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Mortgage Mayhem

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  • MixedPlateBroker
    replied
    Re: Mortgage Mayhem

    Pua'i,
    If a client decides they want to prepay their mortgage, there are no negative consequences for me. I actually advise my clients that they can reap significant interest savings by making extra payments toward principal, especially in the early stages of their mortgages. Although prepaying a mortgage reduces the interest one can deduct from their income taxes, many find the prospect of paying off their mortgage sooner the more attractive option.

    I know some of you have heard the hype surrounding today's Federal Reserve Board meeting regarding the federal funds rate. The majority of economic prognosticators have predicted a moderate rate cut of 0.5%. Although that sounds good on paper, a cut wouldn't be felt immediately by most Americans. Fixed mortgage rates are based on the bond market. ARM and credit card rates would show some downward movement on a rate cut, however. Historically, certain sectors of the stock market get a boost from a rate cut.

    If the Fed serves up a small cut or does not deliver one at all, it's widely expected the Dow will slump on the news and mortgage rates would feel some upward pressure. Some believe the Fed will stand pat on the funds rate over fears of overheating the economy.

    Whichever direction the Fed goes, their announcement is expected at 8:15 a.m. HST today. You can check here for the latest updates.

    808,
    Good call on the change of scenery. Hard to squeeze decent cash flow out of Hawaii properties, even on the Big Island. I'm guessing your alt market doesn't get much snow, either.

    Leave a comment:


  • 808shooter
    replied
    Re: Mortgage Mayhem

    Originally posted by kamuelakea View Post
    Thats right 808shooter. Buy now. Real estate always goes up. If you don't buy now you will be priced out forever, they're not building any more land, it's Hawaii, everybody wants to live here, this is paradise, its Timkona's Baby boomers, they wouldn't give me this no doc- interest only- negative amortization - ARM - bad credit - loan if they didn't think that I could pay for it.

    Hurry, buy buy buy buy. You'll be building equity and getting rich!!!
    Haha you right Big K, no worry about me. I doing jes fine.

    The secret is buying real estate that you can maintain a positive cash flow on with a decent down like 10%-20% with a fixed 30 year.

    Find that and you're good to go. Too bad finding good deals like that in Hawaii is getting pretty tough. Lucky for me, I investing in a market with positive cash flow with 20% down. We talking cap rates of 8-9% and real potential for short to medium term appreciation.

    I'm not going say anymore. Too many haters and skeptics anyway. And... I want my friends to get in and catch this wave while we sit out the Hawaii market for a few years.

    If you right, we'll have lots of cash to throw back in the market in a few years at dirt cheap prices. If not then we'll have good returns for a few years then start investing back into Hawaii - just won't be able to buy as much.
    Last edited by 808shooter; September 17, 2007, 11:04 PM.

    Leave a comment:


  • Pua'i Mana'o
    replied
    Re: Mortgage Mayhem

    Originally posted by MixedPlateBroker View Post

    I have been to a Tardus presentation and I know people who've worked for the company. Tardus' original mission was to provide homeowners a system, utilizing credit cards and a HELOC, to front-load their mortgage -- theoretically paying down the principal more quickly. Ms. Souza now seems to be positioning them as a credit repair shop. They don't broker or lend money. You might find their Hawaii BBB report here interesting. Although their multiple complaints are mostly resolved, it's very odd that the company's principal is an administrative assistant.

    Oh, and I apologize for the slightly inflammatory title, but I already spend hours everyday educating and advising my clients about mortgages. I could not stand idly by while Ms. Souza spreads potentially harmful misinformation in order to steer more business to her own company. Hopefully, Andy will attract other sponsors with some ethics and who won't demand seat time. Best of luck to him.
    As a mortgage broker, do you lose money if people like me pay off our 30yr mortgages in 10 yrs?

    Leave a comment:


  • CranBeree
    replied
    Re: Mortgage Mayhem

    kamuelakea,

    why do you sound so bitter?

    Leave a comment:


  • Guest's Avatar
    Guest replied
    Re: Mortgage Mayhem

    Originally posted by 808shooter View Post
    Real estate is a great investment. Far better than the stock market. Why?

    1. Stocks can go to zero.
    Very easy way to elliminate this possibility.

    2. Time is on your side.
    I tried to explain this already but apparently you went private school. Time is on yourside by about 3 or 4% only if you own stocks. That difference is massive but I know its too hard for you.

    3. You leverage your money in real estate.
    While there is some truth to the benefits of leverage, over time, it becomes less relavent. See in your example, the 25,000 did not turn into 250000. It turned into 250000, adjusted for inflation might take it down to 150,000, minus all the interest you paid on the loan so we are now at 25,000, then minus the new roof, painting, termite, property taxes, etc etc etc etc and guess what? You negative. Great job investing genius. Facinating how people completely forget the "costs" of ownership.


    4. In contrast, I never meet folks that say, whew. I made a lot of money in the stock market. Yeah!!!

    If you gave Warren Buffet 1000.00 in 1957, guess what you would have today?


    Answer: Scroll Down but make up a guess before you do. At least guess.



    a




    a





    a




    a




    a




    a



    a




    a




    a



    a





    a


    a


    a

    ANSWER: 27 MILLION.

    That is not a typo. And no costs of ownership like a house.

    No charge for the advice gangey.

    You welcome.

    Leave a comment:


  • oceanpacific
    replied
    Re: Mortgage Mayhem

    Originally posted by GeckoGeek View Post
    The land never goes to zero. And the value of the land is usually much higher then the building on it.
    Unless, the land is in the "volcano zone" in Puna .................

    Leave a comment:


  • SusieMisajon
    replied
    Re: Mortgage Mayhem

    That British bankrun is still going strong.

    Leave a comment:


  • tikiyaki
    replied
    Re: Mortgage Mayhem

    Originally posted by 808shooter View Post
    Real estate is a great investment. Far better than the stock market. Why?

    1. Stocks can go to zero. Companies go out of business all the time. Even big ones like Enron or Worldcom. Houses never go to zero. If they get destroyed, that is what insurance is for.


    4. Investing in real estate works. I know lots of old people that are rich because of real estate. They own their own home and own lots of rentals. In contrast, I never meet folks that say, whew. I made a lot of money in the stock market. Yeah!!!

    These are the 2 things that I thought about when I bought my Hilo Condo a few months ago. I know people are making a killing right now in the stock market, but it unless you REALLY know about how the stock market works, it seems like playing craps in Vegas to me. I figure people are always going to need a place to live, but that promising new startup company can go under really easy.

    And yea, the old people who bought their properties 10 and 20 years ago who still have them are doiong alright right now.

    The trick is to hold onto it long enough, and keep it rented the whole time.

    Also, I watched some prices in Hilo triple since 2004, and they're still way less expensive compared to anywhere else in hawaii and where I live in SoCal

    I just need to keep it rented.

    Leave a comment:


  • GeckoGeek
    replied
    Re: Mortgage Mayhem

    Originally posted by 808shooter View Post
    Houses never go to zero. If they get destroyed,
    The land never goes to zero. And the value of the land is usually much higher then the building on it.

    Another advantage of home ownership is locking in your expenses. Look at 'eldos post. $700/month for a house is an incredible deal. Think of how much money he's saved - tax free. That may not have been a spectacular deal in 1980, but he's still paying 1980 prices in 2007.

    It's been a long time since I ran the calculations, but I figured I had to earn $1.56 to take home an additional $1.00. So saving money counts for a lot. And once the home is payed off, one is really set for retirement when one has no wages.

    Yes, you can go broke in real estate if you go about it wrong. If you're going for a ARM because that's all you can qualify for - danger! danger! An ARM is either for short term loans or if you expect interest rates to go down. Today it's more likely interest rates will go UP. And since in the early years the payment is almost all interest, the monthly payments will climb like crazy.

    Leave a comment:


  • GeckoGeek
    replied
    Re: Mortgage Mayhem

    Originally posted by kamuelakea View Post
    You will remember me in 3 to 10 years when things get really really bad in housing.
    You're not the first to have this doom an gloom over housing. I've seen this before. It was in the paper about 10 years ago. Guy was so convinced that there would be a big crash that he sold his house and rented it back.

    I'll most likely remember you the same way I remember him.

    Leave a comment:


  • Guest's Avatar
    Guest replied
    Re: Mortgage Mayhem

    Originally posted by 808shooter View Post
    Real estate is a great investment. Far better than the stock market. Yeah!!!
    Thats right 808shooter. Buy now. Real estate always goes up. If you don't buy now you will be priced out forever, they're not building any more land, it's Hawaii, everybody wants to live here, this is paradise, its Timkona's Baby boomers, they wouldn't give me this no doc- interest only- negative amortization - ARM - bad credit - loan if they didn't think that I could pay for it.

    Hurry, buy buy buy buy. You'll be building equity and getting rich!!!

    Leave a comment:


  • 808shooter
    replied
    Re: Mortgage Mayhem

    Real estate is a great investment. Far better than the stock market. Why?

    1. Stocks can go to zero. Companies go out of business all the time. Even big ones like Enron or Worldcom. Houses never go to zero. If they get destroyed, that is what insurance is for.

    2. Time is on your side. Yeh housing prices may go down 35% from here but so what? If you have your rental paying the mortgage - who cares what the value is today. Unless you need to sell in the near future then it's proabably not a good idea to be in real estate. It's not a short term endeavor. Real estate prices never stay down forever. Everyone needs a place to live and we live in the most beautiful place on earth.

    3. You leverage your money in real estate. With $25,000 you could purchase a $250,000 rental. If your property doubles in 20 years, your original $25,000 investment has now turned into $300,000 or a return of over 1200%.

    4. Investing in real estate works. I know lots of old people that are rich because of real estate. They own their own home and own lots of rentals. In contrast, I never meet folks that say, whew. I made a lot of money in the stock market. Yeah!!!

    Leave a comment:


  • Guest's Avatar
    Guest replied
    Re: Mortgage Mayhem

    I am glad that you are comfortable with the current mortgage environment. Good luck to all of you in your investment endeavors. You seem to know what you want and what you are doing.

    You will remember me in 3 to 10 years when things get really really bad in housing.

    Just make that mental note and get back to business.

    Leave a comment:


  • 68-eldo
    replied
    Re: Mortgage Mayhem

    Originally posted by Nords View Post
    The math isn't intuitive but the extra money comes from compounding. My TI-55 calculator handbook (published 1977!) says that the future value (FV) of a series of payments (PMT) at % interest rate over n months is:
    FV = PMT x {(1+%)^^n-1}/%. ("^^" is an exponent, best I can do with this keyboard.)

    The interest rate being used by that example is about 9% per year (.75% per month in the formula) which is about right over most 30-year periods. Of course if the 30 years happened to include 1930-41 or 1966-82 or 2000-2003 the result is significantly less wealthy than that. But large-cap stocks since 1926 have been reasonably close to that number.

    Thanks for providing those numbers. I do understand the extra money would come from compound interest and gains in the stock market. But that was not made clear in the original statement.

    The only reason I am engaging the troll is, like you, to provide balance to the statements made. There are likely others reading this thread that are just starting in the housing market that could be scared away from buying a home. I hope you continue to balance out this thread.

    Kamuelakea dismisses the advantages of home ownership as just buying stability. But stability is very important to the average family.

    I have nephews and a niece that are beginning to look to buy a home and this thread helps me find talking points to help them in this endeavor.

    Leave a comment:


  • Nords
    replied
    Re: Mortgage Mayhem

    Originally posted by kamuelakea View Post
    First, you make my point by illustrating that buying a home is not a slam dunk good investment, even in Hawaii. If you had some bad luck (divorce, bad invesment, job loss) in 1994, you might have lost it all.
    Well, I'm glad to help you, but what I'm really trying to do is to provide a little balance to your "mortgage brokers and real estate bubbles are all bad" diatribes. I agree that RE is not a slam dunk investment but it offers advantages that the stock market just won't do.

    Originally posted by kamuelakea View Post
    Second, it is obvious from your post that you are more financially savvy than the average guy. You were able to navigate your way through the ups and downs of the market. Most people wouldn't.
    Thank you. People either have to educate themselves or find someone to help them navigate the mortgage markets. We've learned a lot from the mortgage people we've worked with (some good, some bad) and most of the info on Bankrate.com & other websites is written by people in the mortgage business. They can't all be as bad as you seem to feel.

    Originally posted by kamuelakea View Post
    Third, it took 18 years for you to say you are happy with the results. And you are saying that as we sit upon the top of the greatest national housing bubble of all times. Sounds like the Midas effect.
    Sorry to give the wrong impression. It didn't take us 18 years to be happy, but rather I meant that over the 18-year period we've owned the house we've been happy with the experience.

    We bought a fixer-upper and even in your 1994 (personally I thought 1996 was worse) our sale price would have been more than the purchase price. Of course we dumped a ton of sweat equity into it, we learned all about real estate & home improvement, and we started to raise our family there. Spouse's parents lived there for nearly six years, too. We learned a lot from that place.

    Ownership gave us opportunities that we wouldn't have had by renting. We would have ended up with a lot less money by renting, and we wouldn't have had anywhere near your $1000/month left over for the stock market. If we'd sold our home then we wouldn't have been able to stay in the Hawaii real estate market when we got back from the Mainland, and indeed today I doubt we could afford the market rent on our rental property or our home.

    Originally posted by kamuelakea View Post
    Fourth, I wonder how happy you will be in 5 years if home prices in Hawaii drop by nearly 50% AGAIN just like they did in the mid-1990s and just as they should if median home prices return to 3 to 5 times median income????
    Well, I'm not looking forward to being a landlord any longer than necessary, but we'll sell when it makes sense and we'll keep renting it out until then. I doubt that Waipio will revert to the mean as much as you claim, but it's a financial decision. If we can make more money elsewhere then it doesn't matter what the house's actual value is... only the opportunity cost.

    I'm not going to go point-to-point on all your statements, but I disagree with your claim that mortgage brokers are bad and that real estate is bad too. I don't necessarily disagree with everything you say but the value of your debating points is weakened by your use of invective, glittering generalities, and strawman examples. I think you take a bit too much pleasure out of raising a ruckus, too, so I'm done with you.

    Originally posted by 68-eldo View Post
    Interesting math. There are 12 months in a year, so in 30 years that would be 360 months. If you paid $1000 per month that would be 360,000. Where did the extra $823,677 come from? You said to put the money in the stock market. Well I tried that too. My portfolio is running at about 75% of what I put into it. I don’t know anybody that is doing well in the stock market since the dot com bubble burst. What is your magic advice for investing in the stock market?
    The math isn't intuitive but the extra money comes from compounding. My TI-55 calculator handbook (published 1977!) says that the future value (FV) of a series of payments (PMT) at % interest rate over n months is:
    FV = PMT x {(1+%)^^n-1}/%. ("^^" is an exponent, best I can do with this keyboard.)

    The interest rate being used by that example is about 9% per year (.75% per month in the formula) which is about right over most 30-year periods. Of course if the 30 years happened to include 1930-41 or 1966-82 or 2000-2003 the result is significantly less wealthy than that. But large-cap stocks since 1926 have been reasonably close to that number.

    I don't know about you guys, but I had to use that $1000/month (or more) to live somewhere during that 30 years. Even at my best paychecks I couldn't afford to own or rent a house AND put $1000/month in the stock market. So while the math is correct, very few people have the resources to achieve that number.

    Originally posted by 68-eldo View Post
    I don’t know anybody that is doing well in the stock market since the dot com bubble burst. What is your magic advice for investing in the stock market?
    Buy value stocks.

    We lost our share during the bubble burst (one heckuva tuition at the School of Experience), but by mid-2002 there were bargains everywhere (even in Hawaii). We added to our international stock mutual fund, we bought a lot of Berkshire Hathaway, and we bought a lot of a small-cap value stock index fund. Heck, by 2003 we'd even made money in the NASDAQ QQQs. Since then we've shifted some of it into dividend stock funds but there are still dollar bills out there selling for 75 cents.

    Investing in a diversified value-stock portfolio is a lot easier to achieve today. Beating the market averages takes a lot more effort but the work is eventually rewarded. If you're living below your means and investing at least 10% of your gross pay then there will always be bargains somewhere-- real estate, stocks, even commodities/natural resources. The market has become global and the expenses are a lot cheaper than they were even in the 1980s. So while there may be as many bad stocks as there may be bad mortgage brokers, there are far more good ones of both.

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