Cash or Mortgage

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coachd50
Posts: 1778
Joined: Sun Oct 22, 2017 10:12 am

Re: Cash or Mortgage

Post by coachd50 »

KlangFool wrote: Sat Jun 10, 2023 4:04 pm
coachd50 wrote: Sat Jun 10, 2023 3:53 pm
Why do you feel making a choice to avoid 7% is not the action of someone preparing for whatever life throws at them (not just the "upcoming recession".
coachd50,

Why do you think someone that

A) With a marginal tax rate of 24%

B) Portfolio size of only 700K

C) Buying a 500K house

D) And, thinking of paying CASH.

is someone that preparing for the coming recession?

Where in OP's post showing he/she is someone thinking of the possible worst case?

KlangFool
That isn't addressing anything Klangfool.
Again, what is the price of liquidity? at 7% you would still borrow because you worry of the "upcoming recession". How about at 9%? 11? 15? Should they finance the home on credit cards so that they are liquid for the "upcoming recession".

In fact should they have anything at all invested in equity assets knowing that there is an "upcoming recession"?
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: Cash or Mortgage

Post by KlangFool »

coachd50 wrote: Sat Jun 10, 2023 6:44 pm
KlangFool wrote: Sat Jun 10, 2023 4:04 pm
coachd50 wrote: Sat Jun 10, 2023 3:53 pm
Why do you feel making a choice to avoid 7% is not the action of someone preparing for whatever life throws at them (not just the "upcoming recession".
coachd50,

Why do you think someone that

A) With a marginal tax rate of 24%

B) Portfolio size of only 700K

C) Buying a 500K house

D) And, thinking of paying CASH.

is someone that preparing for the coming recession?

Where in OP's post showing he/she is someone thinking of the possible worst case?

KlangFool
That isn't addressing anything Klangfool.
Again, what is the price of liquidity? at 7% you would still borrow because you worry of the "upcoming recession". How about at 9%? 11? 15? Should they finance the home on credit cards so that they are liquid for the "upcoming recession".

In fact should they have anything at all invested in equity assets knowing that there is an "upcoming recession"?
coachd50,

"Again, what is the price of liquidity?"

A) Would you buy a house with cash and end up with zero emergency fund?

B) Would you buy a house with cash and if you are unemployed for 3 months, you will lose the house?

C) How about 6 months?

Are you willing to pay the price of not having liquidity?

"In fact should they have anything at all invested in equity assets knowing that there is an "upcoming recession"? "

I have enough liquidity to survive the coming recession. Hence, I invest in equity asset. I am prepared.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
coachd50
Posts: 1778
Joined: Sun Oct 22, 2017 10:12 am

Re: Cash or Mortgage

Post by coachd50 »

KlangFool wrote: Sat Jun 10, 2023 6:53 pm
coachd50 wrote: Sat Jun 10, 2023 6:44 pm
KlangFool wrote: Sat Jun 10, 2023 4:04 pm
coachd50 wrote: Sat Jun 10, 2023 3:53 pm
Why do you feel making a choice to avoid 7% is not the action of someone preparing for whatever life throws at them (not just the "upcoming recession".
coachd50,

Why do you think someone that

A) With a marginal tax rate of 24%

B) Portfolio size of only 700K

C) Buying a 500K house

D) And, thinking of paying CASH.

is someone that preparing for the coming recession?

Where in OP's post showing he/she is someone thinking of the possible worst case?

KlangFool
That isn't addressing anything Klangfool.
Again, what is the price of liquidity? at 7% you would still borrow because you worry of the "upcoming recession". How about at 9%? 11? 15? Should they finance the home on credit cards so that they are liquid for the "upcoming recession".

In fact should they have anything at all invested in equity assets knowing that there is an "upcoming recession"?
coachd50,

"Again, what is the price of liquidity?"

A) Would you buy a house with cash and end up with zero emergency fund?

B) Would you buy a house with cash and if you are unemployed for 3 months, you will lose the house?

C) How about 6 months?

Are you willing to pay the price of not having liquidity?

"In fact should they have anything at all invested in equity assets knowing that there is an "upcoming recession"? "

I have enough liquidity to survive the coming recession. Hence, I invest in equity asset. I am prepared.

KlangFool
How do you know you have enough liquidity? I am just following the logic pattern you have established here. You, nor I, no anyone knows what the "coming recession" will bring. It may be so severe that the most valuable assets will be home garden and ammunition.

We can take this to all levels of ridiculousness.

I am a bit disappointed that you would not provide a direct answer. I genuinely was interested in what you would consider is too costly an interest rate (price) in this particularly situation to maintain liquidity.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: Cash or Mortgage

Post by KlangFool »

coachd50 wrote: Sat Jun 10, 2023 7:29 pm
I am a bit disappointed that you would not provide a direct answer. I genuinely was interested in what you would consider is too costly an interest rate (price) in this particularly situation to maintain liquidity.
coachd50,

That question never arises in my case.

I only buy a house when it is significantly (20% or more ) cheaper than renting with a 20% down payment and 30 years fixed rate mortgage. So, the interest rate does not matter if the resulting mortgage payment is significantly cheaper than renting.

And, I would not pay off the mortgage until and unless I am financially independence.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: Cash or Mortgage

Post by KlangFool »

coachd50 wrote: Sat Jun 10, 2023 7:29 pm
How do you know you have enough liquidity?
coachd50,

I have enough liquidity to outlast the majority and more. Beyond that, it is no longer a money/financial problem.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
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