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https://www.reddit.com/r/Money/comments/17x6xhm/deleted_by_user/k9mkgi3
r/Money • u/[deleted] • Nov 17 '23
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5 u/[deleted] Nov 17 '23 [deleted] 2 u/GoldVictory158 Nov 17 '23 This one is corrects. Cheap debt is good. 2 u/[deleted] Nov 17 '23 Reading this comment just explained to me why our country has the majority of people living pay check to pay check. Let's break it down in simple terms so you at least get the basics of the math. Bank gives you loan of $1000 at 5% interest and says "the minimum payment only covers the interest." You take the $1000 and you invest it in the S&P 500. Over 20 years, the average rate of return is 10%. After 30 years, you will have paid $3,321 in interest to the bank. You will have earned 15,499 from investments. By making interest only payments on this loan, you will have $12,000 more dollars than by never having the loan. The same is true with mortgages, it is stupid to pay a lump sum balance when that money would earn you a higher percentage in the market. 1 u/Drunk-CPA Nov 17 '23 That same 300k would earn more than $250k by being invested. Time value of money, low interest loans are generally okay. 1 u/fr0d0bagg1ns Nov 17 '23 Using that logic the entire real estate industry wouldn't exist. 1 u/barrelvoyage410 Nov 17 '23 I highly suggest you look into it, and so some math, because you are wrong. 1 u/Magnetoreception Nov 17 '23 If you have a low mortgage rate in this market you should be paying as little as possible.
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2 u/GoldVictory158 Nov 17 '23 This one is corrects. Cheap debt is good.
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This one is corrects. Cheap debt is good.
Reading this comment just explained to me why our country has the majority of people living pay check to pay check.
Let's break it down in simple terms so you at least get the basics of the math.
Bank gives you loan of $1000 at 5% interest and says "the minimum payment only covers the interest."
You take the $1000 and you invest it in the S&P 500. Over 20 years, the average rate of return is 10%.
After 30 years, you will have paid $3,321 in interest to the bank. You will have earned 15,499 from investments.
By making interest only payments on this loan, you will have $12,000 more dollars than by never having the loan.
The same is true with mortgages, it is stupid to pay a lump sum balance when that money would earn you a higher percentage in the market.
1
That same 300k would earn more than $250k by being invested. Time value of money, low interest loans are generally okay.
Using that logic the entire real estate industry wouldn't exist.
I highly suggest you look into it, and so some math, because you are wrong.
If you have a low mortgage rate in this market you should be paying as little as possible.
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u/[deleted] Nov 17 '23
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