Looking for a new car...

[tiger]

Sorry about the formatting.

Basically $100,000 conventional mortage at 5.59%, you'll pay at least $69k-$85k in interest. At 3.65, it's $45-$52k.

For every $1 you borrow, you pay back 45 to 85 cents in interest.

If I buy a place for 100k (full mortgage) and sell it for $300k in 21 years, how much did I actually make? A lot of people would think $200k. You have to subtract the interest. So it's only $115k-155k.

The big assumption here is that rates are going to be consistent throughout the 21 years.

1995 - 5 year fixed mortgage - 8.3% without discount.
In the early 80's it was around 12-13% and as high as 23%!

Advantage now: The rates are really, really, really low. For compound interest, the less interest you pay in the beginning, the better because more money goes against the principle.

So in the beginning, try to get the lowest rate possible. 1% of $100k is the same as 10% of $10k. So saving that extra 1% against a high principle is imperative.

[tiger]

some more boring but hopefully useful info:

Investing vs. debt repayment.

Your interest is paid with after tax dollars and your investment returns are usually pre-tax. So 10% investment rate of return could be only 5.59% depending on your tax bracket. So unless it's higher than 10%, it's better to pay off your loan. Even if it's slightly higher, it's always better to pay/invest in yourself/family first and get out of debt. Plus there's no guarantee on investment returns (except for GICs, CSB, etc) and you're not going to get anything near 10%.

The sensitivity spreadsheet could even help you figure out if you should buy RRSPs or pay down your mortgage, or both. Since you can bank your RRSP allowance, you can save some of it when you're in the highest tax bracket, or if you get a huge bonus from work or inheritance (any sort of taxable windfall).

[tiger]

Another depressing but true piece of information.

if you have a mortgage, every dollar you spend, actually costs you more than face value. Remember you're paying 45 - 85 cents for every dollar you owe. So unless the item is 33-50% off, you're losing money.

So when Corris would buy a can of Coke at the mall for $1, it is actually costing us $2. (I had a higher mortgage rate than today's uber low rates)

At 6.3%, you'll pay back twice what you borrowed (25 yr mortage).

[nature boy]

i'm lost...what?

[tiger]

I'm not sure if you're going to have to worry about this for awhile. you PW.

[nature boy]

i thought we were talking about cars here man.

[geForce]

All this talk about people getting new cars kind of makes me want to get a new car. I'm about due... either that, or throw in money to repair my car.

[Keiho]

There's an E39 M5 I'm looking at. I can't afford another place, how about a car?

[nature boy]

why would you need another place?
no need to upgrade unless there's a little one on the way.

whoa, wait, are you trying to tell us something?

[Keiho]

I don't need another place. I want another place.

[JKY88]

My mortgage sucks, I'm paying more than double the current interest rate, and will continue to do so for over 2 more years. I'm just dumping as much disposable money into it as I can so that it's more manageable when I re-do the mortgage. I can't even re-finance as the cancellation and professional fees will roughly equal what I'd save in interest.

Speaking of new car, I still have a sick fantasy of buying a cheap car and making it stupidly fast. Like getting a used Yaris and dropping a supercharger in it. When the Accord finally goes to car paradise to join Ironhide, I guess

[Keiho]

[supersuk]

My car fantasy involves an old Impala, a 2000 watt stereo, hydraulics, disco ball, leapord skin seats and a pair of fuzzy dice.

[Duncan]

[Keiho]

No, this one actually is supercharged, and done up very nicely too. But ya...depends on your definition of fast.

At the end of the day though, it's still a Yaris.