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Originally Posted by Red
Allow me to be painfully honest....
It is very stupid to finance your house and use that money to buy depreciating assets (car) or RRSPs.
What is the point of buying RRSPs that will earn you 3% when it costs you 6% to finance that very purchase?
I guess you could invest the RRSPs in the (increasing unstable) markets, but that's not any smarter.
What is the point of buying a car and repaying the loan over 20 years or whatever you chose your mortgage for.
What happens when the housing goes down 10 years down the road? Some people will have more mortgage debt than assets.
In these prosperous times it should be a priority to get rid of debts rather than trying to accumulate more.
Sorry to rant, but that's how I feel about this. You asked for advise, mine is to not re-finance.
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Wow, I couldn't disagree more (obviously). Except for some of it. I agree, it is completely idiotic to borrow gobs of money from the bank to purchase depreciating assets. Ridiculous that I hear of some people doing this. Oh well, if people think they can handle it, all the power to them.
3% on your RRSPs? Is this all you're making? Ouch. Don't forget the fact that every dollar that goes to RRSPs comes out of your taxable income, so the change in your tax return should be included in the ROR as well. That alone would probably exceed your 3%.
Banks are willing to give me gobs of cash, and only want 6% interest in return. How can you not take that???!? How hard is it to make 6% in today's market? I can tell you, not hard at all. If you're not making 10% AT LEAST you're doing something wrong.
What happens if the housing market goes down over the next 10 years? Let me tell ya, if it takes 10 years for the market to fall I'm going to be one rich sucker. I'm not counting on more than 2-3 years before something happens to the housing market, and even then I'm expecting earnings in the 200-400K range.
Consider this. Those people that right now own 10 houses. Do you think they saved up until they could purchase them without borrowing any money? I can guarantee you they didn't. And yet, I know a couple of those people and they are all set for life. Debt does not have to be a bad thing, as long as you manage the risks properly.
As for your (next to) last statement, these are the times to borrow, borrow, borrow. The money's practically free! Why not use it to make more money?
Who knows, maybe in 2 years I'll be on here crying the blues and asking for handouts. I'd be willing to bet that won't happen, though. Of course, I won't be able to honour the bet if I lose, because, well, I won't have any money.
