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0 pointsafter_care4y ago0 comments

> because spreading the payments out over 12 months means more investment capital

This is essentially borrowing money to invest. It doesn't matter if the investment makes money or loses money the lender will expect payment. This strategy can make a lot of money, but it's also ruined many people. One key thing to watch while implementing this strategy is your debt to assets ratio. Also understand that during a market crash this ratio might change suddenly and dramatically.

I don't make small (sub $10k) purchases on credit, period. Not only is it somewhat risky but it also encourages overspending because it makes the 'pain' of spending money decrease. As for your $2000 mattress, I saved way more money by buying a $600 mattress instead and I sleep like a rock.

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knodi1234y ago

> This is essentially borrowing money to invest

Yeah, I don't know why more people don't see it this way.

Everyone seems to agree that you shouldn't eagerly make extra mortgage payments to pay off your home loan ASAP. Because you can pay it off over 30 years and presumably make more $$ investing than whatever paltry interest rate you had on your home loan.

But the same people can't explain why it's a bad idea to take out a 2nd mortgage to invest in the market, or even secure a low-interest loan with your home as collateral. But isn't it exactly the same thing?

hiq4y ago

> But the same people can't explain why it's a bad idea to take out a 2nd mortgage to invest in the market, or even secure a low-interest loan with your home as collateral. But isn't it exactly the same thing?

So what was their reasoning?

In the end it's all math, where some numbers are random variables with the corresponding variance. So this all depends on what rate you get, what returns you expect from the market, what's your risk tolerance, etc.

antifa4y ago

A second mortgage is extra risk to a person's most important asset which is typically reserved for funding a major home improvement project or for emergencies.

The "$2000 0% APR mattress loan" is useful because $167/ month is much easier to budget for and doesn't require a huge hit to savings.

One of these is just sane budging, the other is minmax gambling.

knodi1234y ago

> A second mortgage is extra risk to a person's most important asset

Okay, fine, so that's the reason we don't like borrowing money to invest.

Now explain why it's good to have a mortgage at all? Don't just say "because a couple hundred a month is a small number". That's not a reason, it's just a single, incredibly subjective and situational factoid. Is there a logical or mathematical reason not to increase the amount of my mortgage as long as I can easily afford the monthly payment?

cogman104y ago

> Not only is it somewhat risky

Sort of depends on the investments doesn't it?

Sure, if you sink every penny into penny stocks or crypto you are definitely running a huge gamble. On the other hand, there are non-stock market investments that are perfectly safe. Go grab some TIPS/iBonds for the full amount of purchase. Or maybe go a little riskier and grab some bond index funds. Both of those options aren't playing the stock market.

If you wanted something a little more risky but not "throw it all on GME" then grab an ETF like VOO or VTI.

Obviously do what you like. I'm pretty comfortable with my ability to pay off my obligations.

after_careOP4y ago

Plenty of rock solid investments have failed throughout history. :).

I would never tell anyone how to spend their money, I'm just bringing up a counter point to the conversation.

cwkoss4y ago

Over the past few years, borrowing money at 0%APR to put into the stock market has been very profitable.

A lot of people are probably getting used to that idea, and if/when the market turns its going to be messy.

j / k navigate · click thread line to collapse

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knodi1234y ago

> This is essentially borrowing money to invest

Yeah, I don't know why more people don't see it this way.

hiq4y ago

So what was their reasoning?

antifa4y ago

A second mortgage is extra risk to a person's most important asset which is typically reserved for funding a major home improvement project or for emergencies.

The "$2000 0% APR mattress loan" is useful because $167/ month is much easier to budget for and doesn't require a huge hit to savings.

One of these is just sane budging, the other is minmax gambling.

knodi1234y ago

> A second mortgage is extra risk to a person's most important asset

Okay, fine, so that's the reason we don't like borrowing money to invest.

cogman104y ago

> Not only is it somewhat risky

Sort of depends on the investments doesn't it?

If you wanted something a little more risky but not "throw it all on GME" then grab an ETF like VOO or VTI.

Obviously do what you like. I'm pretty comfortable with my ability to pay off my obligations.

after_careOP4y ago

Plenty of rock solid investments have failed throughout history. :).

I would never tell anyone how to spend their money, I'm just bringing up a counter point to the conversation.

cwkoss4y ago

Over the past few years, borrowing money at 0%APR to put into the stock market has been very profitable.

A lot of people are probably getting used to that idea, and if/when the market turns its going to be messy.

j / k navigate · click thread line to collapse