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Early_To_Risa@sh.itjust.works

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Anon calls in for financial advice (sh.itjust.works)

submitted 1 day ago by Early_To_Risa@sh.itjust.works to c/greentext@sh.itjust.works

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[–] neshura@bookwormstory.social 5 points 1 day ago (5 children)

One example: If you get to own a house (that's paid off) not having debt on it is stupid because you get the lowest interest a regular person possibly can get. Even if everyone else has interest rates up to their mouth you'll get a rate so cushy investing the money in any index fund will outperform your interest payments.

[–] arrow74@lemm.ee 11 points 23 hours ago (4 children)

Disagree, sure you can make more in the open market over time by getting another mortgage on a paid off home.

But that invested money means absolutely nothing if the market has a downturn and you lose your job. Now you're on the hook to a mortgage you can't pay and risk losing a place to live.

While on paper you can make more money, it's very dumb to gamble with things you need to survive. And that's all any loan is, a gamble that you will be in good health and have the means to pay it back.

[–] neshura@bookwormstory.social 1 points 22 hours ago (1 children)

There is a distinct difference between taking out a loan on your house and saddling it 100% with debt again. Obviously any loan taken out should under all circumstances be one you can comfortably pay back.

Taking out 20k on a 1m home is way different than taking out 20k on a 100k home.

Plus, at least here, if you lose your job the following happens:

for 2 years you'll get 80% of your previous paycheck (assuming you worked long enough to qualify, iirc 5 years. if not you get time deducted)
at the same time as the end of your current employment you have the option to stop/reduce payments on the loan for a time due to special circumstances (technically not mandatory but not bank will give you a large loan without this added insurance, iirc interest will still accrue in this time essentially extending the length of the loan)

Couple that with not being stupid and getting a loan that eats your entire home as backing and you are pretty much safe from any short term disruption in your finances.

To touch on a few other points:

yes blindly investing is dumb, if the market gives you an uneasy gut don't invest. That thing has a habit of being wildly irrational until it suddenly and very quickly is forced to realign with reality
if you have the luck and are in a union that negotiates your wages you will likely receive a "pay rise" aka inflation compensation every couple of years, in such a case a loan as I describe it also makes sense for personal use (in small sums) because inflation will further reduce the interest. Think taking out a loan to renovate a room instead of saving up for it, after everything is properly accounted for the loan backed by property variant will leave you with slightly more money (depending on general interest situation, if interest rates are high but inflation low things might differ)

And worst comes to worst, rent out a room in your house as a sublet and use that to pay exclusively for the mortgage. Any loan you ever take out against an owned home shouldn't have higher monthly payments than that anyway or it, as you say, turns into an insane gamble no one in their right mind should take.

[–] arrow74@lemm.ee 7 points 22 hours ago

Plus, at least here, if you lose your job the following happens:

for 2 years you'll get 80% of your previous paycheck (assuming you worked long enough to qualify, iirc 5 years. if not you get time deducted)

at the same time as the end of your current employment you have the option to stop/reduce payments on the loan for a time due to special circumstances (technically not mandatory but not bank will give you a large loan without this added insurance, iirc interest will still accrue in this time essentially extending the length of the loan)

And that's the difference. Here you just get to be foreclosed on.

So yeah with having reasonable social safety nets in place the idea is a lot more reasonable

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