A question for the financial gurus

Reply #19

Teddi — Sun, 01 Jun 2014 00:55:29 GMT

Hi Michael, I don't think the question is they got mortgages they couldn't afford. They could all afford it initially. And even discounting those that went hogwild or spent their money on drugs and prostitutes, you can be relatively careful and still lose large chunks: banks go under, accountants embezzle, businesses go bankrupt, stocks tank, investments don't pan out, divorces happen...there are a whole lot of non-high spending scenarios where you can end up behind. But in the event of any of t... [ More ]

Reply #18

mjwinsmith — Sat, 31 May 2014 23:47:14 GMT

Logic would dictate in this situation. If someone hit the Lottery for $50,000.00 and took a lump sum then they would have more that enough to purchase a house for $2,000,000.00 outright. So yeah, why would they take out a mortgage on a new home purchase.

Forget the Lottery winnings for a moment, if you had $2 million cash money sitting somewhere and wanted to buy a house, why would you not want to purchase it outright and not go into debt??

Yeah, take into account insurance and monthly exp... [ More ]

Reply #17

Teddi — Sat, 31 May 2014 23:27:53 GMT

Hi CD, thanks for your insight. And trust me I'm taking it all in simply because I hadn't really gotten the mindset of staying in debt to anyone unless I had to. If you don't have to, why do it? But these guys had perspectives I hadn't thought of; not having the money tied up in property when it could be invested hadn't occurred to me because I was looking at being beholden to a bank AND the added interest paid on that mortgage that could be avoided. Regardless of the amount won there still has... [ More ]

Reply #16

CDanaT — Sat, 31 May 2014 12:42:22 GMT

Teddi,

Going back to your original posting. The house purchase is depending on how much you win might and depending on your budget in the future. Lets say you take home a 50 million dollar cash option win of which Uncle Sugar taxes his 40%(yeah yeah I know it's 39.6% right now) plus any state taxes(if applicable)...so for sh*ts n giggles you walk away with ohhhhhhhhhh 26-28 million after all the taxes and lawyers fees,etc etc............The main thing is the nest egg for future financial g... [ More ]

Reply #15

Teddi — Sat, 31 May 2014 01:31:00 GMT

I'll admit the credit angle never once crossed my mind. Probably because I'd think if one won a boat load of money, one wouldn't need to buy anything on credit ever again. But a higher credit rating is definitely something to consider.

At least until AMEX sends their black card. LOL. After that I doubt I'd give my credit score another thought.

Reply #14

HoLeeKau — Fri, 30 May 2014 20:28:42 GMT

Who needs good credit when they have enough money to pay cash for anything they could want?

But I agree with your premise for people who are not wealthy. Even when I could afford to pay cash for a car, I'd get a loan and pay on it for 6 months then pay it off. Gives your credit score a nice jump. And that good score got me the best rate available on my mortgage, saving me thousands over the life of the mortgage loan.

Reply #13

LottoBoner — Fri, 30 May 2014 20:22:22 GMT

I suppose the only real reason to have mortgage, if you can pay off your house in full is to build credit.

Buy paying off your mortgage every month on time for say two years, you will enable yourself the ability to borrow more money later.

I don't know how much interest would be every month, but you could save yourself on interest and build credit at the same time, by paying perhaps quadruple the minimum every month.

And besides if you won $50,000,000, you might as well splurge on a say... [ More ]

Reply #12

bigbear29 — Fri, 30 May 2014 20:08:58 GMT

Good for you Artist77, you did the right thing.

Reply #11

bigbear29 — Fri, 30 May 2014 20:06:50 GMT

Whiteballz, look at the second post. I do mention property taxes.

Reply #10

Teddi — Fri, 30 May 2014 19:49:31 GMT

Okay, that makes sense. So between the tax breaks and interest paid on what isn't tied up in the house but instead invested, you'd presumably come out ahead. I guess that makes sense from a financial point of view.

Even so, I think I'd prefer the peace of mind of being debt free. Or as debt free as I can be. No car payments, no house payments. Insurance and taxes should be my only major monthly/yearly expenses.

Reply #9

Artist77 — Fri, 30 May 2014 19:43:53 GMT

I have always had good jobs but made it a priority to pay my mortgage off long prior to retirement. After buying my townhouse, I got a 15 year mortgage and it was not easy in the beginning but I did it. And the feeling is great every day of the week

Reply #8

Teddi — Fri, 30 May 2014 19:32:55 GMT

I agree with that, but I've yet to hear of these lottery winners losing their homes because of unpaid property taxes. Unpaid mortgages seem to be the#1 reason.

Reply #7

whiteballz — Fri, 30 May 2014 17:05:48 GMT

you can own your house but you will never own the land your house is built on top of. Even if someone has no mortgage and their house is paid off in full, they need to pay property tax every year.

People are just renting land from the government so to speak. If you don't pay your rent in the form of property tax, your house will be auctioned off and sold to the highest bidder.

Reply #6

bigbear29 — Fri, 30 May 2014 15:37:15 GMT

Yes, keywords you own it . We hear about lottery winners losing their money in about 5 years. Do not have a mortgage.

Reply #5

whiteballz — Fri, 30 May 2014 14:14:27 GMT

it depends on someone's risk tolerance. Everyone is different. It's not only lottery winners who can take advantage of this but people who have lots of money. Facebook founder and billionaire, Mark Zuckerberg refinanced his 6 million dollar home to a 30-year adjustable-rate loan starting at 1.05% in 2012.

http://www.sfgate.com/business/article/Mark-Zuckerberg-s-mortgage-rate-1-05-3711118.php

The idea is, if you're paying 1-4% interest on your mortgage, you may be able to get 5% or better i... [ More ]

Reply #4

bluerain — Fri, 30 May 2014 14:11:26 GMT

i would never have a mortgage, you gain interest on your money in your account, plus u own it, u always will have equity,its yours, people are just greedy they dont want to pay cash, they are stupid.

Reply #3

savagegoose — Fri, 30 May 2014 14:10:16 GMT

here where i live

on investments , interest payments are tax deductible and capital gains is a better way to earn than in interest income. so its tax effective to have a mortgage, on investment property. especially if you are on the high tax rates.

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Reply #2

wildbillyloco — Fri, 30 May 2014 13:20:28 GMT

?NWRDOING I AM WHAT

Reply #1

bigbear29 — Fri, 30 May 2014 12:57:12 GMT

I'm not a financial person but, I think you should not have a mortgage and no debt. Also have money in another account to pay your property taxes every year. Be on a budget, know what you can spend per year.

A question for the financial gurus

Teddi — Fri, 30 May 2014 12:15:38 GMT

To the financially savvy lottery post members, I have a quick question for you. Is there any circumstance where it's better to have a mortgage than buy a house outright?

There have been so many lottery winners who lose their homes due to foreclosure because they missed mortgage payments, I had to ask. So many of us would love to win the lottery just so we can pay off our mortgages. I'm not getting why anyone would give away thousands of dollars in interest to the banks instead of just paying... [ More ]