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Mortgage Questions
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<blockquote data-quote="Thomas Rogers" data-source="post: 767633" data-attributes="member: 60724"><p>Caymen,</p><p></p><p></p><p></p><p>If I understood the story about your friend, he has a lot of cash and can easily and safely make 8% annual return on his cash. He is going to pay cash for a motorhome rather than hold a 5% fixed rate loan on the motorhome. Do I have it right? If so, would you agree that by paying cash, for this person, he is forgoing quite a bit of earnings?</p><p></p><p></p><p></p><p>By my calculations, assuming a 15 year term, holding the $75k and enjoying an 8% annualized return grows that money to $248k which is a return of $173k.</p><p></p><p></p><p></p><p>Likewise, the total interest paid over 15 years on the same $75k at 5% is just over $31k.</p><p></p><p></p><p></p><p>So, it seems to me that by his actions friend will forego making $173k in order to save $31k; or put simply, <strong>paying for the motorhome in cash will cost your friend over $140k vs holding the note and keeping the cash invested.</strong></p><p></p><p></p><p></p><p>That's real money to me.</p><p></p><p></p><p></p><p>Now, if there are other reasons he wants to pay cash, then so be it.</p><p></p><p></p><p></p><p>TJR</p></blockquote><p></p>
[QUOTE="Thomas Rogers, post: 767633, member: 60724"] Caymen, If I understood the story about your friend, he has a lot of cash and can easily and safely make 8% annual return on his cash. He is going to pay cash for a motorhome rather than hold a 5% fixed rate loan on the motorhome. Do I have it right? If so, would you agree that by paying cash, for this person, he is forgoing quite a bit of earnings? By my calculations, assuming a 15 year term, holding the $75k and enjoying an 8% annualized return grows that money to $248k which is a return of $173k. Likewise, the total interest paid over 15 years on the same $75k at 5% is just over $31k. So, it seems to me that by his actions friend will forego making $173k in order to save $31k; or put simply, [b]paying for the motorhome in cash will cost your friend over $140k vs holding the note and keeping the cash invested.[/b] That's real money to me. Now, if there are other reasons he wants to pay cash, then so be it. TJR [/QUOTE]
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