Maybe I'm just lucky, but i use my online bill pay from BoA and send my payment about two weeks early every month. No charges , no late fees, no nothing, just a "thank you" on my next statement that payment was received.

 

I don't know about you guys but my bike is not a "toy".

 

Best firehouse lawyer discussion I ever heard was the night an engine driver won $5.4 million in the state lottery. Everybody became a financial adviser.

 

Let me make it simple for ya... if my money is in the bank making twice as much interest as I can borrow it for, why would I use my money??? It is cheaper, (well was) to use HD's money and pay them the couple of points interest then for me to use my money making 5.5% sitting where it is...

Math gentleman, math...

[/quote]



Dude, where are receiving 5.5%? I'm not calling you out on your rate, I am interested in an account that pays 5.5%. Is it an online savingsaccount, CDor a bond & money marketmix? PM me if don't want to reply on the forum.

-Bill-
[/quote]

It was a CD offered at the BankI work for that was discontinuedtwo weeks ago. The rates are pretty grim on the short termas we speak though, but those who locked in for the long term are doing just fine...5.5% was the APY, therate was 5.357%. Now the best is about 4% APY with 25K or more.

 

Ahhhh, I see where you are getting confused...lol I am not writing off the purchase, I am only talking about writing off "The Interest Paid" on a home equity...

 

Nothing personal here either, but this is a good illustration of why the rich get richer and the poor get poorer. A basic lack of financial education, which our public schools do not provide by the way. It makes absolutely no difference what the loan is for, if you can invest the money at a higher interest rate than you are paying for the loan, you end up with more money by financing and keeping yourmoney.

Let's say it was a house that cost $100,000, and you had $100,000 in cash. Do you finance with a 7% mortage and leave your money in an investment account earing 10%, or do you pay cash for the hosue...which is best?

If I pay cash for the house, it costs me $100,000 and I have a house and no cash in my hand. Simple.

If I mortage the house at 7%, the principle and interest payments will be $665.30/month for 30 years. That comes to a total amount I will pay the mortgage company of $665.30 x 12 x 30 = $239,508.

Yes, it costs me an additional $139,508 of interest to finance the house. However where is my $100,000 in cash that I had..it is still in that investment account since I did not use it to buy the house.

Now since I am geting 10% on my $100k for this same 30 years, there is now $537,997.65 in my investment account. So while I was paying an extra $139,508 for the house, at the same time since I did not spend my $100k so I have made $437,997 in interest with my money. Doing it this way, at the end I have not only a house, but I also have $538k in my bank.

Now you might say, but this way I had to make those payments of $665.30 each month, that's why I have money. Not true.

When I bought the house for $100,000 I could have told my investment company, to automatically make those payments for me each month out of the $100,000 I already have. What would the result be then? Well since my money is invested at 10% and the house is financed at 7%, my money is growing faster than the mortage company's money is. By plugging this into a financial calculator, I see that at the end of 30 years, my house is paid for and I would still have $133,096 in my investment account. So essentially I got a free house and $33k extra on top of it.

Some here have said, but you are in debt when you do it this way. Also not true..actually debt is your net worth, not whether or not you have a loan. If you had kept your initial $100,000 then at any time you chose you could pay off the balance on your house. Your only in debt if you finance the house and spend the cash on something else.

The purpose of the loan doesn't matter, just the scale of the numbers change. If you had the cash for your bike and you didn't finance the bike (assuming you could invest at a higher interest rate than you could finance the bike at) then you literally threw money away.

Using the thread example of a $24,000 bike financed at 1.9% interest, and investment rate of 5.5%...
If you invested the $24,000 and financed the bike and paid the payments out of your investment account (the $24,000 you had) each month, at the end of 5 years your bike would be paid for and you would still have $2,682.60 in your investment account. If you paid cash f

 

5.5% is most likely a CD. There are still some decent CD rates around if you shop for them. There are many options to choose from, and a bank is probably not the best place.

I have a few investment acounts with Merrill Lynch that have been making an average of 17 to 22% annually with low to moderate risk. If you have enough to buy a bike for cash, you have enough to invest anywhere you want.

 

Yes, but the value of peace of mind - priceless!

And you've got to subtract the higher costs of insurance and registration from that $2682.60 ,which are required whenever a leinholder is involved - in California anyway.

 

[quote]ORIGINAL: swestbrook60

Nothing personal here either, but this is a good illustration of why the rich get richer and the poor get poorer. A basic lack of financial education, which our public schools do not provide by the way. It makes absolutely no difference what the loan is for, if you can invest the money at a higher interest rate than you are paying for the loan, you end up with more money by financing and keeping yourmoney.

Let's say it was a house that cost $100,000, and you had $100,000 in cash. Do you finance with a 7% mortage and leave your money in an investment account earing 10%, or do you pay cash for the hosue...which is best?

If I pay cash for the house, it costs me $100,000 and I have a house and no cash in my hand. Simple.

If I mortage the house at 7%, the principle and interest payments will be $665.30/month for 30 years. That comes to a total amount I will pay the mortgage company of $665.30 x 12 x 30 = $239,508.

Yes, it costs me an additional $139,508 of interest to finance the house. However where is my $100,000 in cash that I had..it is still in that investment account since I did not use it to buy the house.

Now since I am geting 10% on my $100k for this same 30 years, there is now $537,997.65 in my investment account. So while I was paying an extra $139,508 for the house, at the same time since I did not spend my $100k so I have made $437,997 in interest with my money. Doing it this way, at the end I have not only a house, but I also have $538k in my bank.

Now you might say, but this way I had to make those payments of $665.30 each month, that's why I have money. Not true.

When I bought the house for $100,000 I could have told my investment company, to automatically make those payments for me each month out of the $100,000 I already have. What would the result be then? Well since my money is invested at 10% and the house is financed at 7%, my money is growing faster than the mortage company's money is. By plugging this into a financial calculator, I see that at the end of 30 years, my house is paid for and I would still have $133,096 in my investment account. So essentially I got a free house and $33k extra on top of it.

Some here have said, but you are in debt when you do it this way. Also not true..actually debt is your net worth, not whether or not you have a loan. If you had kept your initial $100,000 then at any time you chose you could pay off the balance on your house. Your only in debt if you finance the house and spend the cash on something else.

The purpose of the loan doesn't matter, just the scale of the numbers change. If you had the cash for your bike and you didn't finance the bike (assuming you could invest at a higher interest rate than you could finance the bike at) then you literally threw money away.

Using the thread example of a $24,000 bike financed at 1.9% interest, and investment rate of 5.5%...
If you invested the $24,000 and financed the bike and paid the payments out of your investment account (the $24,000 you had) each month, at the end of 5 years your bike would be paid for and you would still have $2,682.60 in your investment account. If you paid cash for the bike then you have no mo

 

I'm not confused. You still don't get it, the interest on that loan is NOT deductable. You may get away with it, but if you're audited they'll stick it to ya big time. Ask the tax man.