All Forum Posts by: Joshua S.

Ok, well, here's a question for you. Forget the rates and the HELOC and all that for a minute. Imagine that there was a company that offered an investment that was 100% ROI, put in $10,000 and get $20,000, you just have to pay $600 commission to do it. I guess you're saying that you wouldn't do it. Nah, of course you would do it, right?

See, you're so hung up on the rate and the idea that you're just swapping one debt for another that you're not looking at totals and end result. I'm putting in $10,000 (that I would eventually have to pay anyway), but because I do it early I get an additional $10,000 on top of it when I get it back - $20,000 total and 100% ROI. This is the calculator talking, it's verified the money is coming back with 100% ROI. The "fee" for doing in this investment early is $600 paid throughout the year. The rest of the money going toward the mortgage was going there eventually, anyway, but by paying a bit extra to do it early, I made it into a 100% ROI and can make $100,000 off of it long term.

Look, I HAVE CONCEDED MULTIPLE TIMES that if you just have the $10,000/year lying around and don't mind it being tied up in the mortgage, then that's better. It's totally free and awesome and you get the 100% ROI without paying additional interest. That's so awesome, brother! I've said that a bunch of times, but I'm pouring it on so you remember this time? But what I'm saying is also true. If you DON'T have the $10,000 lying around and have to scrape it together or DON'T want it permanently tied up in the mortgage and want more flexibility - in other words, if you want another way to do it - then paying a small amount of interest or a "fee" to unlock a 100% ROI investment makes sense. If you can't understand this, I hope no one ever approaches you with a good investment you have to pay a fee or some interest to get into, because you'll just blow it off because there's a cost involved. Sad!

Chris, here's what I don't get. According to you, rate is the only thing that matters. As a mathematician, do you not understand the idea of total interest cost? If you buy a donut at 7% interest and you buy a car at .9%, which has a higher total interest cost? 

Wow, nothing like putting yourself on a pedestal, huh, doctor? LOL I own rental properties, too, and you can trust me: you guys are not the 'doctors' to my 'patient'. I put up two amortization calculators and showed the savings, which no one can dispute aside from saying, "Nuh uh!". Then everyone puts up their own calculations that don't match up with the calculators, but can't explain why or reconcile the results. 

Everyone agrees on how much a HELOC costs - $42/month. But the "better" solution is to forget the HELOC and just put all their discretionary into the mortgage. This will save a lot more money, right? When I ask who is doing that instead of what I'm proposing it gets really quiet even though it's supposedly so much better. I'm sure it's because everyone would rather remain liquid than putting all their discretionary in their mortgage, which it's exactly what I'm proposing a solution for. Crazy, right? Just show me the calculations that match up with the amortization calculator AND prove your point. It should be really easy to come up with since I'm so wrong.

So, here's a revised analogy for you. I go to the doctor and he says I have monkeys flying out of my butt disease, so I get a text book and show him I have a hangnail. Then he yells himself red in the face because he supposedly knows more than I do and he still wants to amputate my ***. I'M THE ONE giving you guys two concrete, independent, unbiased tools that show the savings I'm talking about. You guys are giving me your own calculations that might as well be on a cocktail napkin and refuse to address the points I'm making. Then you treat your own calculations like gospel and treat me like the idiot because I'm willing to trust a calculator from my lender instead of some internet mortgage doctors. :-D

Once again, Just show me the calculations that match up with the amortization calculator AND prove your point. That's a slam dunk, I'm sure one of you can do that easily since I'm so wrong. Show me how the HELOC costs $100,000 and negates your $100,000 savings. Please, because I want to be done with this. :)

Well, I guess we're just going to have to agree to disagree, fellas. I find it interesting, though, that people will pay financial advisors, mutual fund fees, management fees, insurance premiums and all kinds of "unnecessary" fees, but when someone says they are happy to pay $42/month to keep their money working for them full time and maintain liquidity while saving a bunch of money people are just dumbfounded. Do any of you pay a tax professional or a mechanic or someone to put in new windows? Do you pay a babysitter, a landscaper, a cleaning service? Why don't you just do all those things yourself? You leverage the money you have to save / make money / improve your life. 

I'm leveraging my $42/month to save thousands and years on my mortgage and not have to lock up all my discretionary income. Well worth it to me. I asked if anyone did it the other way using all of their discretionary and one guy said, "opportunity costs" and then it was crickets. So, you all see the savings, too, but 1) don't have the discretionary to take advantage of it, 2) don't want to lock up your funds, or 3) think the opportunity costs are too high vs the 100% ROI of paying additional mortgage principal (???). It's too bad there's not way to have your cake and eat it, too, right? Keep your investments on the side and still pay down your mortgage quicker for a small fee. Damn it, I wish there was a way! LOL

Have a good one, everybody. Sorry I couldn't help anyone see the benefits. 

Do you really think this is what's happening? I said take out $10,000 at a time and pay it down over the course of the year by putting all of your income and expenses toward it. Wow.

Steve, I think you have a fundamental misunderstanding of the concept. When you hold money in your checking account and wait for your bills to come in, it's doing nothing for you during that time. If you get a small HELOC on your house and use it to pay chunks toward your mortgage principal (I think everyone agrees there are substantial savings in doing that if the money is "free", correct?) and then basically use the HELOC as a checking account, you are putting all of your income and bills against it, it will gradually come down over the course of 10-12 months assuming you make about $1000/month more than you spend.

So, here's where I'm stuck. If you just took your income and put $1000 extra toward your mortgage each month to save on interest over the long haul, everyone thinks that's a great idea. The downside to doing it this way is that if all of your discretionary income is going toward the mortgage where you can't easily get it back, you are exposed to risk if you have an emergency or a job loss. The upside is that there is no "cost". You're simply using your own income.

Now if you use a HELOC to accomplish the same savings, ie. $10-$12,000 extra toward your mortgage each year, the opposite is true. You put money into the HELOC, but it's revolving so it's not locked away in your mortgage and is more liquid. And the downside is the cost. Let's say you are carrying a $10,000 balance at 5%. That's $42/month. So, I'm paying $42/month to be able to have all of my discretionary income working for me and saving me interest while maintaining more liquidity than if I just threw all of my discretionary at my mortgage. Does this make more sense?

This is no more applicable today than it was yesterday. No one is advocating taking out a massive HELOC and paying it down over ten years.

I don't need to be good with math, I have a bunch of different calculators that say the same thing. Here, I've dumbed it down even further for you guys and you can go to Quicken Loans amo calc and try it yourself to make sure I didn't fudge it somehow. All I did was apply an additional $10,000 payment each June and wow, look at that, $95,000 and 18 years savings. So, I guess the HELOC somehow costs me $95,000 and it evens out. I thought Chris the math wizard said it costs around $50/month / $600/year / $7200 over the 12 years (maximum if you maintain a $10,000 HELOC balance), but he must have left something out, right?

So, you know, for the 50th time if you have the $10,000 lying around and don't mind it being locked up in your mortgage then by all means. If don't have the money or you'd prefer to be more liquid maybe paying that $7200 over a decade to save $100,000 doesn't look so bad, huh?

No, I'm not selling a program or anything and I'm not trying to wear people out, I legitimately think it's a shame more people don't understand this, so I'm trying to help. I showed on Bankrate's amortization calculator that the ROI for paying an extra $10,000 principal each year is 100% and you take 20 years off of your mortgage. What is factually incorrect about that? Is their calculator broken somehow? Yes, I'm interested in learning. Do your own amortization calculator and walk me through it. Show me how paying $10,000 extra each year returns $500. Otherwise, you're asking me to trust someone's personal math more than an actual calculator. This should be a simple task if I'm so wrong.

This doesn't make any sense. Bankrate's calculator says that you shave 20 years off of the loan in the scenario I'm proposing. $445 dollars saved each year is $4450 saved over that time. Their calculator says the savings is $100,000. Are you saying the calculator is wrong? If so, how so?