Dave Ramsey’s New House

I do enjoy the line, “Ahh…the things one could do with a 4,554 square foot basement.”

[...] recently ran across an interesting article that provided details about Ramsey’s new mansion just south of Nashville (pictured below). [...]

[...] some other blogs linked to it I found this real estate website local to Ramsey’s area talking about his  home, the cost, and some of the features of the [...]

[...] else so that later they can live like no one else.” He is leading by example according to a recently released article which provides details of Mr. Ramsey’s newly constructed [...]

Great article. I was referred to your blog after I forwarded a video about this for a guy I know who heads up another blog site. Dave Ramsey is mathematically challenged when it comes to mortgages. His advice makes money for ONE party…the banks! This isn’t theory or opinion but mathematical fact.

I’ll link to your blog post here in my upcoming series that I just started about the truths behind mortgages (Owning A Home: The Most Misunderstood American Dream – http://www.bethebank.wordpress.com). I do think you’d find this quick video about Ramsey’s purchase and math behind it interesting.

Here’s the link: http://www.screencast.com/t/BRsxcC6Tz

Kelly O’Connor
Financial Hero #2

Kelly, You forgot to calculate in risk. Even Ramsey says that the market doesn’t give off 8 or 10% year after year. And what happens if you lose your job and can’t pay your mortgage. And even worse what if you’re upside down in your home. Yeah we haven’t seen that happen lately.

In the words of Dave Ramsey, “100% of foreclosures happen with homes that have a mortgage on it.” Dave’s no going to get foreclosed on. If his business went under he’d still be fine.

He teaches financial Peace. Which is part mathematics, but not 100%. Plus with a paid for home you can turn around and invest what you would have paid for a mortgage.

Just my opinion…
Erica

Thanks for the reply Princess2221. Not sure where I forgot risk since Ramsey’s approach is mathematically the riskiest…which certainly doesn’t foster peace. The video is only the math behind paying cash…truly the most foolish financial decision one could make when buying a home (assuming they have the ability to do so). The worst decision is mortgaging a home you can’t afford but that’s not the situation nor the client I’m referring to here.

Also, the quote that 100% of foreclosed homes have mortgages is in fact true but a deflection of the point. This seems to then make the assumption that having a mortgage is always the wrong thing to do. Here’s how it should be stated: “100% of foreclosed homes are those with mortgages where the owner of the home had NO liquidity to pay the mortgage off.”

Paying off the home prior to “turning around and investing” only benefits the bank…this isn’t “peace” this is math. Plus, along the way, life happens. The assumption that you’ll even get to that point is a risk far greater than any stock or investment tip. Just ask some clients of mine whose house burned down here in Colorado or a client of mine whose house was destroyed in Hurricane Katrina, or several clients who lost their job but had the liquidity instead of the bank. Guess who weathered the storm? Those in control.

Ever wonder why banks offer a lower rate on a 15 year mortgage than a 30 year? Is it because they have your best interests at heart? No way. If they are in the business to collect interest then why would they offer you an incentive to pay less? Have you ever run the math that proves they make FAR more money on a 15 year than a 30 year? They get control sooner.

It is math. If you have control your peace is far greater than those who don’t.

“Live like no one else, so that later you can live like no one else” (Isn’t that Dave’s quote)? Looks like he took his own advice!

[...] will ultimately crumble?” I found the above statement on a message board….were Dave Ramsey new home was being talk about….It seems most of the comments were negative towards Dave Ramsey, for being a [...]

[...] it a bit ostentatious to build such a magnificent home atop a hill for all to see? Shouldn’t Dave Ramsey’s new house be a bit more modest? I guess the bottom line for me is that we really have no right to tell Dave [...]

[...] here is what got me thinking: I ran into an article a couple of weeks ago that describes Dave’s new $9,000,000 (13,000+ sq.ft.) home. If this is [...]

[...] here is what got me thinking: I ran into an article a couple of weeks ago that describes Dave’s new $9,000,000 (13,000+ sq.ft.) home. If this is [...]

[...] it a bit ostentatious to build such a magnificent home atop a hill for all to see? Shouldn’t Dave Ramsey’s new house be a bit more modest? I guess the bottom line for me is that we really have no right to tell Dave [...]

It’s amazing how many people on Facebook have clicked the “Share” buttton!

You seem to completely misunderstand Dave’s approach. He is not a “quick-fix” guru nor does he advocate that his approach is mathematically the most pure. In fact he repeatedly says on his show that people can juggle things like you say and they may (MAY) come out financially ahead.

The issue he is tackling is not wonkish fiddling with your finances but rather the mindset it takes to get out of debt. This requires passion, focus and intensity that cause you to get off your butt and attack the problem ferociously. Someone fiddling with systems can potentially make more money, but they are juggling multiple balls in the air and hoping one or more don’t come crashing to the ground. I personally am tired of juggling and would like to start living my life.

Besides, he doesn’t call for paying off your house until AFTER you are fully funding investments for your retirement.

Finally, anybody who lost their home and didn’t have it insured, I can’t really have much pity for. I prefer securing my own financial peace.

Dave, you’re right about those who “fiddle with systems” and simply hope they don’t come crashing down; however, that’s not what I’m talking about. It is never wise to play the risk game instead of paying down your house but if you can act and function just like a bank and win the game in a guaranteed and predictable environment then nothing crashed down…and you win. That’s the key and it is possible.

JD, so glad you decided to enter this conversation with such intellectual fortitude. You really do stand out…grammar mistakes and all.

Also, Dave, if you recall, most people had their homes insured but the insurance companies did not fully restore the homes. Come on, I know you remember those stories. So, all their money was in their house, it was destroyed, the insurance company didn’t restore the house as it was before the storm, and now they can’t get a loan on the house because they can’t get insurance on it because no insurance company is willing to take the risk again. It’s sad but you are mistaken if you lump this into a pool of only those that did not have insurance…that’s just not factual.

Paying off a home early takes money away from the banks!

@Gman – that’s not right. Paying off your home actually gives more money to the banks. Your statement implies that the banks then collect less interest if you pay it off and therefore they ‘earn’ less money…i.e. “money away from the banks”. So, if the banks are in the business to collect interest and they earn less from you on a shorter term loan then please tell me why the banks offer you a lower rate on a 15 year loan than a 30 year loan.

If we follow your logic then this incentive would not make any sense. Why would they give me/you and incentive to pay less? It’s simple. Your money will never be worth more than it is today due to inflation. The more money they collect over a shorter period of time the more money they can spin back out and continue earning interest when it has its highest value.

The math proves, not me or my opinion, but math that banks earn FAR more money on shorter loan terms than longer loan terms for this very reason. That’s why they give you an incentive to do so.

Dave probably created more jobs by just building that one house than Obama did with $800,000,000,000.00.

Good for him……BRAVO Dave!

As Dave Ramsey says, you don’t take fitness advice from fat people, so why would you take financial advice from (someone who has time to respond to a news article over and over again).

while I don’t agree with your economic theories I did like your response to Jd, or should I say “you’re” response to Jd?

I doesn’t matter if the bank can turn the money around faster and loan it out to someone else and they offer lower rates because the money returned faster (therefore less at risk). More power to them, none of that is at the detriment of the person taking out the mortgage. Any financial calculator you plug the numbers in says that the faster you pay the principal balance the less interest is paid out and the less the total amount is paid to the bank compared to the total interest plus principal if they just made the regular mortgage payment. Period, end of discussion. Your advice is so bad as to be laughable.

that was funny…

She is smarter than you think, as she is leveraging the massive traffic this Dave Ramsey article is receiving on a daily post.

that was NOT funny…

Bobby sorry but its true, regardless of whether you agree or disagree with Kelly.

This is the Cool Springs News bro… what’s your idea of “massive”?

You speak a lot like a banker, not a real estate investor… Correct me if I’m wrong but you said owning your own house free and clear is more risky (“riskiest”) then the bank owning your house? You’ve lost your mind.

Its all relative. Bro.

Do you live in or are you familiar with the Cool Springs area at all?

I bet you he paid cash!!!!

http://www.fdave.com

I bet you he paid cash!!!!

http://www.fdave.com

Not if you’re the one in control of the money. Plus, think of emergencies, tragedy and opportunity. The one with the cash is king. Either the bank has the cash or you do.

Truly, if you say “I’ve lost my mind” then you’d have to believe that the model in which banks make money is ineffective. I’m confident you would not make that claim; therefore, you’re arguing in a circle.

Not if you’re the one in control of the money. Plus, think of emergencies, tragedy and opportunity. The one with the cash is king. Either the bank has the cash or you do.

Truly, if you say “I’ve lost my mind” then you’d have to believe that the model in which banks make money is ineffective. I’m confident you would not make that claim; therefore, you’re arguing in a circle.

That was funny. Still doesn’t mean I’m wrong. How many of you have read page 154 and 155 of Dave’s Financial Peace Revisited book? You should read it again. It illustrates his true lack of knowledge. I’ve even posted a blog on it at http://www.bethebank.wordpress.com.

Remember, Dave’s right-hand-man told me this; “kelly, you have to understand that 80% of our clients are financial idiots.”

It’s not my advice @surgeterrix its MATH. If you want to say that 2+2 = 5 and anything that says otherwise is “laughable” then be my guest; however, I’m not willing to be so gullible with my money.

risk risk risk kelly… to own a house or not… I think you have a screw loose.

I think you’ve lost your mind because you’re claiming paying cash for a house is risky. The banks do not have anything to do with the money at that point. The model in which banks make money is highly effective IF you borrow from them. Am I still going in a circle?

Bobby, don’t leave comments under multiple names (Sam).

Editor

How can you be in control of your money and the bank own your money??

You must understand Bobby that banks make FAR more money off of your cash than they do your payments. Unfortunately you don’t have it quite right when you say their model is effective IF you borrow. They model is effective IF they have the cash far more than your borrowing.

Pretend we’re neighbors and we have identical homes. Your house is paid for and mine is mostly mortgaged and I have the cash to pay it off IF I wanted to and when I wanted to. We both lose our jobs. You may have six months of expenses but I’d have many years in cash. Let’s say a disaster happens like a tornado (I have a client in New Orleans who lost his home and one outside of Boulder Colorado who just lost his home this summer to a wildfire – but they had the money) and we lose our houses. Who’s in a better position? Not you. What if after the disaster no insurance company will insure your property once your old company replaced it (happened to my client in New Orleans)? Can you then get a loan on it again if you needed the money since you most likely burned through your emergency savings? Nope, no lender will put a mortgage on a house without insurance. Can you sell it to get the money? Nope, who would buy it if they couldn’t insure it? Again, my client in New Orleans saw virtually every neighbor go down the tubes financially because of this one financial decision…but not him – I got a GREAT Christmas card that year. But as for me, I’d have the money. Who’d be freaking out, me or the bank? The bank. Fine with me.

You see, when you do not have control of your money you are in the riskiest position possible…and you have NO control of equity. Cash is king. The math always wins here Bobby. It has nothing to do with my opinion. And yes, I can prove this with math. That’s the beauty of it. JD can call me a moron, you can say I have a screw loose…that’s fine but math is still on my side. Ironically, it turns out that if you saw the math and decided not to believe it then JD would be the moron and you’d be the one with the loose screw.

I do thank you for not behaving like a elementary kid on the playground by “calling names”…that only shows pure foolishness.

You are totally gullible to another mindset and are unable to think logically when you have already made up your mind to the contrary. Facts don’t lie, but liars can add and get different results. When you owe someone, you are enslaved to them until it is repaid. It is a wonderful feeling not having to worry if I am going to have enough work to make my house payment. I have been there, done that, and don’t plan on going back there. Cash is king and it is better for me to be able to make it and keep it, invest it, or spend it how I want.

I really do not fall into the worship type adoration that many have adopted toward Dave Ramsey. I think his stuff is simple really and it helps many who have never learned to not put their life into credit BUT I don’t have as much respect for someone who pretty much plagiarized a much older book by John Avanzini and called it his own! He can pay cash for a house because he makes bank on other’s stupid choices and his system is such that many, many people never get pass step 3. I know so many DR fanatics who obsess over the steps – to the point that their new DR life becomes a bondage. They leave the bondage of debt to take on the bondage of DR and at the same time make him a multi- millionaire. I’ve always wondered if he would care so much about this nation’s debt and credit problems if he didn’t make millions from it?

I really do not fall into the worship type adoration that many have adopted toward Dave Ramsey. I think his stuff is simple really and it helps many who have never learned to not put their life into credit BUT I don’t have as much respect for someone who pretty much plagiarized a much older book by John Avanzini and called it his own! He can pay cash for a house because he makes bank on other’s stupid choices and his system is such that many, many people never get pass step 3. I know so many DR fanatics who obsess over the steps – to the point that their new DR life becomes a bondage. They leave the bondage of debt to take on the bondage of DR and at the same time make him a multi- millionaire. I’ve always wondered if he would care so much about this nation’s debt and credit problems if he didn’t make millions from it?

Well, I guess Dave Ramsey likes his houses big, if nothing else. I am a bit surprised he is not following the (slowly) developing trend of smaller but better quality.

Good grief, that is one hot mess of a house. It looks like it was designed by a committee!

Let me hop in with some perspective from the standpoint of someone who has been a mortgage loan originator for twenty years and has owned a mortgage company for eleven of those years. First, “The Bank” rarely hangs on to the mortgage. They fund the loan using a special line of credit called a warehouse line. They then sell the loan for cash and a small profit to an investor. Fannie Mae and Freddie Mac are the largest and best known of these. Those mortgages are then pooled into a type of bond called a Mortgage Backed Security. The MBSs are bought and sold on Wall Street just like any other kind of bond. It is very, very rare that The Bank actually holds the loan in its portfolio. While it is true that one will pay less in interest by paying a loan of more quickly, it is important to keep in mind the opportunity cost of that money. Simply put, money will earn more money at some rate or return. If I invest cash into the equity of my house, the opportunity cost is the interest I forgo by making that investement. In the case of paying off a mortgage, we have to also consider the real cost of the mortgage. A mortgage with a note rate of, say, 4.75% may have a significantly lower rate by virtue of being able to deduct mortgage interest. Depending on my tax situation, my REAL rate might be in the mid-3% range or lower.

Here is a concept that Mr. Ramsey does not address, to the best of my knowledge: paying off debt is an investment–in fact, it is the only investment that is essentially riskless. So money being used to retire the principal balance is being invested at whatever the net cost of the mortgage might be.

If I have the ability to earn more on my cash than that rate, I will be ahead of the game by placing that discretionary money in some other investment that earns a higher net rate than the net cost of the mortgage. The difference between the two numbers is called the “arbitrage spread,” and it is how banks make their money.

If you listen to Dave Ramsey’s pitch, you’ll believe that a “quality mutual fund” will generate between 8%-12% per annum in net return. If I can borrow money at 3.5% and invest it at 8%, I am earning an arbitrage spread of 4.5%. If I do that, I will build net worth (wealth) far more rapidly than I would if I blindly followed Ramsey’s advice.

Does that make me a “slave to the lender?” Let me ask you this: I pay a couple of thousand dollars a month for my office lease. I am able to generate many times that amount each month in net profit for my business located in that space. Am I a “slave” to my landlord?

If I have a mortgage on my home, I am simply “renting” money for my benefit. The Bank does not own my home; I do. I possess the whole bundle of rights in that real property that I would have if I paid cash.

Dave Ramsey has become wealthy, not by following his own advice, but by creating a media enterprise to *dispense* advice–and as someone has observed earlier in this thread, the avid (and credulous) DR followers seem to accept all his advice as though it were Holy Writ. the problem is that much of his advice is based on incorrect assumptions, incorrect data or outright, um…falsehood.

That’s just over the top and is a big disappointment. I can’t believe he could not come up with something better to do with his money. I bet there are rooms in that house that he nor his family will ever see. Such a waste. And 18 shower heads, that is ridiculous. What other enviromental wastes are there. He deserves luxury he has built an empire but this is over the top for anyone. I have 340 poverty kids that need help where I work – what’s the chance. Food banks are over burdened by the needs, I’m trying to find a way to get handicapped access playground equipment, tempra paints, library books……….18 shower heads, shame on you

Excellent post. The canned response by his followers, and Ramsey himself, is that you would never risk the money that is being used to create the arbitrage. Ironically, he claims that you will in fact earn 8-12% but somehow you won’t if your mortgage isn’t paid for…silly. Here’s the kicker, you can win the spread game without risk. You can win the spread game in a guaranteed and predictable environment. How could Dave tell me that creating spread in a risk-less environment is bad? He can’t because it’s not.

I highly doubt if his business goes under that he would be able to maintain such a large house. I’m sure the upkeep would bankrupt him.

You can’t Bobby…that’s the problem. So it begs the question: would you rather have the bank control your money and profit from doing so or you and your family going forward?

Kelly is right when speaking of control of your own money, just wrong on the execution of same. When I own my home, I never have to worry about what will happen if I get sick or hurt and can no longer work, or if I decide one day to just spend the rest of my life with nothing to do but play with my grand-kids,(aka early retirement), or if another McGovernite gets elected to the White House and decides to take all my income stream in repressive taxes because, as they say, “Rich people are evil, how else could they have become rich?” After all, anyone who lives in a paid for house MUST be one of the evil rich, right? If I am the one in total control of my income, I decide where to spend it, or even if to spend it. I can put it in the bank, or put it in a box, or just give it away to any charity of my choice. On the other hand, when I have to make payments on a mortgage, car, credit card, and so forth, I no longer have control of either my money or my life. The people I have to make the payments too control my behaviors. If I lose my job for any reason, I must get another one right away so I can keep up the payments or else I will lose my home as well and be in a much worse situation then if I owned my home free and clear.

Kelly, you keep on harping that it is MATH, so why don’t you settle this debate once and for all and demonstrate this MATH you seem to worship so much? While you are at it, please demonstrate how the banks make money from me NOT having a mortgage as well. Pretend I am from Missouri and SHOW ME.

Joe, to quote you, if I may, “If you listen to Dave Ramsey’s pitch, you’ll believe that a “quality mutual fund” will generate between 8%-12% per annum in net return. If I can borrow money at 3.5% and invest it at 8%, I am earning an arbitrage spread of 4.5%. If I do that, I will build net worth (wealth) far more rapidly than I would if I blindly followed Ramsey’s advice.”

That statement neglects one glaring fact: No bank is going to loan you money to invest with because the risk is too great. If it were not, then the banks would put their money into the investment themselves and you could not get a loan from them unless you were willing to pay more than they were making from the investments. Even if you could convince some bank officer to loan you the money to make the investment, what happens when the bank gets cold feet because the market takes a dive or makes a ‘correction’ and decides to “pull the plug” so to speak and call in the loan? Don’t try to tell me they cannot do so because they are the ones writing the rules you had to agree to in order to get the loan from them in the first place and they call in what they perceive to be the riskier loans all the time, it happened to Dave Ramsey even. Notice I said “perceive to be”. Doesn’t necessarily mean they are riskier, just that the bank no longer likes that particular sector maybe even the loan officer is tired of getting calls from the underwriters about the loan or maybe he has an opportunity to make a much more lucrative loan if he can just raise enough capital to do so. Banks are what is known as, ‘Risk Adverse’, a term I am sure you are familiar with but some of the other readers here might not be. Basically it means they only want to bet on a so-called ‘sure thing’ in as much as they can guarantee that they will be getting their principle back one way of the other. That can mean the borrower pays off the loan either on schedule or early, or the bank forecloses on the real property that was pledged as collateral for the loan and then sells it.

I was told by the 1st ward alderman of Franklin that homes were not supposed to be be built in a manner that cleared all the trees off the hilltops in Franklin. Guess Dave gets an exception – lame…. Way to go “Tree City, USA”

amen Melissa, Some say that the lottery is just a tax on the stupid. I guess telling poor people to buy a book of common sense is an easier way to riches, I don’t know what he gives to charity but it’s obvious he keeps more for himself, I mean come on man! how comfortable can a bed be? How many toliets do you need? Who was that said it is easier for a camel to pass through the eye of a needle than a rich man enter heaven. I’m not judging, but I do have an opinion…..TTJ

AMEN SISTER!!! I totally agree with you! People that have money usually end up wasting it on trivia, material things just to show off…they don’t need it are just being selfish when there are sooooo many children that are hungry, homeless and/or abused that could use some help.

turrets, gables, swirls, points and dips – reminds me of Jay’s house in Fitzgerald’s critique of the newly rich – tasteless

Can a Christian really live like this? Especially a “teacher” who people follow. The Bible says that teachers will be held to a higher standard. You simply can’t live in a house like this and tell me that money is not your god. That extravagance is not your god. What good can come from living in a $10million dollar house. Don’t talk about jobs created by the construction.
So sad.

I gaurantee you Dave does not have ALL of his money in this house. $10 Million is a drop in the bucket.

Only if it took more than 600,000 people to build that house.

Only if it took more than 600,000 people to build that house.

I am very happy for Dave because he doing exactly what he is teaching us. I applaud him for his success for not being selfish but at least trying to help the whole world out. Dave does give to charity. There are far more people out there that have millions that waste their money on Stupid things and Dave is just enjoying what he has worked so hard for. People, understand that if everyone was to give to charity we all would be blessed. Let’s applaud a man like this instead of always wanting to put him down for his success. The people that criticize are the same one that wish they were there or Envy him. I am a true believer of the saying if you make your bed, sleep in it. Congrats Dave!!!

Kelley- You make absolutely no sense…So I will stick with Dave Ramsey..we have lived debt free for a number of years before reading his materials and I have to say that we have been able to make decisions in this housing market to move out of state and take better career opportunities because we were not tied to a mortgage on our home and whether it sells or not in the near future it does not put us in a stressful, uncertain situation, it just means we own two homes peacefully and can enjoy both of them while we wait and once you do the math you must realize how much cash you are throwing down the toilet or at the bank sometimes as much as 4 times your original mortgage in interest how can that be wisdom and security?

It’s the house built by poor people.

Everyone who is bitching about this home needs to move to China or North Korea. I’m sure the men and women who built this house and the items that went into the construction were very grateful to Mr. Ramsey for building it.

Envy is ugly.

There are two reasons an insurance company wouldn’t restore a home to it previous conditon. First, the home was underinsured and secondly, the homeowner chooses not to rebuild and elects to buy elsewhere. Insurance companies. This sounds more like improperly insuring your property to me.

Televisions and radio stations are willing to pay him millions for his show because people listen. Advertisers want to buy airtime because people listen. So are they also preying on listeners? Why is the fact that he has made a tremendous amount of money such a problem? He has done nothing unethical to earn it and he is providing a great service to so many. We are so quick to judge people. He may give $100 million to the poor around the world, we don’t know. How much does he have to give to churches, charity or the priceless gift of helping so many change their financial lives before he can “play” with some of his money? Is he being irresposible with his resources? I’m not his judge.

Emma Rae, from what I understand David DID pay back all his creditors from his previous bankruptcy.

Emma Rae, from what I understand David DID pay back all his creditors from his previous bankruptcy.

His net worth would have to be in the hundreds of millions for a house like that.   It wouldn’t be hard to believe he’s worth that.

you really have no idea about the process of manufacturing in third-world countries. first of all, nothing that is consumed in the US, or in most countries in the world for that matter, is made in North Korea. absolutely nothing. it’s basically a post-industrial wasteland run by a dictator who has lost his mind and all concern for the well-being of its inhabitants. secondly, working conditions in chinese and south korean (i’m guessing that is what you meant) manufacturing plants are horrendous. the laborers are not “grateful” to anyone for having more work to do, because they make less than the equivalent of a dollar an hour, regardless of whether they have a few hundred extra bathroom fixtures to make or not.

also, saying that someone’s house is wasteful and overly extravagant does not qualify as envy. especially when it really is wasteful and overly extravagant.

Matthew 6:24 No one can serve two masters, for either he will hate the one and
love the other, or he will be devoted to the one and despise the other.
You cannot serve God and money.

 I can’t find the numbers, but doesnt Dave give a lot of money away every year?   I don’t think he should give away 100% of his wealth, even if he did it wouldnt make a dent in the problems in our country. 

Also, if nothing else, “Live like no one else, so later you can LIVE like no one else.”