Mortgages are not the worst thing.
It’s almost impossible to purchase a first home without one.
A wise old man once told me to not get a mortgage longer than 7 year term. I thought this was absolutely nuts. He was right at the time.
Things have changed.
1. Inflation is worse.
2. Inflation is underreported.
3. The fed rate is way low.
4. Virtually every mortgage is now backstopped by the FHA.
This makes the mortgage a subsidized game that is somewhat advantageous for the borrower.
NOW. Beware. Do not let the Stupid Arbitrage (TM) between reality and the prime mortgage rate lead you t buy too much house.
In order to keep from buying too much house and getting all fucked up, do not consider working with anything longer than a 15 year mortgage.
This will give you an enormous margin of safety.
1. You’ll be debt free in 15 years.
2. You’ll have saved 10’s or even 100’s of thousands in interest.
3. You’ll have bought a less expensive property
3a. This will save you property tax money.
3b. It’s my experience that maintenances and upkeeps are about 5% of the value per year. Some years they will be nothing. Literally. Other years you’ll buy a roof and an air conditioner and be out $35-70K. Buying more modest keeps upkeeps more modest.
4. The more modest property will be less expensive to furnish.
All of these things together mean that at the end of 30 years you will likely have over double the net worth you would have had if you had gotten a 30 year mortgage.
This is the difference between retiring and not retiring for most people.
It’s almost impossible to purchase a first home without one.
A wise old man once told me to not get a mortgage longer than 7 year term. I thought this was absolutely nuts. He was right at the time.
Things have changed.
1. Inflation is worse.
2. Inflation is underreported.
3. The fed rate is way low.
4. Virtually every mortgage is now backstopped by the FHA.
This makes the mortgage a subsidized game that is somewhat advantageous for the borrower.
NOW. Beware. Do not let the Stupid Arbitrage (TM) between reality and the prime mortgage rate lead you t buy too much house.
In order to keep from buying too much house and getting all fucked up, do not consider working with anything longer than a 15 year mortgage.
This will give you an enormous margin of safety.
1. You’ll be debt free in 15 years.
2. You’ll have saved 10’s or even 100’s of thousands in interest.
3. You’ll have bought a less expensive property
3a. This will save you property tax money.
3b. It’s my experience that maintenances and upkeeps are about 5% of the value per year. Some years they will be nothing. Literally. Other years you’ll buy a roof and an air conditioner and be out $35-70K. Buying more modest keeps upkeeps more modest.
4. The more modest property will be less expensive to furnish.
All of these things together mean that at the end of 30 years you will likely have over double the net worth you would have had if you had gotten a 30 year mortgage.
This is the difference between retiring and not retiring for most people.
Paying down mortgages.
1. Take your monthly payment, divide by two. Pay this amount on your note every other week. There being 26 2-week periods per year, this will make a 13th monthly payment every year.
2. When you pay extra on your mortgage, and you should, make sure your extra payments are applied to PRINCIPLE.
3. Have your mortgage company print an amortization table for you. It will show every payment, the interest and principle component for each. Mark them off as you make them.
4. Learn how to build a dynamic amortization table in excel. Use this to track your payments, cumulative interest, the ever shortening payoff date, etc.
1. Take your monthly payment, divide by two. Pay this amount on your note every other week. There being 26 2-week periods per year, this will make a 13th monthly payment every year.
2. When you pay extra on your mortgage, and you should, make sure your extra payments are applied to PRINCIPLE.
3. Have your mortgage company print an amortization table for you. It will show every payment, the interest and principle component for each. Mark them off as you make them.
4. Learn how to build a dynamic amortization table in excel. Use this to track your payments, cumulative interest, the ever shortening payoff date, etc.
More on mortgages.
A lot of what you are paying for when you buy a house are "wear items." It's stuff that wears out. The roof, carpet, flooring, paint, HVAC stuff, light bulbs, water heater, garage door opener, faucet washers, dishwasher, stove, etc. is all stuff that will wear out or break within 10-30 years.
Financing the house for longer than the average life of the wear items in the house means you will be paying for the first roof on your note as you are buying the second roof.
This seems like a technical detail but it is not. Ask anyone who has had to get a HELOC to buy that second roof and they haven't paid off the first note, they know it's not a technicality. Pay off the note and continue to sock that payment away each month so you can maintain that home perfectly, like an aircraft. Perfect home maintenance is very desirable. Maybe poast later on this.
This is yet another reason to get a 12 to 15 year note, to keep yourself from paying for an AC you no longer have while you are paying for it's replacement.
A lot of what you are paying for when you buy a house are "wear items." It's stuff that wears out. The roof, carpet, flooring, paint, HVAC stuff, light bulbs, water heater, garage door opener, faucet washers, dishwasher, stove, etc. is all stuff that will wear out or break within 10-30 years.
Financing the house for longer than the average life of the wear items in the house means you will be paying for the first roof on your note as you are buying the second roof.
This seems like a technical detail but it is not. Ask anyone who has had to get a HELOC to buy that second roof and they haven't paid off the first note, they know it's not a technicality. Pay off the note and continue to sock that payment away each month so you can maintain that home perfectly, like an aircraft. Perfect home maintenance is very desirable. Maybe poast later on this.
This is yet another reason to get a 12 to 15 year note, to keep yourself from paying for an AC you no longer have while you are paying for it's replacement.
You folks that are thinking these mortgage notes are interesting and a good idea, but don't heed them will be materially and demonstrably poorer about 5 years after buying.
This stuff is serious. Be petulant and seek more house on a longer note and condemn older you to HALF THE NET WORTH.
This is serious business. Very serious.
You work 40+ hours a week to get the resources you need to live and have a decent life then squander the proceeds of your work with your usurer.
Respect future you and make the sacrifice now.
This stuff is serious. Be petulant and seek more house on a longer note and condemn older you to HALF THE NET WORTH.
This is serious business. Very serious.
You work 40+ hours a week to get the resources you need to live and have a decent life then squander the proceeds of your work with your usurer.
Respect future you and make the sacrifice now.
I had a lot of rental property before I sold it all in 2015. In those days I was looking to add a 150-200 unit apartment complex to the wad.
During this time wife and I went to dinner with a couple who are good friends. One of those $400 dinners. I know folks spend more, but that's was all I was willing to do. The dude makes more money than I ever did. I was EARNING too. He was making double what I was making, but he didn't own his own business. He is about 12 years older, so he not only made more than me, but had been making more for a LONG time.
He asked what I had been working on and I told him about the apartment bit. He said he was VERY interested in joining in. I was pleased to maybe add some more money to the kitty and try for a larger property. I asked him how much he was willing to put in. He said all he could get was about $100k.
This mother fucker makes more than that a month.
His house is about 5X more than the house we had. Everything he had was big dickin'.
Move forward to 2018, I'm out.
He's still working.
Get self-employed.
Get the shorter note people.
During this time wife and I went to dinner with a couple who are good friends. One of those $400 dinners. I know folks spend more, but that's was all I was willing to do. The dude makes more money than I ever did. I was EARNING too. He was making double what I was making, but he didn't own his own business. He is about 12 years older, so he not only made more than me, but had been making more for a LONG time.
He asked what I had been working on and I told him about the apartment bit. He said he was VERY interested in joining in. I was pleased to maybe add some more money to the kitty and try for a larger property. I asked him how much he was willing to put in. He said all he could get was about $100k.
This mother fucker makes more than that a month.
His house is about 5X more than the house we had. Everything he had was big dickin'.
Move forward to 2018, I'm out.
He's still working.
Get self-employed.
Get the shorter note people.
I did ask him if $100k was all his was willing to contribute to the deal, or was there something about the deal that made him want to limit his part.
He said, "that's all I can muster."
He said, "that's all I can muster."
I had another friend who is gone now. He owned a company that made molded rubber products.
We were eating hamburgers for lunch one day and I was just grilling him and interviewing him because he just knew so much stuff. So much experience.
He was telling me a story about selling prime mover trucks for Crane Carrier Corp in the 1950's. He told me he had made 6 figures every year since 1955.
I remember working on some stuff with him and seeing he was clearing about $700k a year in 2000.
He drove a chevy truck with rubber floor boards and window cranks.
He did not spend the money to speak of. He had a nice house. His wife drove a Cadillac. They lived very well, but not like you'd think a guy with a low 9 figure net worth would.
We were eating hamburgers for lunch one day and I was just grilling him and interviewing him because he just knew so much stuff. So much experience.
He was telling me a story about selling prime mover trucks for Crane Carrier Corp in the 1950's. He told me he had made 6 figures every year since 1955.
I remember working on some stuff with him and seeing he was clearing about $700k a year in 2000.
He drove a chevy truck with rubber floor boards and window cranks.
He did not spend the money to speak of. He had a nice house. His wife drove a Cadillac. They lived very well, but not like you'd think a guy with a low 9 figure net worth would.
I caulked the inside of the new house frame for hours today. About 70 tubes of caulking.
I sealed where the baseplate of each wall sits on the subfloor, betwixt the two top-plates, around all window and exterior door headers, etc.
Every single joint that will not receive spray foam that could allow air infiltration got sealed up from the inside.
The builder thinks I’m crazy. The house is wrapped in tyvek and will have James B Hardie siding on it, which will be caulked up and painted. All voids will be sealed with open and closed cell foam. But there are other things that can allow air leaks.
I sealed those today.
I’m shooting for a $100 max Oklahoma air conditioning bill in this house.
I sealed where the baseplate of each wall sits on the subfloor, betwixt the two top-plates, around all window and exterior door headers, etc.
Every single joint that will not receive spray foam that could allow air infiltration got sealed up from the inside.
The builder thinks I’m crazy. The house is wrapped in tyvek and will have James B Hardie siding on it, which will be caulked up and painted. All voids will be sealed with open and closed cell foam. But there are other things that can allow air leaks.
I sealed those today.
I’m shooting for a $100 max Oklahoma air conditioning bill in this house.
St. Thomas is 100% right about the nature of money and lending.
Abolish the word lending for these financial encumbrances. They are not loans, they are claims on future earnings. This is why those in the know do not call it lending, it’s usury.
I loaned my friend Karl a sharpshooter. He’ll bring it back none the poorer. This is a loan.
If I “lent” him the money to buy a sharpshooter he’d spend it, then have to work and return to me OTHER money in a like amount plus interest. Bad news.
Abolish the word lending for these financial encumbrances. They are not loans, they are claims on future earnings. This is why those in the know do not call it lending, it’s usury.
I loaned my friend Karl a sharpshooter. He’ll bring it back none the poorer. This is a loan.
If I “lent” him the money to buy a sharpshooter he’d spend it, then have to work and return to me OTHER money in a like amount plus interest. Bad news.
I’m beginning to think “they” are going to pull off the soft economic landing.
I’ve been saying that it will be a long slow slide into third worldery. I think that’s true. I reckon it’s just going to be a slower and longer slide.
The central planners that control our currency and economy seem to have figured out how to collapse demand for key goods like housing and fuel.
Collapsing the housing bit has always been easy. Just drive the mortgage rates up. Fine. Done.
Collapsing demand for fuel is different. It has happened. Fuel sales for all types are down year on year, and last year was no record. In spite of “sanctions” disrupting supplies, in spite of shutting down pipelines in the US and all manner of other measures which have slowed production and delivery, prices are coming down again, because aggregate demand is down.
Unbelievable.
I thought in 2019 and early 2020 we were headed for deflation. I still think those conditions exist. (The currency is actually debt. Really. It’s “created” when bonds get bought.). Default on all the massive debt will cause money supply to collapse. This needs to happen, but “they” don’t want it. So they printed more currency currency is not money, money is a currency) in the last 30 months than the world has ever seen. Id din’t know they would do this.
I didn’t know demand would collapse for fuel, etc.
Anyway, soft landing.
Every time the bubble gets blown and the air gets let out the middle class gets smaller. We all get a little poorer while the gubermint keeps on immiserating everyone. Every leg down hurts a bit.
But if they don’t hurt us too much, we’ll take it just fine.
Here’s hoping for the big collapse. The Good Reset. One that deprives our managers of resources and makes good metaphysics and merit matter again.
I’ve been saying that it will be a long slow slide into third worldery. I think that’s true. I reckon it’s just going to be a slower and longer slide.
The central planners that control our currency and economy seem to have figured out how to collapse demand for key goods like housing and fuel.
Collapsing the housing bit has always been easy. Just drive the mortgage rates up. Fine. Done.
Collapsing demand for fuel is different. It has happened. Fuel sales for all types are down year on year, and last year was no record. In spite of “sanctions” disrupting supplies, in spite of shutting down pipelines in the US and all manner of other measures which have slowed production and delivery, prices are coming down again, because aggregate demand is down.
Unbelievable.
I thought in 2019 and early 2020 we were headed for deflation. I still think those conditions exist. (The currency is actually debt. Really. It’s “created” when bonds get bought.). Default on all the massive debt will cause money supply to collapse. This needs to happen, but “they” don’t want it. So they printed more currency currency is not money, money is a currency) in the last 30 months than the world has ever seen. Id din’t know they would do this.
I didn’t know demand would collapse for fuel, etc.
Anyway, soft landing.
Every time the bubble gets blown and the air gets let out the middle class gets smaller. We all get a little poorer while the gubermint keeps on immiserating everyone. Every leg down hurts a bit.
But if they don’t hurt us too much, we’ll take it just fine.
Here’s hoping for the big collapse. The Good Reset. One that deprives our managers of resources and makes good metaphysics and merit matter again.