How do you afford your f $%ing Sprinter?

Brian L. wrote: So I understand your point, but I guess I'm evaluating it from a different perspective. I feel that my method is more practical in real life. To me, the extra freedom of having the house paid off is more important than the extra 23k savings.

That's one of the "it depends on your situation" parts...

Gordon88 wrote:Do people really come here for investment advice?

Heh. Frankly, some days I'm shocked that people would come here for climbing advice. But if it gives you something to consider (not that you take it wholesale) then what's the harm, in either case?

Brian L. wrote: If you're paying the house off through full loan term you HAVE to spend that money each month on your house. (your minimum payment) If your house is paid off early you can do whatever you want with that money, based on your own personal choice. Invest it, spend it, etc. It becomes disposable income, instead of allocated income. So I gain ~$685 a month more disposable income. The additional money I'm using to pay off the house is bonus, plus income I already allocated to savings for various things, so it also free's up that money for other purposes. If you're investing all your money, then you're not able to enjoy it. Like I said, I have retirement covered already, so for me the priority is freeing up income.

This is a misuse of terms.

What is 'Disposable Income'
Disposable income, also known as disposable personal income (DPI), is the amount of money that households have available for spending and saving after income taxes have been accounted for.

Disposable income minus all payments for necessities, such as mortgage, health insurance, food and transportation, equals discretionary income. This portion of disposable income can be spent on what the income earner chooses or, alternatively, it can be saved.

investopedia.com/terms/d/di…

Brian L. wrote: If you're paying the house off through full loan term you HAVE to spend that money each month on your house. (your minimum payment) If your house is paid off early you can do whatever you want with that money, based on your own personal choice. Invest it, spend it, etc. It becomes disposable income, instead of allocated income. So I gain ~$685 a month more disposable income. The additional money I'm using to pay off the house is bonus, plus income I already allocated to savings for various things, so it also free's up that money for other purposes. If you're investing all your money, then you're not able to enjoy it. Like I said, I have retirement covered already, so for me the priority is freeing up income.

After 5 years, your investment portfolio will be $10K more than your loan balance, about $15K is possibly taxable, mostly at long term capital gain rate of 0-20% (probably 0-15% for you). You can decide to pay off your loan all at once at the 5 year mark and still come out ahead. It doesn't affect your choice from year 6-15.

I get that everybody has preferences, but yours is not a purely financial one, either in total return or flexibility.

Edited to add:

Here's the kicker: banks assume average mortgage will be paid off in 7 years (because people move). If it takes you more time, the bank actually loses money on you. Talk about sticking it to the man!!

Tony B wrote: Frankly, some days I'm shocked that people would come here for climbing advice.

Hahaha, fair enough!

I feel like we did this dance a couple months ago over at "Jobs for Climbers"

Anyone remember that thread?

reboot wrote: I get that everybody has preferences, but yours is not a purely financial one, either in total return or flexibility.

Right. The argument is basically that once your are in a solid financial situation, you can do what you want. Which is fine (maybe - fairly sure most Americans that report being financially sound are actually not). But it is not true that "it depends" and somehow the fast payoff is better from a financial perspective. "It depends" in this thread seems to be a cover for "this is what I do!".

Now, an individual may not care about some financial inefficiency - this is the new Sprinter thread after all. But might as well call it what it is.

Tony B wrote: Some landlords are counting on appreciation, not rent, to make the $, and the landlord amortizes the aforementioned costs over the long term of holding the place - if she was only staying a few years, she'd fall short of making it work too.

I've seen lots of leased real property, and not one has the monthly rental amount been less than the sum of the mortgage, property tax and insurance. While it is true the most of the investment comes from the appreciation of the property (until it's paid off, then it's all gravy), with the exception of a credit for capital improvements on a commercial lease, I have yet to see a lease where the owner is losing money every month.

Again, I believe the calculators that compare the benefits of investing in home ownership vs. in the market ignore the obvious issue that you need to pay to live someplace. If we were talking about an investor with sufficient additional cash to choose between investing in a house vs. stocks, then I'd agree that the market is going to be a better choice most (but not all) of the time. Let's see a rent vs. invest in stock calculator. That comparison would be interesting.

Thanks for the input Tony. Yes, there are many ways to approach investment property. Having been a renter for maybe ten years of my life, an owner for 20 and investment property owner/landlord I have seen it from many perspectives.

One thing for sure, as a renter, when you move out you don't get one penny back whether you rented for 10 weeks or ten years. As an owner or landlord, it could go either way.

reboot wrote: After 5 years, your investment portfolio will be $10K more than your loan balance, about $15K is possibly taxable, mostly at long term capital gain rate of 0-20% (probably 0-15% for you). You can decide to pay off your loan all at once at the 5 year mark and still come out ahead. It doesn't affect your choice from year 6-15. I get that everybody has preferences, but yours is not a purely financial one, either in total return or flexibility. Edited to add: Here's the kicker: banks assume average mortgage will be paid off in 7 years (because people move). If it takes you more time, the bank actually loses money on you. Talk about sticking it to the man!!

Assuming you get that rate of return. Just judging by my other investments it's highly likely I'd be at a loss for the first year.

My point is the advice: run out your mortgage and invest instead doesn't always align with everyone's goals.

Xam, sorry, I'm an engineer, not a financial expert. All I'm relating here is my situation and how I've analyzed it based on my personal goals.

Back to the original question:

How do/did we afford a Sprinter?

Work for money, live frugally, save money, avoid debt, search for months for a deal on a used Sprinter, DIY the "conversion", avoid the super expensive Sprinter aftermarket products.

We used to tent car camp for decades. Buying/outfitting our Sprinter has been money and time well spent! I regret we didn't do it sooner.

reboot wrote: After 5 years, your investment portfolio will be $10K more than your loan balance, about $15K is possibly taxable, mostly at long term capital gain rate of 0-20% (probably 0-15% for you). You can decide to pay off your loan all at once at the 5 year mark and still come out ahead. It doesn't affect your choice from year 6-15. I get that everybody has preferences, but yours is not a purely financial one, either in total return or flexibility. Edited to add: Here's the kicker: banks assume average mortgage will be paid off in 7 years (because people move). If it takes you more time, the bank actually loses money on you. Talk about sticking it to the man!!

They don't lose money. Not sure where you are getting your information but it cost them next to nothing to maintain your loan, pretty much everything is pure profit for them (yes there are some expenses but really not enough to cause a loss).

They do make alot more money when people keep selling and buying a more expensive house every 3 years though.

Brian L. wrote: Xam, sorry, I'm an engineer, not a financial expert. All I'm relating here is my situation and how I've analyzed it based on my personal goals.

Oh ya...me too. Just like everyone else here, I have no idea what I am talking about. I just remembered that those terms are commonly misused so I figured I would look it up and drop in a correction.

Haha no worries. Thanks for the correction though.

It's not hard to imagine a situation in which a bank "loses" money if it locks in a huge percentage of fixed-rate long term mortgages in its asset base.

Part of the reason the S&L industry in the 80s blew up was because of this: a mismatch between the duration of its assets (loans given out) and liabilities (deposits).

Interest rates went up, depositors had to be paid more interest, borrowing from the Feds became more expensive and meanwhile most of the mortgages still had the same low rates as before.

Thankfully, these days banks are smarter about duration matching strategies.

Greg D wrote: Do you think landlords are charitable. Your rent covers all these costs and then some. Hello.

Do you think that landlords could possibly recoup their $7000 in closing costs in their first 1-2 years of ownership? Of course not. There's long term amortization factored into their rent.

Hence why I was very clear - under 5-7 years, you're almost always better off renting with a few minor exceptions. Longer than that is when buying starts to make more sense from a purely financial standpoint. Outlier housing markets (SF, Boulder, or dying rust belt towns) will have different calculus.

Christian wrote:It's not hard to imagine a situation in which a bank "loses" money if it locks in a huge percentage of fixed-rate long term mortgages in its asset base... Thankfully, these days banks are smarter about duration matching strategies.

Nowadays most banks don't keep mortgages on their books for very long. Most mortgages end up being sold to Freddie Mac and Fannie Mae, who slice them up and repackage them into mortgage-backed securities, which are then sold to Wall Street investment banks and asset managers like Fidelity and Vanguard, who put them into 401k plans and mutual funds, which are then bought by the likes of... you and me. Well at any rate those of us that try to save a bit and don't spend all our money on Sprinters.

BTW I hear there's a discussion about rock-climbing ethics over at bogleheads.org.

For every mortgage going out the door, there's another one coming in, or another rate lock being made, so you're still the owner of a portfolio of loans and exposed to interest rate risk at any given moment in time.

You may be exposed on the back end, depending on the contract you have with the final buyer (money center banks for the mortgage banks and GSEs for the money center banks) and you're definitely exposed when you lock the rate for the home buyer.

If you hedge too much and interest rates don't move, you lose the cost of the hedging.

If you don't hedge enough..Lots of people in the industry took a big hit in the late spring of 2013 when interest rates took a jump.

Jon H wrote: Do you think that landlords could possibly recoup their $7000 in closing costs in their first 1-2 years of ownership? Of course not. There's long term amortization factored into their rent. Hence why I was very clear - under 5-7 years, you're almost always better off renting with a few minor exceptions. Longer than that is when buying starts to make more sense from a purely financial standpoint. Outlier housing markets (SF, Boulder, or dying rust belt towns) will have different calculus.

According to the google the average buyers pay roughly $3,700 in closing fees, your talking more about worst case closing cost.

reboot wrote: Somebody else has already pointed out that it was mostly compounded interest. But even that's a gross exaggeration: $300K is the lifetime payment sum, but adjusted for inflation, it's probably closer to $200K. Regardless, what do you think happens when you rent? You are still paying insurance, taxes, maintenance, etc passed down from the landlord. And unlike the fixed rate mortgage, which actually is less costly over time because of inflation, rent will go up w/ cost of living. Not saying buying a house is always or often the smart idea, but let's get the facts straight. That entirely depends on the what your interest rate is and what your investment return rate is. That's not entirely true...but few live in the same place for 30 years, and you are free to refinance w/ a conventional loan once you have enough equity in the house.

What does any of this have to do with climbing hard??

Kevin DB wrote: What does any of this have to do with climbing hard??

I guess the point he is making is that if you can understand the financial intricacies of the above discussion, then understanding the physics of climbing should be easy by comparison?