Mortgage Re-fi question

[detlef]

While your argument does have merit, this statement is simply not true.

Historically, how often can you not do better than 5%? In the big picture, not often. Thus, in nearly every period, you can.

 

I would imagine that if we have to endure 15 year stretches of time where you can do no better than 5% growth per year over the duration of the period, it will not be pretty.

 

I'm sure someone like muck would better know how often this happens and how ugly it would be if we had to endure such a prolonged stretch. For that matter, he'd be able to confirm whether or not it's a relative safe assumption that one can expect at least 8% growth on some index based investments given a 15 year stretch.

 

Specifically, muck, as a professional, would you not advise someone who had 15 years before they needed their money away from 5% fixed income investments and towards something with a bit more risk but will likely yield closer to 10%?

Edited April 25, 2009 by detlef

[MrTed46]

PMI is still needed (and harder to avoid) if your mortgage is 80-100% of the value.

[muck]

Specifically, muck, as a professional, would you not advise someone who had 15 years before they needed their money away from 5% fixed income investments and towards something with a bit more risk but will likely yield closer to 10%?

 

FWIW, I have a 30yr and wish I could have a 50yr. PRIMARILY this is due to the fact that I'm self-employed and welcome all flexibility when budgeting for unexpected items.

 

That said, if I could have the house paid off in five years, I absoutely would (just for the "peace of mind" reasons that Ursa references).

 

Why the dichotomy?

 

First, I'm not out to optimize my personal finances. I'd rather get it generally right than precisely wrong -- peace of mind is worth a bunch (as is financial flexibility to do other things in the future).

 

Second, the "market" does not put up 8% / annualized over 15yr periods. Most 15yr periods are positive, some more and some less than 8% / yr. However, it's by no means a guarantee. The 'near guarantee' that many go from is a false bill of goods sold to a naive public.

 

Third, there are ways to earn double digit returns with out hardly any risk at all ... however, it does take a ton of time to research and is not for those willing to put the time in. NOTE: These investments are NOT accessable via your 401(k) plan at work.

 

For some, their investment portfolio just not as important as odd-jobs around the house, buying and fixing up a rental house, fishing on the weekends, hauling their kids all over creation, getting ahead at their current job, etc ... AND THAT IS ABSOLUTELY FINE ... just as long as these people don't expect to get extraordinary results with lackadasical effort and no creativity.

[MrTed46]

FWIW, I have a 30yr and wish I could have a 50yr. PRIMARILY this is due to the fact that I'm self-employed and welcome all flexibility when budgeting for unexpected items.

 

That said, if I could have the house paid off in five years, I absoutely would (just for the "peace of mind" reasons that Ursa references).

 

Why the dichotomy?

 

First, I'm not out to optimize my personal finances. I'd rather get it generally right than precisely wrong -- peace of mind is worth a bunch (as is financial flexibility to do other things in the future).

 

Second, the "market" does not put up 8% / annualized over 15yr periods. Most 15yr periods are positive, some more and some less than 8% / yr. However, it's by no means a guarantee. The 'near guarantee' that many go from is a false bill of goods sold to a naive public.

 

Third, there are ways to earn double digit returns with out hardly any risk at all ... however, it does take a ton of time to research and is not for those willing to put the time in. NOTE: These investments are NOT accessable via your 401(k) plan at work.

 

For some, their investment portfolio just not as important as odd-jobs around the house, buying and fixing up a rental house, fishing on the weekends, hauling their kids all over creation, getting ahead at their current job, etc ... AND THAT IS ABSOLUTELY FINE ... just as long as these people don't expect to get extraordinary results with lackadasical effort and no creativity.

 

Well said.

[Big Country]

Is anyone here a mortgage or heloc broker? I have technical questions and would appreciate a moment of someone's time. Thanks

 

I believe Missoula Griz is.

[Big John]

I believe Missoula Griz is.

Yes, and a few others are in that business too.

[Missoula Griz]

Thanks guys! I sent a PM to Griz, maybe he'll have the time?

 

I shot you my email address. Feel free to ask any questions you may have.

[MrTed46]

Thanks guys! I sent a PM to Griz, maybe he'll have the time?

 

Make sure you send him $100 check, he aint cheap.

 

(Griz if he actually pays I want 1/2)

Edited April 28, 2009 by MrTed46

[paulzale]

Was going to start my own thread, but found this one to resurrect. I am thinking about refinancing. I have done this a few times to lower my rate, keep paying the same amount as previous thereby reducing the number of years left on my loan. I am currently paying 5.125% on a 30 year fixed loan, we are about 18 months into this loan and rates look to be about 4.27% for 30 year fixed and 3.75% for 15 year fixed. I will keep my payment the same in all scenarios thereby making extra principle payment each month. Does anyone have a spreadsheet or online calculator that can help me compare when each loan will be paid off vs. monthly P/I payments? I like the idea of being flexible if needed on the 30 year, but the sooner the mortgage is paid off the less financial burden we have on our lives. Essentially we have Zero other debt and my thought is once the mortgage is paid in full we are retired (choose to work) vs. having to work.....

Edited October 6, 2010 by paulzale

[whomper]

We are in the process of doing a mortgage modification. From what i understand it is much easier than a refi. Its basically filling out a few forms and paying 1000 bucks and my rate will go from 6.3 to 4.87

[matt770]

We're doing a refi, going from 6.5 to 4.125 (7 year ARM). We're going to put the savings into the second mortgage, try to pay that sucker down ASAP so we can finally get into positive equity and get the hell out of dodge. Will still likely be a few years before we can afford to move but it feels good to know we're throwing much less away on interest.

[whomper]

You might come out ahead if you did a refi. If you could get similar rates that were quoted to paulzale, that might be better. Granted, a mod is certainly a nice option.

 

 

Refi was tough. We looked into it last week. I have a first and 2nd mortgage. I tried to lump them into one and I was pretty much right at the 80/20 ltv ration but the bank said the ratios change because they considered paying the 2nd mortgage off a cash out. They offered 4.50 on the first mort which we calculated would save close to 300 a month. Estimated closing costs about 3 gs. With that you gotta get the lawyer and go throiugh the whole refi process. With the modification it is simpler ,cleaner and less expensive up front. I am sure eventually the refi would be the better deal in the long run . The modification payment is about 68 dollars more a month

 

Paul. sorry to hijack just throwing the modification option out to you

[paulzale]

Refi was tough. We looked into it last week. I have a first and 2nd mortgage. I tried to lump them into one and I was pretty much right at the 80/20 ltv ration but the bank said the ratios change because they considered paying the 2nd mortgage off a cash out. They offered 4.50 on the first mort which we calculated would save close to 300 a month. Estimated closing costs about 3 gs. With that you gotta get the lawyer and go throiugh the whole refi process. With the modification it is simpler ,cleaner and less expensive up front. I am sure eventually the refi would be the better deal in the long run . The modification payment is about 68 dollars more a month

 

Paul. sorry to hijack just throwing the modification option out to you

 

No problem, now back to my question. Anyone?

[moneymakers]

Open up a line a credit and pay off everything.

interest rate is 3.35 with great credit.

 

no fees. 15 year interest only note at 10 years to payoff.

 

greatest thing going if you are disciplined to pay off in 10 years.

 

almost free money

[AtomicCEO]

I'm closing on my refi soon.

 

We're going from a 30 to a 20y loan, so...

- knocking 4 years off the length of the loan

- more of the payments go to principal each month

- lower monthly payment (barely)

- PMI will go away in 27 months as opposed to never going away on our FHA loan

 

Not a dramatic change in my life, but I'd be a fool not to take advantage of it. According to my calcs... the savings will pay for the closing costs after a year, and if we stick it out for 3 more years, it'll have an even more dramatic effect.

[paulzale]

Open up a line a credit and pay off everything.

interest rate is 3.35 with great credit.

 

no fees. 15 year interest only note at 10 years to payoff.

 

greatest thing going if you are disciplined to pay off in 10 years.

 

almost free money

 

If I am figuring this correctly, this would be an awesome option. Is it a fixed interest rate?

[moneymakers]

If I am figuring this correctly, this would be an awesome option. Is it a fixed interest rate?

 

 

nope

 

floats with prime.

 

but if you did it 3 years ago. you would be at the minimum of 7 years to go. but if you just keep throwing money at it you will pay it off in five.

 

I f you get in a bind you just borrow the money back. (but dont do this unless you plan on investing the funds at a higher rate)

 

lots of cheap real estate out there.

 

3-2-2

better than gold

[paulzale]

I agree with you, but doesn't the logic stand that we have no where to go but up? Is there a cap on the rate increase per year? The concern here is the volatility at 3.35 for 10 years vs. stability with the 15 year fixed at 3.75. I need to look into this further.

Edited October 6, 2010 by paulzale

[cre8tiff]

I'm closing on my refi soon.

 

We're going from a 30 to a 20y loan, so...

- knocking 4 years off the length of the loan

- more of the payments go to principal each month

- lower monthly payment (barely)

- PMI will go away in 27 months as opposed to never going away on our FHA loan

 

Not a dramatic change in my life, but I'd be a fool not to take advantage of it. According to my calcs... the savings will pay for the closing costs after a year, and if we stick it out for 3 more years, it'll have an even more dramatic effect.

 

We are going from a 30 to 15 year, and dropping our rate to 4, fixed. It is a good time to refi, for certain.

[moneymakers]

I agree with you, but doesn't the logic stand that we have no where to go but up? Is there a cap on the rate increase per year? The concern here is the volatility at 3.35 for 10 years vs. stability with the 15 year fixed at 3.75. I need to look into this further.

 

 

no cap but also no cost.

If you can lock in at 3.75 with no cost do it.

 

If rates go up you can always lock in at a cost. Key is to pay off primary resident and have credit line tied to investment .

 

5 years from now you will be saying woulda shoulda couda.

Edited October 6, 2010 by moneymakers

[The Irish Doggy]

Was going to start my own thread, but found this one to resurrect. I am thinking about refinancing. I have done this a few times to lower my rate, keep paying the same amount as previous thereby reducing the number of years left on my loan. I am currently paying 5.125% on a 30 year fixed loan, we are about 18 months into this loan and rates look to be about 4.27% for 30 year fixed and 3.75% for 15 year fixed. I will keep my payment the same in all scenarios thereby making extra principle payment each month. Does anyone have a spreadsheet or online calculator that can help me compare when each loan will be paid off vs. monthly P/I payments? I like the idea of being flexible if needed on the 30 year, but the sooner the mortgage is paid off the less financial burden we have on our lives. Essentially we have Zero other debt and my thought is once the mortgage is paid in full we are retired (choose to work) vs. having to work.....

 

 

Microsoft calculator templates

 

There are a couple mortgage / loan / amortization schedule templates here among other things.

[Easy n Dirty]

Open up a line a credit and pay off everything.

interest rate is 3.35 with great credit.

 

no fees. 15 year interest only note at 10 years to payoff.

 

greatest thing going if you are disciplined to pay off in 10 years.

 

almost free money

 

Is the interest on this still tax deductible?

[moneymakers]

Is the interest on this still tax deductible?

 

 

It depends if you like to eat well or sleep well.

[paulzale]

Microsoft calculator templates

 

There are a couple mortgage / loan / amortization schedule templates here among other things.

 

Found a handy one here, difference for me (keep payment the same as currently paying):

 

- Current will be paid off on 2/1/2025 (making extra payments currently)

- 30 year at 4.37 would be paid up 11/1/2023 (1 year 3 mo improvement, keeping total monthly payment the same in all cases)

- 15 year at 3.75 would be paid up 9/1/2022 (1 year 3 mo improvement on 30 year or 2.5 year improvement on original)

- 10 year L-O-C at 3.35 (variable on prime) would be paid off 12/1/2021 (1 year 3 mo improvement on 15 year, but not stable and requires an increase in currently monthly payment of a few hundred)

 

Interesting how each has a 1 year 3 month improvement, probably has something to do with how they figure the rates! My main thought now is do I want the flexibility of a lower payment obligation of the 30 year if times got tough or the 1 year 3 month improvement for the 15 year? The Line Of Credit is too risky for me since it isn't a fixed rate, therefore I would have to monitor rates each and every month, also I am sure the mortgage is tax deductible.

Edited October 6, 2010 by paulzale

[sundaynfl]

Is the interest on this still tax deductible?

 

Interest is tax deductible up to a loan amount of 100K... My website has mortgage am calculators... if interested click my linky!

 

Atomic/all... rates are at about 4.00% today on 30 year fixed mortgages. Matt... you mentioned a 7/1 ARM at 4.125.... current rates are at 3.375% to 3.250% for that... are you a JUMBO loan??? If not, they better be giving you a free jar of vasoline for bending you over!