Car loan stats
07-19-17, 08:56 AM
#61
Lexus Fanatic
The extra payments I make go directly to principal so I'm cutting interest on overall length of loan. My interest rates are always low last one was 3.75%. Finishing a loan 12-20 payments ahead of schedule is a win in my book. Don't see how "not much point" if I'm paying it off early versus going entire length and paying more interest.
This move was to avoid PMI. I remember a shady mortgage broker telling me dont' do that, just borrow 90% @ 7%, you'll never be able to pay off the 10% anyway. HUH? Interesting with all the cheating, today, a person working for a mortgage broker might be higher qualified than a bank, because they have to pass an exam today. Commercial bank, nope.
Anyway, my coworker told me, don't buy a BMW, instead, take all your extra money each month, and pay it back to principal. No lie, I said are you sure they won't lose it? I mean how do they keep track of it? lol This is a person who researched how much replacement tires costed, before she bought a car. Very smart and good advice.
07-19-17, 08:58 AM
#62
Lexus Fanatic
I think the new generation of under 40 have it worst today. The amount of debt young people are taking on is just astounding.
07-19-17, 09:19 AM
#63
Lexus Champion
Not talking about you, good for you to be able to save, not a lot of people can do it and you should be proud of it.
in 1997 median home value in LA was 170K
in 2012 it was 398K
Let's forget about kids, family and other choices that you've made. You lost an opportunity to make over 200K in housing appreciation (or you would have an opportunity to sell it for $580 in 2006). In addition you lost available tax deduction. So in reality it is a wash in your case.
Edit: For apples to apples comparison do not swing from 400sq.f. apartment to 2000sq. f. home otherwise your opportunity loss will be even larger. For example you would have bought house for 240K and in 2006 it would sell for 740K.
in 1997 median home value in LA was 170K
in 2012 it was 398K
Let's forget about kids, family and other choices that you've made. You lost an opportunity to make over 200K in housing appreciation (or you would have an opportunity to sell it for $580 in 2006). In addition you lost available tax deduction. So in reality it is a wash in your case.
Edit: For apples to apples comparison do not swing from 400sq.f. apartment to 2000sq. f. home otherwise your opportunity loss will be even larger. For example you would have bought house for 240K and in 2006 it would sell for 740K.
as far as the 400sqft apartment to the 2000sqft house, I left a studio for a home, I left single life for family life, didn't buy the home until I was ready to get remarried, and be a family man.. in reality it is a fair comparison as my mortgage is the same as I was paying for rent but on a house almost 5 times the size; that basically costs the same as it would have in 1999.
did I lose on a possible windfall sale of a home that over appreciated during the mid-2000s? possibly, however when you consider that I saved roughly the same as I would have made without the expense of a mortgage, property taxes, utilities, not to mention the return I got from investing that money during that 15 years, I did ok IMO, now if you factor in flipping several homes yeah, maybe I would have a couple hundred grand more in the bank, but I don't live in a should have, would have world. I don't regret the decisions I have made because they have worked out for me and I have achieved my goals in life without a whole lot of risk or stress.
the thing is I would not have sold the house for profit if I had bought it 10 years earlier, I bought a home to live in, Unless something drastic changes in my life I plan on living here until I pass, and leaving it to my child, same as my parents have set up for me when they pass on.
in regards to a primary residence, some people see it as an opportunity to profit, personally I don't, my home is my home.. Now that I have said home, buying and either flipping or renting additional homes is something I am looking into, but that is a whole other topic.
07-19-17, 09:31 AM
#64
Lexus Fanatic
I agree...the level of competitiveness is exponential.....top schools in my day accepted 20%, today, 4%.....same school, same number of seats, the entire world applying....I was shocked in 2004 to have a woman tell me, my daughter is in summer school. She then goes, oh it's not what you're thinking, she's in summer school to get ahead, actually, keep up with her peers...nowadays kids go to summer school to remain competitive, you're probably thinking it was remedial in our day.....I dont' envy what my 3 1/2 y.o. will face in his lifetime...
07-19-17, 09:48 AM
#65
This is how 5 year loan interest distribution looks like
1st year 35%
2nd 28%
3rd 20%
Almost 85% of interest is paid in 3 years
4th 13%
5th 4%
07-19-17, 10:00 AM
#66
Lexus Fanatic
Got you now. I see what you mean.
07-19-17, 10:00 AM
#67
Exactly! This was the point I was trying to make earlier. It makes little sense to pay off a 5 year loan at year 4.
07-19-17, 10:36 AM
#69
Lexus Fanatic
If you had a 60 mo. loan, and paid it off in 35, you are better off. If you could have done a 36 mo. in the first place, likely the rate would have been lower. But one never knows, maybe the lowered payment was a benefit, and a person got a raise 2 yrs. later, or etc. Anything is possible, but one is better off paying sooner, than later. None of us probably have experienced it, but my grandfather said there could be a penalty to pay off early in his time. Isn't that how a lease works today? Looking at home loan documents, there is usually a field with what the penalty to pay off early is, and it says $0.
07-19-17, 10:41 AM
#70
07-19-17, 10:55 AM
#71
Lexus Fanatic
07-19-17, 11:15 AM
#73
Lexus Fanatic
.......that's partly because they know that in many cases, they won't have to pay it back....or, at least, to the full amount. A good example (though it is somewhat off the thread-topic of car loans) is student-debt for college-loans. Our Government, here in the U.S., jumped headlong into a program to lend college students tuition money...on the assumption that, when they got a good job upon graduation, they could repay it. Well, because of a number of reasons, it didn't work out that way (they still couldn't get a good job)....or, if it did, they were still not able to repay because of rash spending decisions or whatever. So, as result, the predictable happened...much of that loan-debt is simply being forgiven or written off, adding further to the already-$20-trillion national debt. With car loans, it is somewhat similar, except that one deals with repo agents or bank representatives instead of the government. And, a few posts ago, I outlined why it is so difficult for banks and finance companies to actually DO repossessions...it's not the piece of cake that many people think it is for the banks.
07-19-17, 11:15 AM
#74
Lexus Fanatic
I was thinking this is an old concept.....so now you have an additional cost to refi, say the rate goes from 6 to 5, then to 4, etc. Like when people used to say you need to buy 100 shares of stock or it's an odd lot. When I bought amazon.com @ $175/share they were like how many shares can you buy? I was young at the time, so 12. They were like 12? Why bother. Because it would have been worth 34k today. But you know the story, I sold it when it tripled (sigh). I had 72 shares by them as it split on 2 occasions, once 3:1. Never managed to get one of those stocks that went 20X+, I thought Cisco woulda done it for me....I like Navy and PenFed myself. If not for the rates, the people are very nice to deal with. I hope I don't need one though for a very long time.
07-19-17, 11:17 AM
#75
Lexus Fanatic
VERY few consumer loans today have early payment penalties