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badboy00z

CA
United States
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December 26, 2009
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Oct 6, 2010, 9:30 pm

So here's the situation...you just won $2 million dollars (after taxes) and want to buy a house. Would you rather buy a house with the winnings or get a mortgage so you have more money to invest?

My thinking is that if the jackpot is really low you would be better off to invest the money and get a mortgage and pay it off in 10-20 years. If you buy a house with the winnings you won't have that much to invest it.

Would banks even approve your loan if you have money from winning the lottery?
Jack Pot

United States
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September 20, 2007
225 Posts
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Oct 6, 2010, 10:19 pm

I would use $500K to buy a house (including furnishings) and a car---- invest and share the rest of the winnings.
joker17

United States
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June 1, 2009
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Oct 6, 2010, 11:14 pm

Why would I dump all my winnings on a house?

You forgot the Porsche, and the $500,000 recording studio...lol
OwlCreekBridge

lottoville
United States
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August 11, 2010
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Oct 7, 2010, 2:09 am

Quote: Originally posted by badboy00z on Oct 6, 2010
So here's the situation...you just won $2 million dollars (after taxes) and want to buy a house. Would you rather buy a house with the winnings or get a mortgage so you have more money to invest?

My thinking is that if the jackpot is really low you would be better off to invest the money and get a mortgage and pay it off in 10-20 years. If you buy a house with the winnings you won't have that much to invest it.

Would banks even approve your loan if you have money from winning the lottery?

Winning 2 million dollars (after taxes) will not count against you when you apply for a mortgage. With a reasonably good credit score and enough cash to put a 20% down payment getting a home loan shouldn't be a problem.

Personally I would get a 30 year fix mortgage. The APR on these is around 4.25%. Winning 2 million dollars, I wouldn't buy a house more than 400 grand. So, I'd put down 80 grand and borrow 320 grand at 4.25%. If I could invest the money I would have used to pay off the house in full and get at least a 5% yearly return I'd be coming out ahead. With 320 grand I'd go with something like gold or silver.

Gold price per ounce has gone up almost 30% in one year

http://goldprice.org/gold-price-history.html#1_year_gold_price

Silver has gone up 33% in one year

http://silverprice.org/silver-price-history.html
Coin Toss

Zeta Reticuli Star System
United States
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January 17, 2006
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Oct 7, 2010, 2:11 am

With a mortgage you pay for the house three times or more.

Those who run the lotteries love it when players look for consistency in something that's designed not to have any. So many systems, so many theories, so few jackpot winners.

There is one and only one 'proven' system, and that is to book the action. No matter the game, let the players pick their own losers.
OwlCreekBridge

lottoville
United States
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August 11, 2010
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Oct 7, 2010, 3:58 am

Quote: Originally posted by Coin Toss on Oct 7, 2010
With a mortgage you pay for the house three times or more.

If you can invest your money where the interest you make is more than the interest you pay to the bank, you'll come out ahead. If someone can get a 4.25% fixed APR and get a 5% return on their investments they're turning out a profit. Mortgage rates are at historic lows, why not take advantage of it?
kapla

United States
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July 24, 2010
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Oct 7, 2010, 5:57 am

Quote: Originally posted by Coin Toss on Oct 7, 2010
With a mortgage you pay for the house three times or more.

True. Think of it this way - if you borrow the money you PAY for the cost of borrowing that money. Now if you can MAKE more than 5% a year on the money you DIDN'T put in the house then you would end up ahead. That is what ALOT of people did in the last 5-10 years, put as little down as possible and keep as much as possible in the market when they bought new or (if they already owned a home) took out money at the low rate and put in the market making a much higher rate.

So, do you think you could make more than 5 %?? Personally I would like the opportunity to TRY!!
joker831

Tucson, Arizona
United States
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July 27, 2008
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Oct 7, 2010, 6:40 am

Buy a house for cash. This way you don't end up paying $350,000 on a $120,000 home over a 30 year stretch. If you take $50,000 and invest it wisely, then there is no reason why you shouldn't see $40,000 to $60,000 return per $10,000 invested over a 6 to 8 year period. Check out Lithium stocks and up and comming Chinese Bio Tech stocks. Huge gains and returns on these over the next 3 years. The one to watch right now would be Weikang Bio-Technology Group Co. Inc. Stock Symbol (WKBT). It is a very strong buy option right now. The Chinese Stock Market has HUGE potential right now because they are quickly becoming an economic force to be reckoned with.

The possibilites are endless.... might as well start at the begining
markp1950

Milwaukee, WI
United States
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December 27, 2003
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Oct 7, 2010, 8:05 am

I buy my land first, on cash.

THEN I put on it whatever I can afford. EVERYTHING cash.

You pay a mortgage, the market crashes, then they take your house from you. Then you have nothing.

MarkP
Coin Toss

Zeta Reticuli Star System
United States
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Oct 7, 2010, 6:47 pm

Quote: Originally posted by OwlCreekBridge on Oct 7, 2010
If you can invest your money where the interest you make is more than the interest you pay to the bank, you'll come out ahead. If someone can get a 4.25% fixed APR and get a 5% return on their investments they're turning out a profit. Mortgage rates are at historic lows, why not take advantage of it?

OwlCreekBridge,

"Paid off" beats "if" every single time.

Those who run the lotteries love it when players look for consistency in something that's designed not to have any. So many systems, so many theories, so few jackpot winners.

There is one and only one 'proven' system, and that is to book the action. No matter the game, let the players pick their own losers.
OwlCreekBridge

lottoville
United States
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August 11, 2010
132 Posts
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Oct 7, 2010, 8:23 pm

Quote: Originally posted by Coin Toss on Oct 7, 2010
OwlCreekBridge,

"Paid off" beats "if" every single time.

I disagree "Paid off" beats every other scenario every single time. There are scenarios where not paying for a house in full might not be the best decision for someone. The topic creator's scenario is if someone won a $2 million (after taxes) jackpot. If the winner was in their 30s they could live another 30 or 40 years so the money has to last and grow. If someone bought a $400,000 house and paid it off in full the money does nothing. The house might even lose value. If someone bought a $400,000 house and put 20% down and borrowed the rest they'd have $320,000 to invest. A 15 year fix mortgage is about 3.9% APR.

One way of looking at it is you're taking out a $320,000 loan at 3.9% interest. You're telling me you can't invest the money and do better than a 3.9% annual return? I'm not talking about risky penny stocks either.

Gold per oz. has increased in value 30 percent from it's price a year ago and 252 percent from it's price 15 years ago. http://goldprice.org/gold-price-history.html#1_year_gold_price

Even if gold doesn't grow as much as it did before, say it only grows 15 percent annually instead of 30 percent in the past, you will still come out ahead because you're only paying 3.9% interest on your mortgage. 15 percent minus 3.9 percent equals an 11.1 percent return. I'd take that deal any day of the week.

There is also the benefit that someones mortgage rate is tax deductable.
TeAl*888

Ontario
Canada
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September 17, 2010
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Oct 7, 2010, 8:45 pm

Owning a business is more important than owning a House ..in my opinion

or even an investment that generates a reasonable profit

you can pay your mortgage using the profit from your investment

but if the Prize money amount is large enough to get you a nice house with enough money left for a good size investment ,then you're set!
PrisonerSix

Baton Rouge, LA
United States
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May 7, 2004
1,192 Posts
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Oct 7, 2010, 10:10 pm

Quote: Originally posted by badboy00z on Oct 6, 2010
So here's the situation...you just won $2 million dollars (after taxes) and want to buy a house. Would you rather buy a house with the winnings or get a mortgage so you have more money to invest?

My thinking is that if the jackpot is really low you would be better off to invest the money and get a mortgage and pay it off in 10-20 years. If you buy a house with the winnings you won't have that much to invest it.

Would banks even approve your loan if you have money from winning the lottery?

I already have a mortgage so I'd probably just pay it off and fix up the house I have. I only owe around $60,000, so that's not going to hit me too hard.

I live in an area where housing costs aren't as bad as in some areas. I could probably get a house in the $200-$300K range here that's bigger than then one I have. Going that route, and then just living off interest/investments would be the way to go. Or better yet, move to a lower cost area so I won't need that much to live on, and pay cash for everything.

Prisoner Six

"I am not a number, I am a free man!"
Coin Toss

Zeta Reticuli Star System
United States
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January 17, 2006
11,788 Posts
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Oct 7, 2010, 11:56 pm

OwlCreekBridge

" If someone bought a $400,000 houseand paid it off in full the money does nothing. The house might evenlose value. If someone bought a $400,000 house and put 20% down andborrowed the rest they'd have $320,000 to invest. A 15 year fixmortgage is about 3.9% APR."

One way of looking at what you're saying is, "I can't stand paying you only the $320,000 remaining for the house, let me pay you tens of thousands more over the next 15 years, where do I sign?"

Those who are truly financially secure will tell you there m.o. is "Heat (utilities), eat (food), and taxes".

From your example above, pre-Keating Five S & L scandal people could have just put the money in a S & L. That was then. Now you're lucky to get 1 %. Stocks tank, gold fluctuates. No one can see that far into the future to know what's going to happen. To have $2,000,000 cash and borrow $320,000 is crazy.

Those who run the lotteries love it when players look for consistency in something that's designed not to have any. So many systems, so many theories, so few jackpot winners.

There is one and only one 'proven' system, and that is to book the action. No matter the game, let the players pick their own losers.
OwlCreekBridge

lottoville
United States
Member #95,470
August 11, 2010
132 Posts
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Oct 8, 2010, 8:04 am

Quote: Originally posted by Coin Toss on Oct 7, 2010
OwlCreekBridge

" If someone bought a $400,000 houseand paid it off in full the money does nothing. The house might evenlose value. If someone bought a $400,000 house and put 20% down andborrowed the rest they'd have $320,000 to invest. A 15 year fixmortgage is about 3.9% APR."

One way of looking at what you're saying is, "I can't stand paying you only the $320,000 remaining for the house, let me pay you tens of thousands more over the next 15 years, where do I sign?"

Those who are truly financially secure will tell you there m.o. is "Heat (utilities), eat (food), and taxes".

From your example above, pre-Keating Five S & L scandal people could have just put the money in a S & L. That was then. Now you're lucky to get 1 %. Stocks tank, gold fluctuates. No one can see that far into the future to know what's going to happen. To have $2,000,000 cash and borrow $320,000 is crazy.

Did you even look at the chart I posted? http://goldprice.org/gold-price-history.html#1_year_gold_price

Over 40 years the value of gold has increased substantially. If you want to know what really fluctuates, it's the value of the dollar.

Ben Bernanke the chairman of the federal reserve has already gone on the record saying there isn't enough inflation. No one can see into the future but people can look back into the past. Look at what's happened to every fiat currency in history. Cash is not the safe havenyou make it out to be. Look at the value of the dollar since the inception of the fed.

http://www.infoplease.com/ipa/A0001519.html

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