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Originally Posted by Baronvonellis
Your extremely rude and arrogant, there's no need to resort to petty name calling when we are just discussing things. It's seems your really triggered by this discussion. Why do you have to insult my intelligence and every post bring up something from months ago? It was my opinion and a thought experiment first of all.
Second, the S&P 500 has averaged 12% per year for the last almost 100 years since 1923. Or more recently, from 1987 to 2016, it’s averaged 11.66% If you are so savvy you should know that. So yes on average you should expect that over the long term. I've averaged 30% return for the last couple years in my investments.
Yes, it's a zero sum game since you only have limited money you earn every year. If your putting your capital into the stock market you will make far more money per year with it than in a house, and if you live in it its not a liquid asset anyway. It's a forced savings plan with a modest return. With compounding interest you can grow your capital far bigger and faster with stock.
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Oh boy, where to start with this….
I’m not triggered at all, but there are not words strong enough to describe how stupid of an idea it is to allow banks to adjust the principle of a loan because of built equity. If that was implemented in society, borrowing of money would come to a complete halt, the markets would crash, there would be complete chaos.
For those reading, this poster is stating he believes a bank should be able to loan somebody $300,000 for a home in the form of a mortgage, then 10 years later when the house is worth $340,000 - the bank should legally have the right to go back to the home owner and add $40,000 the the principle of their loan, because of…….i’m not sure why. That is seriously this guys stance. SERIOUSLY.
The very first thing you should learn about volatile markets is that past performance does not guarantee future returns - If you have a financial advisor telling you the market averaged 11.66% return during XXX time frame, so you should expect that moving forward over the long term….Fire him immediately. Seriously. Not saying you won’t earn that rate over the long term, but it’s not guaranteed. Most people use a threshold of around 8-9% as a good measure of long term gains.
No it is not a zero sum game, I don’t have the time to lay out each scenario investing the $60k in a mutual fund vs. put as down payment, but keep in mind that a couple things:
I’m assuming after the $60K this hypothetical person is still investing in the market via 401K and/or putting an additional post tax dollar amount into some sort of ETF. If this hypothetical person only has $60K to their name and has no ability to save any additional money, then they have no business purchasing a house they can’t afford. So to repeat, it is not a zero sum game, a savvy person can both purchase a home and invest in the stock market through some vehicle.
Tax benefits: Purchasing a home allows the homeowner to deduct Mortgage Insurance and Property Taxes, lowering the overall tax burden. Also keep in mind the 1031 exchange, very few people will grind out 360 payments over 30 years in the same house, real estate allows homeowners to “roll” the equity earned into a new home, tax free. So if the $300,000 home sells for $340,000 the $40,000 in equity is deferred tax, and can be put towards purchase of new home.
Paying down principle: Every month a portion of your mortgage payment pays down the balance of your principle, you are essentially paying yourself to live in your home. Additionally, with a mortgage you are locking in your payment regardless of what the housing market does (hint: it goes up long term), while renting, your monthly rent will surely increase over time, due to inflation.
The best approach is to Own Real Estate and invest in the stock market, not one or the other. I read a stat once that of a surveyed group of self-made millionaires, nearly 95% owned real estate. It’s a proven startegy, and the #1 wealth builder for the vast majority of Americans. If you choose not to invest long term in real estate, that’s your choice, but to try and deny PROVEN PATH to wealth is just plain foolish. Now it should go without saying, but individual circumstances may change this, but generally speaking this is true.