4 ms·

"and first home entirely as a cash transaction" Separately, and depending on when one buys a home that might not be the best strategy. I have the cash to pay o

by larrys 14y ago

"and first home entirely as a cash transaction" Separately, and depending on when one buys a home that might not be the best strategy. I have the cash to pay off my home but I choose to take advantage of a low 3.25% mortgage rate to keep the money available for something else. Mortgage rates are very low now (once again I don't know when your friend did this) so it makes sense to take advantage of that.

bmelton 14y ago
Ironically that's the same advice I gave him. He bought shortly after 9/11 originally, and the rate was a ridiculously low 2.75% (which I think he paid down points to get). I should probably clarify that he originally financed the home, just so that when he paid it off it would look great on his credit (though he already had near perfect credit at the time) -- he put 30% down, another small percentage in buying down points, then made the first few payments and then just paid it off because he preferred to just own it outright. It's also worth noting that he could have, on paper, afforded to pay cash for a house that cost three times as much as the one he bought (which means he could have bought three of his same house and paid cash for each), so having the money available wasn't a big factor, though optimizing its dollar performance could definitely have been a factor.
- georgemcbay 14y ago
  Getting way off topic here, but paying off a loan early (especially that early) will often hurt your credit score more than help it, particularly if it it the only active personal loan you have on record.
  - bmelton 14y ago
    I hadn't thought of that, but I doubt he cared terribly much, as he pretty much hates credit as a practice. I learned from that though, but I'm not exactly money-savvy, as I tend to care very little about it.
    - georgemcbay 14y ago
      Yeah for the guy you're talking about it makes no real-world difference if he takes a minor credit score hit. But people who need to optimize their credit score for whatever reason should keep in mind that there are all sorts of events that may impact your credit score in ways that seem odd at first but make sense when you consider the scores aren't just about how likely you are to pay off debts, but a combination of how likely you are to pay off debts while also giving the credit issuers a enough profit off interest to make it worth their while to loan to you.

by larrys 14y ago

bmelton 14y ago

Ironically that's the same advice I gave him. He bought shortly after 9/11 originally, and the rate was a ridiculously low 2.75% (which I think he paid down points to get). I should probably clarify that he originally financed the home, just so that when he paid it off it would look great on his credit (though he already had near perfect credit at the time) -- he put 30% down, another small percentage in buying down points, then made the first few payments and then just paid it off because he preferred to just own it outright. It's also worth noting that he could have, on paper, afforded to pay cash for a house that cost three times as much as the one he bought (which means he could have bought three of his same house and paid cash for each), so having the money available wasn't a big factor, though optimizing its dollar performance could definitely have been a factor.

georgemcbay 14y ago
Getting way off topic here, but paying off a loan early (especially that early) will often hurt your credit score more than help it, particularly if it it the only active personal loan you have on record.
- bmelton 14y ago
  I hadn't thought of that, but I doubt he cared terribly much, as he pretty much hates credit as a practice. I learned from that though, but I'm not exactly money-savvy, as I tend to care very little about it.
  - georgemcbay 14y ago
    Yeah for the guy you're talking about it makes no real-world difference if he takes a minor credit score hit. But people who need to optimize their credit score for whatever reason should keep in mind that there are all sorts of events that may impact your credit score in ways that seem odd at first but make sense when you consider the scores aren't just about how likely you are to pay off debts, but a combination of how likely you are to pay off debts while also giving the credit issuers a enough profit off interest to make it worth their while to loan to you.