8 replies to this topic

[zedor]

The only reason to buy such a house is that you have the hard cold cash to buy it. Period. A mortgage on such a property is a recipe for disaster should things turn sour. Other than a first home and one you must have to live in a mortgage on these million dollar homes is kwazy.

[S.I.M.O.N.]

The only reason to buy such a house is that you have the hard cold cash to buy it. Period.

interest on said mortgage is tax deductable, this is the main reason why only a moron would buy a
3million dollar house for cash.

[zedor]

The only reason to buy such a house is that you have the hard cold cash to buy it. Period.

interest on said mortgage is tax deductable, this is the main reason why only a moron would buy a
3million dollar house for cash.

Not so. interest deduction is capped at 1 million dollars worth of mortgage interest and/also gets taken away by AMT. So only the interest on the 1st million is deductible not the interest on the 2 million.

But assuming all of it is deductabi it is is a red herring. Why pay out 6 million over 30 years in interest (thats what it is on a 3 mill house) for the benefit of getting back maybe 2 million ? Still cost you 4 million


Deductabliltiy is a raison daitre for smaller income individuals as the mortgage interest is the only item large enough to surpass the standard 5000 and thus allow other things to be included in the list of itemized deductions.

Edited by zedor, 17 August 2007 - 01:38 PM.

[LarryT]

The only reason to buy such a house is that you have the hard cold cash to buy it. Period.



A mortgage on such a property is a recipe for disaster should things turn sour.



Other than a first home and one you must have to live in a mortgage on these million dollar homes is kwazy.

The reason is logical, they figure they can earn more with the capital than the interest they pay on a net basis. If that spread were to narrow to the point it was not profitable they would simply pay it off.

LT

[zedor]

The only reason to buy such a house is that you have the hard cold cash to buy it. Period.



A mortgage on such a property is a recipe for disaster should things turn sour.



Other than a first home and one you must have to live in a mortgage on these million dollar homes is kwazy.

The reason is logical, they figure they can earn more with the capital than the interest they pay on a net basis. If that spread were to narrow to the point it was not profitable they would simply pay it off.

LT

Well its always that. But then over a 30 year period things can go south and one can lose a business, their health, their fat paycheck and have investments that go to zero like with various Bear Sterns hedge funds. Ones house should be paid for. Those that dont will have great pain in the coming years.



Spending house money on toys and trips and gas guzler cars is going to bite many in the a$$.

[kjt71]

Z: You give no specifics in your post. If you have $3 million in cold hard cash to purchase a house, then you are considered a high net worth individual. There are many more financial tools available to a HNWI. More than likely, if you can consider paying $3 million cash for a house, then you probably have more in the bank or other investments. Examples: Interest rate dependent, some might decide to take out an interest only mortgage for as much as possible. This could be beneficial to someone who has other investments that might be making a better return on their cash or they do not want to liquidate for tax purposes or some other reason. Some institutions will give you a mortgage by letting you put up your investments as collateral. Someone might have some deferred comp tied up for a number of years and thus would take an interest only mortgage until the comp comes out of being locked up and then decide whether it is worth paying off the note. There are many ways to look at this and everyone's situation will be different. Don't paint with broad strokes.

Edited by kjt71, 17 August 2007 - 02:06 PM.

[zedor]

Z: You give no specifics in your post.

If you have $3 million in cold hard cash to purchase a house, then you are considered a high net worth individual. There are many more financial tools available to a HNWI. More than likely, if you can consider paying $3 million cash for a house, then you probably have more in the bank or other investments.

Examples:

Interest rate dependent, some might decide to take out an interest only mortgage for as much as possible. This could be beneficial to someone who has other investments that might be making a better return on their cash or they do not want to liquidate for tax purposes or some other reason.

Some institutions will give you a mortgage by letting you put up your investments as collateral.

Someone might have some deferred comp tied up for a number of years and thus would take an interest only mortgage until the comp comes out of being locked up and then decide whether it is worth paying off the note.

There are many ways to look at this and everyone's situation will be different.

Don't paint with broad strokes.

Have a friend an attorney -- was making 500K a year. Bought a 3 million house and invested his money in other things.



He had the money to buy the house.



Now the investment land he bought he cant sell. He has a 90,000 dollar car he leases. Everything was leveraged.



His law frim lost its big client that brought in 70% of the revenue and thus is about to fold.



He cant meet his mortgage payment and cant sell the house for 3 million.



He is in a dread panic. Ridiculous that someone who had so much did not allocate for a rainy day.

[JAP]

Z: You give no specifics in your post.

If you have $3 million in cold hard cash to purchase a house, then you are considered a high net worth individual. There are many more financial tools available to a HNWI. More than likely, if you can consider paying $3 million cash for a house, then you probably have more in the bank or other investments.

Examples:

Interest rate dependent, some might decide to take out an interest only mortgage for as much as possible. This could be beneficial to someone who has other investments that might be making a better return on their cash or they do not want to liquidate for tax purposes or some other reason.

Some institutions will give you a mortgage by letting you put up your investments as collateral.

Someone might have some deferred comp tied up for a number of years and thus would take an interest only mortgage until the comp comes out of being locked up and then decide whether it is worth paying off the note.

There are many ways to look at this and everyone's situation will be different.

Don't paint with broad strokes.

Have a friend an attorney -- was making 500K a year. Bought a 3 million house and invested his money in other things.



He had the money to buy the house.



Now the investment land he bought he cant sell. He has a 90,000 dollar car he leases. Everything was leveraged.



His law frim lost its big client that brought in 70% of the revenue and thus is about to fold.



He cant meet his mortgage payment and cant sell the house for 3 million.



He is in a dread panic. Ridiculous that someone who had so much did not allocate for a rainy day.

Rich, middle class or poor... there are a lot of stupid people in this world who live at, or beyond their means.

[youmast]

RE: If you have $3 million in cold hard cash to purchase a house, then you are considered a high net worth individual.

If you have $3 million in cold hard cash to purchase a house, then you are considered a high net worth individual. And if you buy a house for that money, you're no more HNWI, because this house will be your first piece of real estate you live in, and you have less than $1m cash to be considered as HNWI.

The real question is... how much return can you get on "free" money? If it could be more than you pay for your mortgage, then it's okay, get the mortgage and invest somwhere else the rest.

For example, your business is able to generate 15% ROI... Your mortgage is only 7%. Why should you take your money out of business? That's nonsense! But if your CD account brings only 4%, and you pay 7% mortgage.... then you're really STUPID. Pretty simple, huh...

The problem with attorney is not in his house. The problem is in his client he lost, and with unliquid assets he bought. Also... he must be really easygoing guy leasing $90K car. I bet I can buy the same 1-2yrs old car for $50K on ebay, and sell it for $40-45K a year or two later.

P.S. GUYS, PLEASE CLICK ON "ADD REPLY" BUTTON INSTEAD OF "REPLY". SAVE MARK'S SPACE!