Resurrecting the debate of Leverage using a house

General Discussion on the Permanent Portfolio Strategy

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sophie
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Re: Resurrecting the debate of Leverage using a house

Post by sophie » Tue Mar 15, 2016 7:44 am

Often, the decision to buy a home has more to do with quality of life (and quality of housing) than finances.  Barrett is right to call a home a consumption item.  You can sell and move to a cheaper home later, but there's a huge overhead of cost & effort involved with that.

You may not agree with Tyler's rule, but it's better than relying on the real estate market's idea of affordability which I think is a catastrophic level of debt and a near-zero savings rate.  I like the rule about spending no more than your current amount of liquid savings on a house, because I'm in compliance with that one :-).  After that, it doesn't matter too much what you decide to do with the mortgage.  For what it's worth, my handling of the mortgage right now hinges on where my savings are located (tax-advantaged vs taxable), so that may be something for you to consider before deciding to pay down the mortgage - which is an irreversible action.
"Democracy is two wolves and a lamb voting on what to have for lunch." -- Benjamin Franklin
Libertarian666
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Re: Resurrecting the debate of Leverage using a house

Post by Libertarian666 » Tue Mar 15, 2016 10:42 am

rocketdog wrote:
Tyler wrote:1) If you can't afford to pay cash for the home, you can't afford it.
So... no one should ever finance anything?  Not even a college education?  That's not very realistic now, is it? 

Top-rated financial advisor Ric Edelman says there are 11 Great Reasons to Carry a Big, Long Mortgage
Most of that is one reason, with several different ways of describing it. That actual reason, of course, is inflation. Without inflation, none of those reasons make any sense at all.

Well, he also mentions the "tax advantages", which are available only to the extent that your deductions are greater than the standard deduction, which for most people amounts to very little. And even those assume that you can earn more than the mortgage rate, after taxes, which is not a certainty (to put it mildly).
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