential better option is to wait and get the HELOC later, forgoing the savings until that point, and dealing with the problems listed above?
That's what I'm trying to figure out. Everyone keeps rattling off "simple" counters to the strategy as if the financing just appears or that if you just throw the $50K into the mortgage it functions the same not acknowledging what the resulting scenario looks like. All the while, no one has been able to show that the HELOC strategy I presented isn't simple, or comes with opportunity costs, or anything really. Granted there is an upfront cost (potentially) and has variable interest, but it lowers the balance and keeps your money available. And if you play with the numbers, you'd see that in most scenarios the variable interest doesn't affect the total interest paid as much as you'd think.
I understand that there was a large debate going on regarding a slightly different spin on this strategy, and that the math may prove that strategy to be ineffective, but now that the dust has settled I'm trying to address a variation that I think is a home run and haven't been able to get much response other than that I'm not comparing apples to apples scenarios.
Nick, there are some differences in our approaches, but only ones that change the risk, not the results in any distinct, tangible ways.
In other words, you replace your mortgage with a HELOC and expose yourself to a variable rate for a larger portion of your debt and a worse position if you are frozen. For those risks, and I guess because of your physical location your $50,000 is at a better teaser rate, you may have slightly better results, but as you said I can also bail at any time. To me, that's a wash, because I'm getting lower risk in exchange for my lower results.
That said, neither you or I can pay down $10,000 or $50,000 or $200,000 any quicker than our income will allow, but this is simply a more efficient way of going about it.
Most people won't accelerate their mortgage at all, which is goofy because it's the only investment where you can get a massive ROI and get out of debt. Those who do want to accelerate, many will save save save and then have an emergency or buy a big screen with it.
In either of our situations you pay a small amount of HELOC interest (which I have argued is more than paid for, but in the worse case scenario is the same as you would pay on the mortgage because all debt is exactly the same no matter what according to the detractors) in order to keep your money comfortably focused on your mortgage. The alternative works out mathematically, but is a mess, which is why no one seems to be doing it. Calculate what your discretionary income at the end of the month (nevermind that throughout the month the money didn't spend any time on your mortgage because you didn't know if you would need it or not), THEN dump the money on your mortgage. If the electric comes back high or the car goes in the shop or your wife needs new bedroom toys because you're spending so much time managing the strategy, now you borrow against the HELOC to pay. You and I get that that's "so much better" than our strategy, but we're really lazy and just want bills and income all coming and going from the same account because we can't be bothered to do it right. But we get that now and we're sorry. I would still rather do it wrong than not at all, so I'm all in. Hopefully this a good summation for everyone, you're just a lazy bastard who's doing it wrong, buddy. Nothing else to worry about. Everyone admits that the strategy works, they just think you should be doing it manually.
Originally posted by @Jeremy Z.:
I'm not fully clear on what you are asking us to show in that last paragraph, but I'm pretty certain the calculations that have been presented already have the answers.
On another note, you did remind me that I need to start going to the gym more. Full agreement with you there. :)
No, everyone has been focused on calculating the mortgage vs HELOC numbers. What I'm saying is forget the HELOC for now, PLEASE. The calculators I presented may not be perfect, but they are not "wrong" or way off. I'm sure they are reasonably correct.
So, imagine someone gets a bonus or wins the lottery or any other free money you can imagine and you've never even heard of a HELOC. They put the free money toward their principal. Calculate the savings on Bankrate or Quicken or whoever and then show that work. If they say you save 2.5 years and $21,000 like my previous example, how did they arrive at those savings? What are the calculations that they did to arrive at those numbers and where do the savings come from? That's what I want to know. Again, please forget the HELOC.
I have my understanding of where the savings come from, but no one seems to want to set aside the HELOC and attack this question directly and I suspect it's because you know I'm right. So, just show me the calculations and how the money is saved and make sure it matches the results on the calculator. It's that simple. It should be pretty simple for you guys with all the other calculations I've seen.
Just to be clear, this request has absolutely nothing to do with a HELOC. There is no HELOC involved in this question whatsoever. The HELOC has been gagged and chained up like gimp and I'm not interested in anything related to the HELOC discussion at this time. I don't feel like counting, but I'm trying to get this NO HELOC thing up to about ten times, because this question has nothing to do with a HELOC. Please answer the question in a manner that is completely devoid of HELOCS. Thanks so much (not interested in answers regarding HELOCS right now).
Sincerely,
Please forget about the HELOC and show me exactly where paying extra principal saves on interest and make sure it matches the calculators. Thanks so much.
Post: Am I a Jerk for Asking Buyers to do this?
- Posts 294
- Votes 96
The agent's priority is to get the deal done so they can get their commission. Anything that could rock the boat is against THEIR best interest, so he's just trying to protect his deal.
I would be inclined to do the same thing, but I think you have to pick your battles. That said, maybe as a compromise you could approach your agent about having the buyer sign an addendum to the contract agreeing to a hard deadline at the 12 day mark and if they don't make it THEN they will have to pay holding costs. This way you aren't being a jerk, but are also not being walked on and you're offering a fair compromise.
Originally posted by @Jeremy Z.:
Originally posted by @Chris May:
Originally posted by @Jeremy Z.:
Ok, one more thought because I can't help myself. You seem to be hung up on the amortization schedule and scheduled interest.
Here is an example to ponder:
Year 1 - You buy a house and take out a loan for $200,000 at 4%.
Year 2 - You come into a large some of money and pay off the remaining loan. Bankrate's calculator says you saved almost $144,000.
Year 3 - You sell the home.
Did you really save $144,000? No. You saved 1 year worth of interest because you ended up selling it anyway.
That savings that the calculator is showing you is only if you follow the full 30 year schedule. You keep comparing your HELOC approach to the full 30 year schedule. Compare your HELOC approach to a mortgage being paid in the same aggressive fashion.
Again, we aren't saying you're not saving by using the HELOC method. It is your claim that it allows you to pay faster that we take issue with. It might help you keep on an aggressive pay down schedule, but there is nothing* about the HELOC that allows your payments to chew through interest faster.
*Note: There IS an "average daily balance" aspect of using your HELOC as a checking account that can have a marginal effect on pay down time, but that is separate from the current discussion at hand.
HAHAHA I love that I'm not the only one throwing my phone at the wall from reading this thread.
It's been an exercise patience and persistence for sure. I feel like we've reached a breakthrough or an impasse, but then again I thought that about six pages ago!
I'm trying to move on, guys. Here's my summary of what happened here, so hopefully we can put it to bed.
1. We all agree that paying extra principal is a good idea. Cool.
2. The HELOC thing is a way of keeping you disciplined and making it easy to keep all of your discretionary working toward the mortgage to accomplish #1.
3. Your answer to that is that you "could" just do the same thing without the HELOC, yet none of you seems to be doing it ostensibly because it's not very convenient or comfortable to figure out how much you can spare each month and then empty your checking onto the mortgage and hope you don't have any unexpected bills.
4. My answer to that is those are the exact benefits of the HELOC strategy. It's easy to put all of your discretionary into the mortgage without juggling anything or worrying that you are going to be short.
5. Your answer - but there's a cost.
6. My answer - yes, there's a cost, but if you aren't currently doing it because it's uncomfortable, why not pay a small cost to make it comfortable and be able to accomplish the goal?
7. Your answer - but you *COULD* do the same thing by simply taking all of your discretionary income at the end of the month and put it on the mortgage while using the HELOC as backup. This way there are no costs.
8. My answer - great, is that what you do currently?
9. Your answer - no, it's not very convenient to do that.
Etc etc etc etc etc etc Etc etc etc etc etc etcEtc etc etc etc etc etc
Etc etc etc etc etc etcEtc etc etc etc etc etc
Etc etc etc etc etc etcEtc etc etc etc etc etc in a never ending circle.
So, in other words, to me this is the conversation.
Hey, man, there's a really great new gym down the street and it's only $40/month. You should check it out.
Nah, I need to get in shape, but I don't want to pay for a gym when I can ride my bike around town for exercise.
Oh, that's cool. How often do you ride?
Almost never. We live in Seattle and it rains nine months out of the year, dummy.
Yeah, I know, that's kinda why I suggested the gym. You can ride indoors and check out the hotties and it's a pretty low cost. Just skip one dinner out a month and it's paid for.
Yeah, but it's not free. Why would I do that when I can just ride my bike?
Right, I get that, but you just said you don't get to ride your bike that much because of the rain.
I know. You get that we live in Seattle, right?
Yeah, I know. So, I guess all I was saying is you can still ride your bike once in awhile when it's nice, but when it's not you can head to the gym.
Right, but there's a cost.
It's a never ending argument, because you're fixated on the number one preferred strategy even though there are barriers to doing it. Instead of acknowledging the barriers and that it might be a good idea to pay a little bit of money to do the number two strategy you'd rather sit on your hands and just put your tax refund into the mortgage once in awhile or whatever the third best strategy would be. To me it just seems like you're throwing the baby out with the bathwater and we're just going in circles because no one wants to admit it might be a good idea to do the number two strategy.
The only thing I'd be interested in at this point is the savings calculations behind what the calculators have come up with. I say that when you pay off extra principal you cancel or skip the interest payments and my calculations for that line up with calculators. If that's not true, I'd like to see the calculations that show the savings coming from a different avenue, but still equaling the amounts shown by the calculators. Let me know if you figure that one out.
Originally posted by @Chris May:
Originally posted by @Joshua S.:
Originally posted by @Chris May:
@Joshua S. I'm sorry, but if that was your takeaway from that analogy, then you're not going to get this.
Respectfully, I'm done doing math for your.
I mean this with all sincerity: please teach yourself some Excel skills and really get into the weeds of financial math if this is something that interests you.
I'm not getting "stuck in the math". The math is literally all there is.
A dozen people on this thread are trying to explain it to you, but you keep looking at it through this lens of "somehow I must be right." If your accept that you're probably wrong, because a chorus of smart people are saying so, then go back and read through the thread, combined with your new Excel and financial math skills, I'm confident it'll click.
Good luck, man.
Chris, that IS the takeaway. You're good at math, that's great. But if you would truly hear the guy say he cut down the commute by switching jobs and then not accept when he said, "Oh, sorry, I guess I should've mentioned the other job is a one year contract, so that's how I'm really saving on my commute", then it's really got nothing to do with math, you're just being rude and not listening. You might roll your eyes or chuckle that he thought initially he saved on commute by switching jobs, but he was right about the end results.
The reason I'm saying you're too wrapped up in the math is because you yourself admitted - you wrote a whole post admitting - that unless it's a direct comparison and everything else is equal, then it's somehow not a true comparison. I think that's a convenient way for you to ignore the variables that I'm talking about that make the two situations different. You seem like a smart guy, so the only conclusion I can come to is that you're deliberately acting obtuse because you don't want to end up wrong because you overlooked some important aspect. I understand apples to apples comparisons, but this isn't one. I'm saying that this is an orange and here are some of the differences between an orange and an apple. See, apples are great, Chris, but this is an orange and it's got fiber like your apple, but also it's got vitamin C and stuff. Cool, right? No, it's not cool, Josh. Comparing something that might have different benefits is not fair. If you're going to compare fruit, go get another apple to compare to my apple so it's a level playing field.
Who's a better baseball team, the Cubs or the Sox? I don't know, Chris told me we're not allowed to compare and contrast the differences or do any real world comparisons because they're both baseball teams with the same amount of players in the same city. He just wants to leave it at that. You mean you can't look at the different variables and stats and try to see who is better? No, Chris said they look the same on the surface, so they are exactly the same no matter what. I think he's been saying they are equal for a couple years and his ego is wrapped up it, so he doesn't anybody to find out they are different.
Anyway, I'm happy to leave it here, too. I'm actually happy about the way this turned out to be honest. When I found out about it I sort of felt like I would feel guilty not explaining it to friends and family and stuff, but didn't know how they would take it, so I think that's why I reached out on here to try to help people understand it. But after seeing "a dozen super smart people" or whatever struggle with it, I feel like at least I tried and I'm totally happy to do it and just keep it to myself. I'll try to come back and let you know about all the money I'm saving at some point, though, when I'm a bit deeper in. Good luck to you, too.
It's not a one year contract, he decided after switching jobs that he only wants to work a year. If he had just decided to stay at his current job and only work a year THE SAVINGS ARE THE SAME.
Chris, I honestly want to be done with this now, I'm trying to end it on a positive note, but here's something a little bit unrelated for everyone to ponder.
When you refinance, there are a lot of different reasons to do so. You might want a lower rate, you might want your cash out, you might want a lower payment, some combination of those, right? But ultimately you are swapping debt for other debt on different terms. There's a lower payment, you're paying it back faster or slower (10, 15, 30 year), you get a better interest rate, you walked with cash to do something else, something is different that works for you and maybe you are sacrificing something to get something else that you wanted more. Maybe you lowered your payment but extended your mortgage and that was the best end result for you. People do things all the time that are counterintuitive or "wrong", but they needed or wanted the end result bad enough. The act of swapping debt for other debt isn't by default a bad or stupid thing to do, it's a calculated decision based on what your needs are at that time. Maybe you don't even care that much about your terms, but you want to be with a different lender because you think that might improve your situation. There are tons of reason to "swap debt for other debt" that have nothing to do with math.
My point is, there is a lot more to this (and every situation) than math. You studied math, so you think it's everything, but it's not plain and simple. Math can figure out the numbers - awesome. But it can't account for all the intangibles or other aspects that a person might be considering. That's what you are refusing to look at, so obviously this couldn't truly go anywhere. All I can say is that I hope you see someday that there is more to a decision than calculations. As I said, good luck and take care.
Originally posted by @Chris May:
@Joshua S. I'm sorry, but if that was your takeaway from that analogy, then you're not going to get this.
Respectfully, I'm done doing math for your.
I mean this with all sincerity: please teach yourself some Excel skills and really get into the weeds of financial math if this is something that interests you.
I'm not getting "stuck in the math". The math is literally all there is.
A dozen people on this thread are trying to explain it to you, but you keep looking at it through this lens of "somehow I must be right." If your accept that you're probably wrong, because a chorus of smart people are saying so, then go back and read through the thread, combined with your new Excel and financial math skills, I'm confident it'll click.
Good luck, man.
Chris, that IS the takeaway. You're good at math, that's great. But if you would truly hear the guy say he cut down the commute by switching jobs and then not accept when he said, "Oh, sorry, I guess I should've mentioned the other job is a one year contract, so that's how I'm really saving on my commute", then it's really got nothing to do with math, you're just being rude and not listening. You might roll your eyes or chuckle that he thought initially he saved on commute by switching jobs, but he was right about the end results.
The reason I'm saying you're too wrapped up in the math is because you yourself admitted - you wrote a whole post admitting - that unless it's a direct comparison and everything else is equal, then it's somehow not a true comparison. I think that's a convenient way for you to ignore the variables that I'm talking about that make the two situations different. You seem like a smart guy, so the only conclusion I can come to is that you're deliberately acting obtuse because you don't want to end up wrong because you overlooked some important aspect. I understand apples to apples comparisons, but this isn't one. I'm saying that this is an orange and here are some of the differences between an orange and an apple. See, apples are great, Chris, but this is an orange and it's got fiber like your apple, but also it's got vitamin C and stuff. Cool, right? No, it's not cool, Josh. Comparing something that might have different benefits is not fair. If you're going to compare fruit, go get another apple to compare to my apple so it's a level playing field.
Who's a better baseball team, the Cubs or the Sox? I don't know, Chris told me we're not allowed to compare and contrast the differences or do any real world comparisons because they're both baseball teams with the same amount of players in the same city. He just wants to leave it at that. You mean you can't look at the different variables and stats and try to see who is better? No, Chris said they look the same on the surface, so they are exactly the same no matter what. I think he's been saying they are equal for a couple years and his ego is wrapped up it, so he doesn't want anybody to find out they are different.
Anyway, I'm happy to leave it here, too. I'm actually happy about the way this turned out to be honest. When I found out about it I sort of felt like I would feel guilty not explaining it to friends and family and stuff, but didn't know how they would take it, so I think that's why I reached out on here to try to help people understand it. But after seeing "a dozen super smart people" or whatever struggle with it, I feel like at least I tried and I'm totally happy to do it and just keep it to myself. I'll try to come back and let you know about all the money I'm saving at some point, though, when I'm a bit deeper in. Good luck to you, too.
Originally posted by @Chris May:
OK, math time.
200k mortgage. 5%. 30 years. Monthly payment is $1,073.64.
Month 1: Transfer $10,000 to a HELOC at 5% interest. Monthly interest is $41.67. Let's assume you only pay the HELOC interest. Your combined payment is $1,151.
- Homework - Plug these two scenarios into a mortgage calculator:
- #1 - One time extra payment of $10,000. Total interest is: $155,383. Payback: 322 months.
- #2 - Instead of a one time payment, add $41.67 to every monthly payment. Total interest: $168, 836. Payback: 331 months.
- The difference in interest between #1 and #2 is ~$13,500, but you're missing a piece--the $41.67 you paid every month on the HELOC. 41.67 * 322 = $13,417.
- #1 finishes 9 months ahead of #2 but you haven't paid the HELOC yet. Since your mortgage is done, you have an extra $1,073 per month. Pay that towards the HELOC balance. It will take you 9.5 months, and cost you $221 in interest.
So, as I keep saying, what matters is when you pay off the HELOC. If you just take whatever payments you're making to the HELOC, but apply them to the mortgage instead, it's a wash. The reason your total interest on the mortgage comes down is because you're paying 41.67 extra every month. The $10,000 transfer to the HELOC in month one doesn't have any impact.
Chris, as I said in my other post, I think the key to this whole thing is setting the HELOC aside completely and understanding where the savings come from when you make an additional principal payment. The HELOC aspect seems to be obfuscating the source of the savings from paying extra principal.
Could you just do me a favor and show the calculations of savings from paying additional principal (from income, bonuses, inheritance, lottery winnings, etc.) that match up with the calculator? I'd like to see your explanation of how much you save and where the savings come from when you get a $10,000 lump sum from wherever and plunk it on the mortgage.
Originally posted by @Chris May:
Josh said "You just said last time that you see $21,000 savings on the calculator, but I'm just swapping that interest over onto the HELOC and now it's all washing out for some reason because I showed you the $21,000 in HELOC interest wasn't possible. I mean, that's legitimately what just happened, so I don't really understand."
You need to look at interest accrued per period for it to make sense. It sounds like you understood my last post about the combined interest. So that's a good step. You're relying on a calculator for future interest savings, but it's missing a piece--the HELOC. The HELOC has unknown future interest. You're missing a variable in the equation--how much principal you pay on the HELOC and when--so the comparison isn't possible. Once you fill in the missing variable, the two scenarios are the same.
I'll jump into the math later, but here's an analogy:
You take the bus to work. It's always a reliable 5 minutes each way. You plan on working there for 10 years. That means you have a total of 26,400 commute minutes in your future (5 minutes x 2 x 22 days in month x 12 months in year x 10 years).
You have a midlife crisis and switch jobs. The new job is in the same building. You tell everyone you saved 26,400 of commuting minutes by ditching that crummy job. Your friends say "but you're still commuting 10 minutes each day, you didn't save any time". To which you respond "but I decided I'm actually going to work one more year". By your math, you're only commuting another 5 x 2 x 22 x 10 = 2,200 minutes.
You changed a variable midway through so the comparison doesn't make sense. If you look at it on a per day (per period) basis, it's clear that you didn't save any commuting time.
The mortgage calculators assume you're going to take 30 years to pay off a loan. Now, you moved 10,000 to the HELOC and say "it only cost me $40 per month" and "I decided I'm actually going to pay this balance off in 4 months" so it only cost me $160. For an accurate comparison, you need a customized amortization table that only assumed 4 months of interest on that $10,000.
Once you do that, the phantom "savings" net out. You didn't save anything by moving the $10,000 to a HELOC. The only thing that saved interest was paying cash.
Right, that's my exact point to you, Chris. You're saying that the friends are right about the commute, but who wouldn't acknowledge if the guy corrected himself and said he is only working for one more year? Everyone would say, ok, great. So, changing jobs didn't save you on your commute, but changing the length of your career did. Once you understand the full picture of what the guy did, HE DID ULTIMATELY SAVE ON HIS COMMUTE. You're too fixated on the math and trying to make a direct comparison to see the real world results. And then you're calling the guy a dummy because he originally said it was due to the change in jobs. That was a mistake in explanation, not in calculating the results.
So, you're proving my point. By switching the $10,000 from the mortgage to the HELOC, you're not changing the rate you pay on interest (actually, you're going up in rate), but you are changing the rate IN SPEED that you can comfortably pay.
Old way of paying $10,000: 2.5 years and $21,000 in interest if you leave it on the mortgage.
New way of paying $10,000: 10 months and $400 in interest if you put it in the HELOC and use all of your income.
So, I'll do your analogy one better. Everything is the same except the guy's new job is in a building that's a little further away (higher interest rate). Now he's working for one more year and his total commute is 4,400 minutes. But he still saved on total commute vs ten years in the other building, you were just too fixated on his explanation of why (and for some reason saying it's not okay to clarify or update variables to get a proper comparison) to see it.
See, YOU'RE the one trying to keep everything in a little box and saying that everything else being equal, $10,000 on the mortgage is the same as $10,000 on the HELOC, because you're too fixated on the math to see that there are other important variables at play. Everything else ISN'T EQUAL. You take a shorter time to pay it off. If you can't allow for that variable, then what is the point of comparing anything at all? The whole point of comparison is to see the change in results when all the differences are accounted for.
So, going back to the analogy, you're saying that the guy didn't save on his commute because he explained it wrong the first time around. You are wrong. He did ultimately save on his commute, he just explained it wrong and you won't accept the updated information.
Originally posted by @Steven D.:
@Joshua S. Your definition of "savings" is about equal to someone with no money and 0 net worth taking out a 1 million dollar loan and then calling themselves a self made millionaire. The Loan calculators you posted literally show nothing except that making principal payments reduces the term and total interest paid. You didn't even include the dollar amount prepaid in the calculator posted.
No idea what you are talking about, Steven. When you have a $200,000 loan at 4% you are on the hook for $144,000 in interest over 30 years. Saving some of that money is like taking out a loan and calling yourself a millionaire?
Yes, I'm trying to show that making principal payments reduces the term and total interest paid, but also how much is saved and why, because that seems to be a point of contention. I have been talking about paying an extra $10,000 over and over to keep it easy to follow, so I don't understand what, "You didn't even include the dollar amount prepaid in the calculator posted" means. This is so off base, I honestly don't understand what you're responding to.