Money Math.

AS regular readers probably know by now, I am looking at a mobile home.
I could pay cash, but that seems like a bad idea cause I loose the
flexibility of having liquid assets.
Turns out I wrote a program years ago that includes the ability to
compare paying cash with financing something and leaving the money in a CD.

So a "test".

Term is 15 years. Amount is $30,000. Cost of a loan is 9% true rate
(APR). If I can get 5% CDs what is the result at the end of 15 years?

Results will be available at a (slightly) later date:-))

Joy...

I don't know about 15 years, but I know that with a 30-year mortgage you end
up paying about twice the list price. I have a thing about debt and monthly
payments. Of course, right now I couldn't afford monthly payments. The
three houses my husband and I bought during our married life were all bought
with mortgages, because that was the only way we could manage. However, my
house was paid off several years ago. I pay the total balance on my credit
card every month. I have no intention of ever incurring another debt, if it
is humanly possible. As far as I can see, there should be no reason why I
should do so. YMMV.

Chakolate...

I'm with you, Joy. The only loan I've ever taken out was my college loan
in 1970 and 1971. If I can't pay cash (or pay off the charge right away)
I don't buy it.

Then again, the most I ever paid for a car was $2000, and I rent. I'm
pretty happy with that, though. :-)

Lou...

Jean B....

Hmmm. I hope you're still around when I get a new car (which
won't be in the near future).

Lou...

As you will see there can be a very good reason to take on debt - if you
have savings:-))

Joy...

Actually, I don't see it. Maybe I'm just a bit dense. Paying 9% to receive
5% doesn't make sense to me.

Lou...

It took a while for me to realize why it makes sense and the reason it
does is that I am *starting* with $30,000 and the 5% compounds on that
so the amount goes up each year. OTOH the lone balance goes down each
year - a little at first, more at the end.

Joy...

Okay, I can see that. As for the tax deduction - can you get that on a MH?
I don't know; I'm just asking. I know that I don't have enough deductions
to itemize, so it wouldn't do me a bit of good unless I was making humongous
monthly payments. I'm sure it works for some people. I'll stay debt-free,

david...

i agree with the concept, as we recently did a similar process, only for a
much shorter period... :)

You folks would faint instantly if you saw how I "played" with credit in

Chakolate...

Did you get burned? I admire people who can do it and not get burned.

Myself, I'd certainly get burned.

the past.