[miahmarie]

We should all have financial advisors. I agree Debbie that we should be willing to look at the numbers if they make good sense. However our advisor says that interest only loans are for people who do not plan to live in their homes for more than 5-10 years depending on their incomes. When this was so hot back in June of last year I talked to him about this. He said it wasn't for us. Illustration:

Suppose you borrow $500,000 from Wells Fargo and you have three loan options: a 30-year fixed-rate loan at 6 percent; a traditional 30-year amortizing ARM with a rate that is fixed at 4.75 percent for five years, then adjusts annually; or the same ARM that for the first five years is interest only.

With the fixed-rate loan, your payments will be $2,998 per month for the Life of the loan.

With the amortizing ARM, your payments will be $2,609 per month for the first five years.

With the interest-only ARM, your payments are only $1,980 per month for the first five years. That's $629 per month or 24 percent less than the traditional ARM.

Now let's see what happens after five years.

First, suppose interest rates have gone up a bit and the ARM rate floats up to 6 percent.

In year six, the monthly payment on the traditional amortizing ARM rises to $2,948. (That's 6 percent on your remaining balance of $457,491, amortized over 25 years.)

On the interest-only loan, your payment is now $3,222. (That's 6 percent of your remaining $500,000 balance, amortized over 25 years.)

The fixed rate is still the same. $2998

Now suppose after five years, the interest rate on the ARM has leaped to 8 percent.

On the traditional amortizing loan, your monthly payment is now $3,531.

On the interest-only loan, the payment has leaped to $3,859 - double your initial payment. And $869 more than the fixed rate life of the loan mortgage.

That means your income would also have to double if you want to keep your monthly payment at the same percentage of your monthly income as it was.

Now I also agree with charging market value on rental property. We own land in California which we lease to several companies. This investment has already paid for itself and we net $40,000 a year after paying all our expenses on the land and we only own 10% of it.

Personal belief-I am all for rental property, but choose to own them rather than borrow from someone else who I have to pay my profits to. I think investing in general is an excellent idea (however most people don't save, and don't have an emergency account should they lose their job). My kids have 529 plans, family has life insurance, we have retirement. We are 28 years old and by 35 Michael can retire without ever having to work again and put his kids through college 4 years later. An we have an emergency fund!

Talking about money is bound to offend people. We hardly ever talk about it. The thread of discussion wasn't talking about trying to pay off debt but instead how someone could maximize their taxes. Then someone else assumed this meant the person was in $$$$ trouble. That is just sad.

For me DEBT is a Dumb Excuse for Buying Things. I NEVER use a credit card. Personal choice. I live well below our means. Mike is a little spend thrifty but still we are living well below our means. Paying off our mortgage in 7 years, along with monthly bills and Mike's car habit we still have $13,000 in the bank at the end of the year. Some is invested, some we use to take vacations and my indulgence: STARBUCKS!!!!

I have no problems with auto loans. and I am for 401k's with matching. I mean if we can get someone else to contribute to our financial future jump on it--FREE MONEY!!!! I agree with Debbie, I agree with Mike too (for obvious reasons). I don't care how anyone spends their money. I would like to see the people we care about have their dreams paid for so that there will be peace in their later days. But at the same time we could all die tomorrow and none of this would have mattered!