Re: Scary article on retirement planning.

On 2 Dec 2003 13:05:09 -0800, [EMAIL PROTECTED] (Larisa) wrote:

>True, but if you pay a normal 30-year mortgage, you end up paying much
>more in interest (twice as much, no?) than what the house is actually
>worth.  Even if you pay it off quicker, you still pay much more.  I
>haven't done the math, but wouldn't it be faster to live in a *very*
>cheap room and save up the money for the house, and then, in about 10
>years, pay cash?  That way, compound interest works with you instead
>of against you.

The problem is that your rent money is money that disappears down a
hole, never to be seen.  When you pay a mortgage, some of that money
goes towards principle, and some towards interest which is deductable.
You have do do the math 30 years out to figure out which one is
ultimately the better deal, but almost always the better deal is
buying rather than renting.  If you want to live with the "very cheap
room" expenses while buying, buy a bigger house and rent out the other
rooms so you are left with the "very cheap room" for yourself.  Then
pay your fair share of the "rent" into your housing fund, use the fund
to pay the mortgage, insurance, repairs, etc. and when it has a
healthy surplus make an extra payment against your mortgage principle.
Now all your housemates are helping to buy YOUR house.

If you want a *really sweet* deal, get your retirement fund setup
somewhere  where you can borrow money from the fund, and pay it back
with interest.  Then take a loan from the retirement fun to help buy a
house.  Now when you pay interest on your homeloan, you pay it to
yourself!

jc