Heloc to pay off mortgage faster

[Drew Cameron]

I recently came across a new strategy that I don't quite understand and it sounds too good to be true. The principal is simple. Use your heloc to pay your mortgage and funnel all your funds in and out of it like a checking account. The interest updates daily so you can pay down principal balance much faster than on a traditional mortgage. With a decreasing principal balance the payments go down each month as you pay it off. Plus you can get rid of other payments by funneling them into your account as well. Has anyone else heard of this? Or has anyone used this successfully?

[Gary Floring]

Originally posted by @Jeremy Z.:

@Joshua S.

There is a simple reason a mortgage has such a large initial interest amount compared to your other loan examples... It is a much larger loan. It's not a trick. 

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).

[Chris May]

Originally posted by @Gary Floring:

Originally posted by @Jeremy Z.:

@Joshua S.

There is a simple reason a mortgage has such a large initial interest amount compared to your other loan examples... It is a much larger loan. It's not a trick. 

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).

False. A 200k mortgage, credit card, HELOC etc all incur the exact same interest.

[Jeremy Z.]

Originally posted by @Gary Floring:

Originally posted by @Jeremy Z.:

@Joshua S.

There is a simple reason a mortgage has such a large initial interest amount compared to your other loan examples... It is a much larger loan. It's not a trick. 

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).

 You are confusing that with the reason the initial interest/principle ratio is so high. Also, I mentioned the lengthy amortization period in the same paragraph of that response you quoted.

[Chris May]

@Joshua S. 

I don't know what to tell you, man. You keep acting like you're the teacher explaining these concepts to me. As I've said, I do this all day, every day, for money. You can't even do the math right. You're not the teacher. 

Once again, your math is wrong.

If I use your scenario, 10k invested in the stock market each year for 10 years with 10% return, you need to let it ride out to 30 years for an apples-apples comparison. 

That scenario will net you $1.08 million dollars! It's not even close.

[Jeremy Z.]

Originally posted by @Chris May:

I don't know what to tell you, man. You keep acting like you're the teacher explaining these concepts to me. As I've said, I do this all day, every day, for money. You can't even do the math right. You're not the teacher. 

Once again, your math is wrong.

If I use your scenario, 10k invested in the stock market each year for 10 years with 10% return, you need to let it ride out to 30 years for an apples-apples comparison. 

That scenario will net you $1.08 million dollars! It's not even close.

 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.

[Chris May]

Originally posted by @Jeremy Z.:

Originally posted by @Chris May:

I don't know what to tell you, man. You keep acting like you're the teacher explaining these concepts to me. As I've said, I do this all day, every day, for money. You can't even do the math right. You're not the teacher. 

Once again, your math is wrong.

If I use your scenario, 10k invested in the stock market each year for 10 years with 10% return, you need to let it ride out to 30 years for an apples-apples comparison. 

That scenario will net you $1.08 million dollars! It's not even close.

 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.

Totally a different discussion, you're right. I'm really just trying to highlight the lack of knowledge on the other side of this debate.

It's impossible to have an intelligent conversation when the other person doesn't have even a basic understanding of the subject matter.

[Jeremy Z.]

Originally posted by @Chris May:

Originally posted by @Jeremy Z.:

Originally posted by @Chris May:

I don't know what to tell you, man. You keep acting like you're the teacher explaining these concepts to me. As I've said, I do this all day, every day, for money. You can't even do the math right. You're not the teacher. 

Once again, your math is wrong.

If I use your scenario, 10k invested in the stock market each year for 10 years with 10% return, you need to let it ride out to 30 years for an apples-apples comparison. 

That scenario will net you $1.08 million dollars! It's not even close.

 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.

Totally a different discussion, you're right. I'm really just trying to highlight the lack of knowledge on the other side of this debate.

It's impossible to have an intelligent conversation when the other person doesn't have even a basic understanding of the subject matter.

 Makes sense. I'm in complete agreement with you there.

[Joshua S.]

Originally posted by @Chris May:

@Joshua S. 

I don't know what to tell you, man. You keep acting like you're the teacher explaining these concepts to me. As I've said, I do this all day, every day, for money. You can't even do the math right. You're not the teacher. 

Once again, your math is wrong.

If I use your scenario, 10k invested in the stock market each year for 10 years with 10% return, you need to let it ride out to 30 years for an apples-apples comparison. 

That scenario will net you $1.08 million dollars! It's not even close.

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.

[Chris May]

Originally posted by @Joshua S.:

Originally posted by @Chris May:

@Joshua S. 

I don't know what to tell you, man. You keep acting like you're the teacher explaining these concepts to me. As I've said, I do this all day, every day, for money. You can't even do the math right. You're not the teacher. 

Once again, your math is wrong.

If I use your scenario, 10k invested in the stock market each year for 10 years with 10% return, you need to let it ride out to 30 years for an apples-apples comparison. 

That scenario will net you $1.08 million dollars! It's not even close.

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.

 10k per year for 10 years, 10% rate of return, riding out to 30 years is:

Year	Start	Extra	End
1	10,000	10,000	21,000
2	21,000	10,000	33,100
3	33,100	10,000	46,410
4	46,410	10,000	61,051
5	61,051	10,000	77,156
6	77,156	10,000	94,872
7	94,872	10,000	114,359
8	114,359	10,000	135,795
9	135,795	10,000	159,374
10	159,374	-	175,312
11	175,312	-	192,843
12	192,843	-	212,127
13	212,127	-	233,340
14	233,340	-	256,674
15	256,674	-	282,341
16	282,341	-	310,575
17	310,575	-	341,633
18	341,633	-	375,796
19	375,796	-	413,376
20	413,376	-	454,713
21	454,713	-	500,185
22	500,185	-	550,203
23	550,203	-	605,223
24	605,223	-	665,746
25	665,746	-	732,320
26	732,320	-	805,552
27	805,552	-	886,108
28	886,108	-	974,718
29	974,718	-	1,072,190
30	1,072,190	-	1,179,409

 Minus the 100k invested leaves you with a net gain of $1.08M.

The same 10k paid against our 200k mortgage for the first 10 years saves 126k in interest over the 30 year life of the loan. $1.08M > $126k.

[Joshua S.]

Originally posted by @Chris May:

Originally posted by @Joshua S.:

Originally posted by @Chris May:

@Joshua S. 

I don't know what to tell you, man. You keep acting like you're the teacher explaining these concepts to me. As I've said, I do this all day, every day, for money. You can't even do the math right. You're not the teacher. 

Once again, your math is wrong.

If I use your scenario, 10k invested in the stock market each year for 10 years with 10% return, you need to let it ride out to 30 years for an apples-apples comparison. 

That scenario will net you $1.08 million dollars! It's not even close.

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.

 10k per year for 10 years, 10% rate of return, riding out to 30 years is:

Year	Start	Extra	End
1	10,000	10,000	21,000
2	21,000	10,000	33,100
3	33,100	10,000	46,410
4	46,410	10,000	61,051
5	61,051	10,000	77,156
6	77,156	10,000	94,872
7	94,872	10,000	114,359
8	114,359	10,000	135,795
9	135,795	10,000	159,374
10	159,374	-	175,312
11	175,312	-	192,843
12	192,843	-	212,127
13	212,127	-	233,340
14	233,340	-	256,674
15	256,674	-	282,341
16	282,341	-	310,575
17	310,575	-	341,633
18	341,633	-	375,796
19	375,796	-	413,376
20	413,376	-	454,713
21	454,713	-	500,185
22	500,185	-	550,203
23	550,203	-	605,223
24	605,223	-	665,746
25	665,746	-	732,320
26	732,320	-	805,552
27	805,552	-	886,108
28	886,108	-	974,718
29	974,718	-	1,072,190
30	1,072,190	-	1,179,409

 Minus the 100k invested leaves you with a net gain of $1.08M.

The same 10k paid against our 200k mortgage for the first 10 years saves 126k in interest over the 30 year life of the loan. $1.08M > $126k.

Awesome. Now we're getting somewhere. But you're doing the same thing you complained about me doing. You're comparing your apples to my oranges. When I compared the two I said that you could just continue that $10,000 investment for 30 years and it came out to $1,800,000. After my initial ten years I can take the $22,000 I was spending on the house and put it toward stocks for the remaining 20 years and more or less catch you at $1,400,000. Then when you factor in the $100,000 you paid in interest that I didn't that makes your total $1,700,000 and mine $1,500,000. That's a true 30 year comparison. And obviously, I would be out of debt after ten years, which is worth something to most people. I notice you're not saying any of that is "wrong", btw. As usual, you just prefer looking at a snapshot that is technically correct, but misses the point.

So, here's what it boils down to. You're saying that to truly capture the savings on a mortgage you have to ride it out for 30 years and more or less "collect" the savings over time. I understand that in theory, but it's not true to the spirit of the idea of saving money. Like I said in my bike and car example. If you buy a bike instead of a car, obviously the cost of the car, gas, insurance, and maintenance for ten years doesn't show up in your account. I've never said anything like that. But you're comparing saving mortgage interest to saying you've earned $16,000 on your stocks on day one and that's not true, either. The stock thing is a projection of what you're expected to earn on your money. When I pay mortgage principal, it's a done deal. Those interest payments are canceled. So, the truth is somewhere between. Correct, I don't physically have the money yet, but it's also not a projection of what I could earn if the market goes right. It's locked in because the debt is gone and they can't charge me interest on something I don't have anymore.

So, we are both right in some sick sense, but here's the thing I don't get about your views on it. Look up any advice on paying off credit cards and getting out of debt, Chris. They all tell you to pay as much as you can so that it will save you interest. They don't then turn around and stipulate that you won't get the savings until you're 45. The savings are intangible, but they're not imaginary, for christ sake. If I buy a car at .09% for five years and pay it off in the first year, I don't turn to my wife and say, "Well, in four more years we can afford to have a baby once we've collected all the interest savings we are owed from the universe". You're acting like a slave to this theoretical idea that savings can only be real once you've "captured" them. Aren't you an accounting guy? What about a balance sheet? Hey, I got a raise, so now I can AFFORD to have someone mow the lawn if I am busy. Hey, I paid off my car and saved a bunch of interest, so now I can AFFORD a babysitter so we can go out once a month. You don't physically have the money, but you can still make plans with it because it's been realized in terms of your budget. Great, it looks like I'll have the mortgage paid off in six more years and save a ton of interest so I can AFFORD to send Jenny to school out of state if we need to. This is the real world, not the bizarro world you're trying to force this stupid discussion into. Literally nothing else works this way where you say, "Oh, awesome, I just saved a bunch of money on car insurance by switching to Geico. Now I just have to wait until my savings get here", but you're trying to contort mortgage interest savings into that box because it suits your argument. Obviously, you're not stupid, so I have to assume you're disingenuous or deluded or something.

[Joshua S.]

Originally posted by @Joshua S.:

Originally posted by @Chris May:

Originally posted by @Joshua S.:

Originally posted by @Chris May:

@Joshua S. 

I don't know what to tell you, man. You keep acting like you're the teacher explaining these concepts to me. As I've said, I do this all day, every day, for money. You can't even do the math right. You're not the teacher. 

Once again, your math is wrong.

If I use your scenario, 10k invested in the stock market each year for 10 years with 10% return, you need to let it ride out to 30 years for an apples-apples comparison. 

That scenario will net you $1.08 million dollars! It's not even close.

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.

 10k per year for 10 years, 10% rate of return, riding out to 30 years is:

Year	Start	Extra	End
1	10,000	10,000	21,000
2	21,000	10,000	33,100
3	33,100	10,000	46,410
4	46,410	10,000	61,051
5	61,051	10,000	77,156
6	77,156	10,000	94,872
7	94,872	10,000	114,359
8	114,359	10,000	135,795
9	135,795	10,000	159,374
10	159,374	-	175,312
11	175,312	-	192,843
12	192,843	-	212,127
13	212,127	-	233,340
14	233,340	-	256,674
15	256,674	-	282,341
16	282,341	-	310,575
17	310,575	-	341,633
18	341,633	-	375,796
19	375,796	-	413,376
20	413,376	-	454,713
21	454,713	-	500,185
22	500,185	-	550,203
23	550,203	-	605,223
24	605,223	-	665,746
25	665,746	-	732,320
26	732,320	-	805,552
27	805,552	-	886,108
28	886,108	-	974,718
29	974,718	-	1,072,190
30	1,072,190	-	1,179,409

 Minus the 100k invested leaves you with a net gain of $1.08M.

The same 10k paid against our 200k mortgage for the first 10 years saves 126k in interest over the 30 year life of the loan. $1.08M > $126k.

Awesome. Now we're getting somewhere. But you're doing the same thing you complained about me doing. You're comparing your apples to my oranges. When I compared the two I said that you could just continue that $10,000 investment for 30 years and it came out to $1,800,000. After my initial ten years I can take the $22,000 I was spending on the house and put it toward stocks for the remaining 20 years and more or less catch you at $1,400,000. Then when you factor in the $100,000 you paid in interest that I didn't that makes your total $1,700,000 and mine $1,500,000. That's a true 30 year comparison. And obviously, I would be out of debt after ten years, which is worth something to most people. I notice you're not saying any of that is "wrong", btw. As usual, you just prefer looking at a snapshot that is technically correct, but misses the point.

So, here's what it boils down to. You're saying that to truly capture the savings on a mortgage you have to ride it out for 30 years and more or less "collect" the savings over time. I understand that in theory, but it's not true to the spirit of the idea of saving money. Like I said in my bike and car example. If you buy a bike instead of a car, obviously the cost of the car, gas, insurance, and maintenance for ten years doesn't show up in your account. I've never said anything like that. But you're comparing saving mortgage interest to saying you've earned $16,000 on your stocks on day one and that's not true, either. The stock thing is a projection of what you're expected to earn on your money. When I pay mortgage principal, it's a done deal. Those interest payments are canceled. So, the truth is somewhere between. Correct, I don't physically have the money yet, but it's also not a projection of what I could earn if the market goes right. It's locked in because the debt is gone and they can't charge me interest on something I don't have anymore.

So, we are both right in some sick sense, but here's the thing I don't get about your views on it. Look up any advice on paying off credit cards and getting out of debt, Chris. They all tell you to pay as much as you can so that it will save you interest. They don't then turn around and stipulate that you won't get the savings until you're 45. The savings are intangible, but they're not imaginary, for christ sake. If I buy a car at .09% for five years and pay it off in the first year, I don't turn to my wife and say, "Well, in four more years we can afford to have a baby once we've collected all the interest savings we are owed from the universe". You're acting like a slave to this theoretical idea that savings can only be real once you've "captured" them. Aren't you an accounting guy? What about a balance sheet? Hey, I got a raise, so now I can AFFORD to have someone mow the lawn if I am busy. Hey, I paid off my car and saved a bunch of interest, so now I can AFFORD a babysitter so we can go out once a month. You don't physically have the money, but you can still make plans with it because it's been realized in terms of your budget. Great, it looks like I'll have the mortgage paid off in six more years and save a ton of interest so I can AFFORD to send Jenny to school out of state if we need to. This is the real world, not the bizarro world you're trying to force this stupid discussion into. Literally nothing else works this way where you say, "Oh, awesome, I just saved a bunch of money on car insurance by switching to Geico. Now I just have to wait until my savings get here", but you're trying to contort mortgage interest savings into that box because it suits your argument. Obviously, you're not stupid, so I have to assume you're disingenuous or deluded or something.

Earnings just came out for XYZ Inc and they saved a bunch of money by closing 100 stores, but nothing is happening to the stock price because investors say they don't ACTUALLY HAVE THE SAVINGS YET. HAHAHAHAHA. I kill me.

[Brent Coombs]

@Joshua S., 1. The stock market regularly responds in anticipation of future outcomes based on current company decisions! [Investors don't say they don't have the savings yet!]

2. You "can't take the $22,000 you were spending on the house and put it toward stocks for the remaining 20 years and more or less catch you at $1,400,000", because, you don't physically have the $22k yet! ie. Your argument works against you as well. Cheers...

[Jeremy Z.]

@Joshua S.

@Joshua S.

"There's no magic involved, you're simply borrowing super cheap money to pay off really expensive money more quickly than you could do on your own."

That quote is from your first post. That is a myth you and Gary kept perpetuating, right up until this last couple of pages with your comparison of the Total Interest Percentage on a 6 year credit card payoff vs. an "extortionate" 30 year mortgage.

Are you ready to acknowledge that fallacy? If so, I am ready to be done and move on.

[Joshua S.]

Originally posted by @Brent Coombs:

@Joshua S., 1. The stock market regularly responds in anticipation of future outcomes based on current company decisions! [Investors don't say they don't have the savings yet!]

2. You "can't take the $22,000 you were spending on the house and put it toward stocks for the remaining 20 years and more or less catch you at $1,400,000", because, you don't physically have the $22k yet! ie. Your argument works against you as well. Cheers...

No offense, Brent, but nothing you say makes any sense and your comments are like speed bumps in this conversation. If I had the $22,000 of my earnings to put into my mortgage each year for ten years then in subsequent years I just take that amount and put it into the market because I don't have a mortgage to pay on anymore. Not physically having the money is Chris' argument about savings and has nothing to do with this part of the discussion. I honestly get the feeling you get drunk and make comments on here because they are so out of left field. 

Yes, I know investors look at future returns based on current decisions. That was the whole point of the joke I made to Chris. We all make decisions this way yet he seems to think that for purposes of this discussion you actually need to "collect" these savings before they are real. You make a decision today that saves you thousands in interest - YESSSS! - but now you have to begrudgingly collect the savings over the next 30 years as you struggle financially to get by........ Cue sad slide whistle.

[Brent Coombs]

@Joshua S., sorry, you lost me when you wrote: "You make a decision today that saves you thousands in interest - YESSSS! - but now you have to begrudgingly collect the savings over the next 30 years as you struggle financially to get by........ Cue sad slide whistle".

Seems to me that you're blowing that sad slide whistle at your own argument!

[Joshua S.]

Originally posted by @Jeremy Z.:

@Joshua S.

@Joshua S.

"There's no magic involved, you're simply borrowing super cheap money to pay off really expensive money more quickly than you could do on your own."

That quote is from your first post. That is a myth you and Gary kept perpetuating, right up until this last couple of pages with your comparison of the Total Interest Percentage on a 6 year credit card payoff vs. an "extortionate" 30 year mortgage.

Are you ready to acknowledge that fallacy? If so, I am ready to be done and move on.

Yes, I thought I already had. I said that I had some misconceptions and understand now that they are calculated in the same way, but that paying them in different ways obviously nets different results. In other words, I wasn't wrong in terms of the results you can get, but I was wrong in my explanation. You're not borrowing super cheap money to pay off expensive money, you're just putting part of your loan in a spot where you can put more of your income toward it easily and pay it down quicker than you normally would if you were just making normal payments. 

[Joshua S.]

Originally posted by @Brent Coombs:

@Joshua S., sorry, you lost me when you wrote: "You make a decision today that saves you thousands in interest - YESSSS! - but now you have to begrudgingly collect the savings over the next 30 years as you struggle financially to get by........ Cue sad slide whistle".

Seems to me that you're blowing that sad slide whistle at your own argument!

That's because you don't understand words.

[Brent Coombs]

Originally posted by @Joshua S.:

Originally posted by @Brent Coombs:

@Joshua S., sorry, you lost me when you wrote: "You make a decision today that saves you thousands in interest - YESSSS! - but now you have to begrudgingly collect the savings over the next 30 years as you struggle financially to get by........ Cue sad slide whistle".

Seems to me that you're blowing that sad slide whistle at your own argument!

That's because you don't understand words.

Oh. Riiiiight. Good one... 

[Jeremy Z.]

Originally posted by @Joshua S.:

Originally posted by @Jeremy Z.:

@Joshua S.

@Joshua S.

"There's no magic involved, you're simply borrowing super cheap money to pay off really expensive money more quickly than you could do on your own."

That quote is from your first post. That is a myth you and Gary kept perpetuating, right up until this last couple of pages with your comparison of the Total Interest Percentage on a 6 year credit card payoff vs. an "extortionate" 30 year mortgage.

Are you ready to acknowledge that fallacy? If so, I am ready to be done and move on.

Yes, I thought I already had. I said that I had some misconceptions and understand now that they are calculated in the same way, but that paying them in different ways obviously nets different results. In other words, I wasn't wrong in terms of the results you can get, but I was wrong in my explanation. You're not borrowing super cheap money to pay off expensive money, you're just putting part of your loan in a spot where you can put more of your income toward it easily and pay it down quicker than you normally would if you were just making normal payments. 

 Yes, I think you had. You stated quite a few other things, so I just wanted to make sure we were clear on that part. I do agree that you have a better handle on this stuff than your explanations convey at times. Best of luck with your future saving and investing.

[Joshua S.]

Originally posted by @Joshua S.:

Originally posted by @Joshua S.:

Originally posted by @Chris May:

Originally posted by @Joshua S.:

Originally posted by @Chris May:

@Joshua S. 

I don't know what to tell you, man. You keep acting like you're the teacher explaining these concepts to me. As I've said, I do this all day, every day, for money. You can't even do the math right. You're not the teacher. 

Once again, your math is wrong.

If I use your scenario, 10k invested in the stock market each year for 10 years with 10% return, you need to let it ride out to 30 years for an apples-apples comparison. 

That scenario will net you $1.08 million dollars! It's not even close.

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.

 10k per year for 10 years, 10% rate of return, riding out to 30 years is:

Year	Start	Extra	End
1	10,000	10,000	21,000
2	21,000	10,000	33,100
3	33,100	10,000	46,410
4	46,410	10,000	61,051
5	61,051	10,000	77,156
6	77,156	10,000	94,872
7	94,872	10,000	114,359
8	114,359	10,000	135,795
9	135,795	10,000	159,374
10	159,374	-	175,312
11	175,312	-	192,843
12	192,843	-	212,127
13	212,127	-	233,340
14	233,340	-	256,674
15	256,674	-	282,341
16	282,341	-	310,575
17	310,575	-	341,633
18	341,633	-	375,796
19	375,796	-	413,376
20	413,376	-	454,713
21	454,713	-	500,185
22	500,185	-	550,203
23	550,203	-	605,223
24	605,223	-	665,746
25	665,746	-	732,320
26	732,320	-	805,552
27	805,552	-	886,108
28	886,108	-	974,718
29	974,718	-	1,072,190
30	1,072,190	-	1,179,409

 Minus the 100k invested leaves you with a net gain of $1.08M.

The same 10k paid against our 200k mortgage for the first 10 years saves 126k in interest over the 30 year life of the loan. $1.08M > $126k.

Awesome. Now we're getting somewhere. But you're doing the same thing you complained about me doing. You're comparing your apples to my oranges. When I compared the two I said that you could just continue that $10,000 investment for 30 years and it came out to $1,800,000. After my initial ten years I can take the $22,000 I was spending on the house and put it toward stocks for the remaining 20 years and more or less catch you at $1,400,000. Then when you factor in the $100,000 you paid in interest that I didn't that makes your total $1,700,000 and mine $1,500,000. That's a true 30 year comparison. And obviously, I would be out of debt after ten years, which is worth something to most people. I notice you're not saying any of that is "wrong", btw. As usual, you just prefer looking at a snapshot that is technically correct, but misses the point.

So, here's what it boils down to. You're saying that to truly capture the savings on a mortgage you have to ride it out for 30 years and more or less "collect" the savings over time. I understand that in theory, but it's not true to the spirit of the idea of saving money. Like I said in my bike and car example. If you buy a bike instead of a car, obviously the cost of the car, gas, insurance, and maintenance for ten years doesn't show up in your account. I've never said anything like that. But you're comparing saving mortgage interest to saying you've earned $16,000 on your stocks on day one and that's not true, either. The stock thing is a projection of what you're expected to earn on your money. When I pay mortgage principal, it's a done deal. Those interest payments are canceled. So, the truth is somewhere between. Correct, I don't physically have the money yet, but it's also not a projection of what I could earn if the market goes right. It's locked in because the debt is gone and they can't charge me interest on something I don't have anymore.

So, we are both right in some sick sense, but here's the thing I don't get about your views on it. Look up any advice on paying off credit cards and getting out of debt, Chris. They all tell you to pay as much as you can so that it will save you interest. They don't then turn around and stipulate that you won't get the savings until you're 45. The savings are intangible, but they're not imaginary, for christ sake. If I buy a car at .09% for five years and pay it off in the first year, I don't turn to my wife and say, "Well, in four more years we can afford to have a baby once we've collected all the interest savings we are owed from the universe". You're acting like a slave to this theoretical idea that savings can only be real once you've "captured" them. Aren't you an accounting guy? What about a balance sheet? Hey, I got a raise, so now I can AFFORD to have someone mow the lawn if I am busy. Hey, I paid off my car and saved a bunch of interest, so now I can AFFORD a babysitter so we can go out once a month. You don't physically have the money, but you can still make plans with it because it's been realized in terms of your budget. Great, it looks like I'll have the mortgage paid off in six more years and save a ton of interest so I can AFFORD to send Jenny to school out of state if we need to. This is the real world, not the bizarro world you're trying to force this stupid discussion into. Literally nothing else works this way where you say, "Oh, awesome, I just saved a bunch of money on car insurance by switching to Geico. Now I just have to wait until my savings get here", but you're trying to contort mortgage interest savings into that box because it suits your argument. Obviously, you're not stupid, so I have to assume you're disingenuous or deluded or something.

Earnings just came out for XYZ Inc and they saved a bunch of money by closing 100 stores, but nothing is happening to the stock price because investors say they don't ACTUALLY HAVE THE SAVINGS YET. HAHAHAHAHA. I kill me.

Kids, I have great news. I switched to a cheaper insurance, started bringing my lunch to work, and made a few other changes and saved about $500/month. You know what that means! I just have to collect these savings over the next ten years and I can take you to Disneyland when you are 21!

:-D 

[Thierry Enongene]

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.

[Brent Coombs]

@Thierry Enongene, if you only have 5-10% equity in your home, will a Lender even approve an additional HELOC? Welcome to BP, and welcome to the debate. Good luck...

[Joshua S.]

Originally posted by @Thierry Enongene:

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.

You may want to check with your lender that your target is 80%, because I have PMI on one of my loans and their website says they will take it off when I reach 70%. I'm not sure why that is, but it's their rule. The other place you can look for more equity / lower LTV is in your appreciation depending on how long you have had the property. Again, this is the case with my lender, but they say you can pay for an appraisal and if your home has appreciated, that will add to your equity as well.

Secondly, if you are paying PMI you might not be able to find a lender that will give you a HELOC since you may not have the equity. But in this case you could also try a personal line of credit. The interest rate will be higher, but especially if you are able to avoid years of paying for PMI, it would still work in your favor. I know I'm in the "for" crowd, just thought I would throw this out there. Good luck.

[Thierry Enongene]

Originally posted by @Joshua S.:

Originally posted by @Thierry Enongene:

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.

You may want to check with your lender that your target is 80%, because I have PMI on one of my loans and their website says they will take it off when I reach 70%. I'm not sure why that is, but it's their rule. The other place you can look for more equity / lower LTV is in your appreciation depending on how long you have had the property. Again, this is the case with my lender, but they say you can pay for an appraisal and if your home has appreciated, that will add to your equity as well.

Secondly, if you are paying PMI you might not be able to find a lender that will give you a HELOC since you may not have the equity. But in this case you could also try a personal line of credit. The interest rate will be higher, but especially if you are able to avoid years of paying for PMI, it would still work in your favor. I know I'm in the "for" crowd, just thought I would throw this out there. Good luck.

Yes the target is 80%. The thing is the actual loan it not at 80% LTV, but the value of the home is significantly more, thanks to pretty good appreciation from the past 2.5 years or so since purchase. I think an appraisal would be required if a lender was to grant a heloc, to kinda get the real market value of the home on the record or something along those lines. We are in fact in a high growth area. Anyway I will just need inquire with lenders and check if they do grant them. But my thinking included the projected new appraised value to be considered as equity.

[Joshua S.]

Originally posted by @Thierry Enongene:

Originally posted by @Joshua S.:

Originally posted by @Thierry Enongene:

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.

You may want to check with your lender that your target is 80%, because I have PMI on one of my loans and their website says they will take it off when I reach 70%. I'm not sure why that is, but it's their rule. The other place you can look for more equity / lower LTV is in your appreciation depending on how long you have had the property. Again, this is the case with my lender, but they say you can pay for an appraisal and if your home has appreciated, that will add to your equity as well.

Secondly, if you are paying PMI you might not be able to find a lender that will give you a HELOC since you may not have the equity. But in this case you could also try a personal line of credit. The interest rate will be higher, but especially if you are able to avoid years of paying for PMI, it would still work in your favor. I know I'm in the "for" crowd, just thought I would throw this out there. Good luck.

Yes the target is 80%. The thing is the actual loan it not at 80% LTV, but the value of the home is significantly more, thanks to pretty good appreciation from the past 2.5 years or so since purchase. I think an appraisal would be required if a lender was to grant a heloc, to kinda get the real market value of the home on the record or something along those lines. We are in fact in a high growth area. Anyway I will just need inquire with lenders and check if they do grant them. But my thinking included the projected new appraised value to be considered as equity.

Yes, it's definitely worth a shot, then. You're right in most cases they will do at least a desktop appraisal before lending money against your home, so if it really has appreciated it should work out. Just keep in mind that if you're using Zillow or something comparable to estimate your appreciation, you may not want to count your chickens. My primary home has appreciated over $30,000 in the last few years according to Zillow and Redfin, but when I got my HELOC the actual appraisal came back at the same amount as when we originally bought it. Granted, they didn't come in and see all the changes we've made, but I was shocked that even based on comparable sales in the area my appraisal wasn't any higher. Not saying this will happen to you, just something to consider. Hope it works out for you.

It's not preferred, but you could get a personal line like I said, or Discover offered me a balance transfer for a 3% ($300) transfer fee and zero percent interest, so you could also go that route if you need a leg up on the equity in order to get your HELOC a bit further down the road. If you go that route just make sure whoever is giving you the balance transfer is doing it in check form. You write the check to yourself and cash it and then transfer it onto your mortgage. I didn't end up going that route, but for a total cost of $300 as long as you can pay it back in 12 months (or maybe 15-18, I can't remember), it's pretty good to save all that interest.

Just remember, once you save the mortgage interest on paper you have to turn around and collect it in a piggy bank for 30 years before it's real. That's the whole thing with savings that I learned recently. When you save money it's kind of like a mythological mathematical creature that you let out of a tiny treasure chest, but then you have to go on a 30 year quest to capture him. My parents got me a bike instead of braces 31 years ago and when they finally got their $3000 last year you should have seen the smile on my face. :-D