Question on refi

[MadeInTaiwan]

I was going to e-mail HLS directly but would like input from other piggies as well.

Sheldon,

During the last interest low 2003 I think? I refinanced to a 15year mortgage, the idea being when the oldest is about to start college we will have no mortgage.

I rolled the points and fees into the loan to get the lowest payments. I think my interest rate is 4.75 or thereabouts. I think a 30 year loan would have reduced our monthly payment by about $400.

Looking back I think that was a mistake, because it gave us less maneuverability. My wife took this school year off (she is a teacher) and we are thinking about her staying home another year. That extra $400 a month would have been quite a psychological cushion, probably makes cash flow neutral vs dipping into savings. Besides, with inflation by the time the oldest go to college the 30 year mortgage payment probably won’t even cover rent for him. With 30 year loan we always have the option of paying down the principal faster (as we did before refinancing to 15 years).

The only roadblock besides convincing the misses is that our loan amount might be lower than the minimum need to check my statement when I get home tonight; lets just say that our paper equity is quite a bit more than our mortgage).

What is everyone’s opinion?

MadeInTaiwan

[Raybyrnes]

Hopefully your kids end up on scholarship but the benefit of being house rich and saving poor works to your advantage when applying for finacial aid.

By committing to a 15 year shchedule you also force yourself to pay down the loan. Easy to say you will do it when you are on a 30 year program, harder to do.

If you have equity in the home and are looking for a short term bridge why not take out an equity line. Right now you could find rate on those for 4% or less.

[Raybyrnes]

Hopefully your kids end up on scholarship but the benefit of being house rich and saving poor works to your advantage when applying for finacial aid.

By committing to a 15 year shchedule you also force yourself to pay down the loan. Easy to say you will do it when you are on a 30 year program, harder to do.

If you have equity in the home and are looking for a short term bridge why not take out an equity line. Right now you could find rate on those for 4% or less.

[Raybyrnes]

Hopefully your kids end up on scholarship but the benefit of being house rich and saving poor works to your advantage when applying for finacial aid.

By committing to a 15 year shchedule you also force yourself to pay down the loan. Easy to say you will do it when you are on a 30 year program, harder to do.

If you have equity in the home and are looking for a short term bridge why not take out an equity line. Right now you could find rate on those for 4% or less.

[Raybyrnes]

Hopefully your kids end up on scholarship but the benefit of being house rich and saving poor works to your advantage when applying for finacial aid.

By committing to a 15 year shchedule you also force yourself to pay down the loan. Easy to say you will do it when you are on a 30 year program, harder to do.

If you have equity in the home and are looking for a short term bridge why not take out an equity line. Right now you could find rate on those for 4% or less.

[Raybyrnes]

Hopefully your kids end up on scholarship but the benefit of being house rich and saving poor works to your advantage when applying for finacial aid.

By committing to a 15 year shchedule you also force yourself to pay down the loan. Easy to say you will do it when you are on a 30 year program, harder to do.

If you have equity in the home and are looking for a short term bridge why not take out an equity line. Right now you could find rate on those for 4% or less.

[MadeInTaiwan]

[quote=Raybyrnes]Hopefully your kids end up on scholarship but the benefit of being house rich and saving poor works to your advantage when applying for finacial aid.

By committing to a 15 year schedule you also force yourself to pay down the loan. Easy to say you will do it when you are on a 30 year program, harder to do.

If you have equity in the home and are looking for a short term bridge why not take out an equity line. Right now you could find rate on those for 4% or less.
[/quote]

I say we will pay down the 30yr loan faster than schedule because once we set up the auto payment plan (2 extra payments divided by 12 added to each months auto withdrawal) we didn’t change until we re-fied to 15 years (There might have been a few months were we stopped due to me being laid off and the wife not working). So in this case at least we do have a track record. By the way, we are not totally savings poor. I contribute $100/month/child for college, we have the Roth, I think I put in 10% or thereabouts for 401k. We do have enough in the bank to live for a year, maybe only on ramen noodles, and the wife manages her own “Pre-marriage” money

What is the schedule for equity lines? Let’s say I take out $10k, how soon do I have to pay it back? Unlike paying down the mortgage, we don’t have a track record with equity lines so I don’t know how we handle the temptation of that “piggy bank”. Where as a bank account balance forces you (at least me) to look at monthly spending. Plus can’t banks pull your equity line without notice as I have heard happen to people recently? I am not saying that an equity line is the wrong solution, but these are questions I have.

I do appreciate your response

MadeInTaiwan

[MadeInTaiwan]

[quote=Raybyrnes]Hopefully your kids end up on scholarship but the benefit of being house rich and saving poor works to your advantage when applying for finacial aid.

By committing to a 15 year schedule you also force yourself to pay down the loan. Easy to say you will do it when you are on a 30 year program, harder to do.

If you have equity in the home and are looking for a short term bridge why not take out an equity line. Right now you could find rate on those for 4% or less.
[/quote]

I say we will pay down the 30yr loan faster than schedule because once we set up the auto payment plan (2 extra payments divided by 12 added to each months auto withdrawal) we didn’t change until we re-fied to 15 years (There might have been a few months were we stopped due to me being laid off and the wife not working). So in this case at least we do have a track record. By the way, we are not totally savings poor. I contribute $100/month/child for college, we have the Roth, I think I put in 10% or thereabouts for 401k. We do have enough in the bank to live for a year, maybe only on ramen noodles, and the wife manages her own “Pre-marriage” money

What is the schedule for equity lines? Let’s say I take out $10k, how soon do I have to pay it back? Unlike paying down the mortgage, we don’t have a track record with equity lines so I don’t know how we handle the temptation of that “piggy bank”. Where as a bank account balance forces you (at least me) to look at monthly spending. Plus can’t banks pull your equity line without notice as I have heard happen to people recently? I am not saying that an equity line is the wrong solution, but these are questions I have.

I do appreciate your response

MadeInTaiwan

[MadeInTaiwan]

[quote=Raybyrnes]Hopefully your kids end up on scholarship but the benefit of being house rich and saving poor works to your advantage when applying for finacial aid.

By committing to a 15 year schedule you also force yourself to pay down the loan. Easy to say you will do it when you are on a 30 year program, harder to do.

If you have equity in the home and are looking for a short term bridge why not take out an equity line. Right now you could find rate on those for 4% or less.
[/quote]

I say we will pay down the 30yr loan faster than schedule because once we set up the auto payment plan (2 extra payments divided by 12 added to each months auto withdrawal) we didn’t change until we re-fied to 15 years (There might have been a few months were we stopped due to me being laid off and the wife not working). So in this case at least we do have a track record. By the way, we are not totally savings poor. I contribute $100/month/child for college, we have the Roth, I think I put in 10% or thereabouts for 401k. We do have enough in the bank to live for a year, maybe only on ramen noodles, and the wife manages her own “Pre-marriage” money

What is the schedule for equity lines? Let’s say I take out $10k, how soon do I have to pay it back? Unlike paying down the mortgage, we don’t have a track record with equity lines so I don’t know how we handle the temptation of that “piggy bank”. Where as a bank account balance forces you (at least me) to look at monthly spending. Plus can’t banks pull your equity line without notice as I have heard happen to people recently? I am not saying that an equity line is the wrong solution, but these are questions I have.

I do appreciate your response

MadeInTaiwan

[MadeInTaiwan]

[quote=Raybyrnes]Hopefully your kids end up on scholarship but the benefit of being house rich and saving poor works to your advantage when applying for finacial aid.

By committing to a 15 year schedule you also force yourself to pay down the loan. Easy to say you will do it when you are on a 30 year program, harder to do.

If you have equity in the home and are looking for a short term bridge why not take out an equity line. Right now you could find rate on those for 4% or less.
[/quote]

I say we will pay down the 30yr loan faster than schedule because once we set up the auto payment plan (2 extra payments divided by 12 added to each months auto withdrawal) we didn’t change until we re-fied to 15 years (There might have been a few months were we stopped due to me being laid off and the wife not working). So in this case at least we do have a track record. By the way, we are not totally savings poor. I contribute $100/month/child for college, we have the Roth, I think I put in 10% or thereabouts for 401k. We do have enough in the bank to live for a year, maybe only on ramen noodles, and the wife manages her own “Pre-marriage” money

What is the schedule for equity lines? Let’s say I take out $10k, how soon do I have to pay it back? Unlike paying down the mortgage, we don’t have a track record with equity lines so I don’t know how we handle the temptation of that “piggy bank”. Where as a bank account balance forces you (at least me) to look at monthly spending. Plus can’t banks pull your equity line without notice as I have heard happen to people recently? I am not saying that an equity line is the wrong solution, but these are questions I have.

I do appreciate your response

MadeInTaiwan

[MadeInTaiwan]

[quote=Raybyrnes]Hopefully your kids end up on scholarship but the benefit of being house rich and saving poor works to your advantage when applying for finacial aid.

By committing to a 15 year schedule you also force yourself to pay down the loan. Easy to say you will do it when you are on a 30 year program, harder to do.

If you have equity in the home and are looking for a short term bridge why not take out an equity line. Right now you could find rate on those for 4% or less.
[/quote]

I say we will pay down the 30yr loan faster than schedule because once we set up the auto payment plan (2 extra payments divided by 12 added to each months auto withdrawal) we didn’t change until we re-fied to 15 years (There might have been a few months were we stopped due to me being laid off and the wife not working). So in this case at least we do have a track record. By the way, we are not totally savings poor. I contribute $100/month/child for college, we have the Roth, I think I put in 10% or thereabouts for 401k. We do have enough in the bank to live for a year, maybe only on ramen noodles, and the wife manages her own “Pre-marriage” money

What is the schedule for equity lines? Let’s say I take out $10k, how soon do I have to pay it back? Unlike paying down the mortgage, we don’t have a track record with equity lines so I don’t know how we handle the temptation of that “piggy bank”. Where as a bank account balance forces you (at least me) to look at monthly spending. Plus can’t banks pull your equity line without notice as I have heard happen to people recently? I am not saying that an equity line is the wrong solution, but these are questions I have.

I do appreciate your response

MadeInTaiwan

[HLS]

MIT,
Your question is more philosophical than anything.

I could discuss this for an hour.

Paying down any debt is simply paying off principal in addition to the interest due.

The question is does it make sense.

I have had people tell me that they are paying their mortgage debt down faster, yet they have consumer debt, which is not tax deductible at rates of 7%-25%. Assuming that they don’t plan on BK and will pay it off someday, they are being foolish.

IF history repeats itself, you will pay off a 30 YR mortgage with cheaper inflated dollars.

I also believe that in a few years, CD rates could be 8%-10% or higher. Paying off a 5% mortgage will look foolish if that happens.

There are pros and cons, and no one right answer for everyone.

Choice is to opt for more cash in your pocket now, with debt for a longer period of time as opposed to less cash in the pocket now, with less debt service later in life.

Managed debt isn’t so crazy.

Many people today have equity in their house but cannot get to it because they don’t qualify for a loan. In many cases this is because they paid their mortgage down faster than perhaps they should have.

I can make an argument for both sides. It depends on your personal situation, and understanding the projections…. HLS

[HLS]

MIT,
Your question is more philosophical than anything.

I could discuss this for an hour.

Paying down any debt is simply paying off principal in addition to the interest due.

The question is does it make sense.

I have had people tell me that they are paying their mortgage debt down faster, yet they have consumer debt, which is not tax deductible at rates of 7%-25%. Assuming that they don’t plan on BK and will pay it off someday, they are being foolish.

IF history repeats itself, you will pay off a 30 YR mortgage with cheaper inflated dollars.

I also believe that in a few years, CD rates could be 8%-10% or higher. Paying off a 5% mortgage will look foolish if that happens.

There are pros and cons, and no one right answer for everyone.

Choice is to opt for more cash in your pocket now, with debt for a longer period of time as opposed to less cash in the pocket now, with less debt service later in life.

Managed debt isn’t so crazy.

Many people today have equity in their house but cannot get to it because they don’t qualify for a loan. In many cases this is because they paid their mortgage down faster than perhaps they should have.

I can make an argument for both sides. It depends on your personal situation, and understanding the projections…. HLS

[HLS]

MIT,
Your question is more philosophical than anything.

I could discuss this for an hour.

Paying down any debt is simply paying off principal in addition to the interest due.

The question is does it make sense.

I have had people tell me that they are paying their mortgage debt down faster, yet they have consumer debt, which is not tax deductible at rates of 7%-25%. Assuming that they don’t plan on BK and will pay it off someday, they are being foolish.

IF history repeats itself, you will pay off a 30 YR mortgage with cheaper inflated dollars.

I also believe that in a few years, CD rates could be 8%-10% or higher. Paying off a 5% mortgage will look foolish if that happens.

There are pros and cons, and no one right answer for everyone.

Choice is to opt for more cash in your pocket now, with debt for a longer period of time as opposed to less cash in the pocket now, with less debt service later in life.

Managed debt isn’t so crazy.

Many people today have equity in their house but cannot get to it because they don’t qualify for a loan. In many cases this is because they paid their mortgage down faster than perhaps they should have.

I can make an argument for both sides. It depends on your personal situation, and understanding the projections…. HLS

[HLS]

MIT,
Your question is more philosophical than anything.

I could discuss this for an hour.

Paying down any debt is simply paying off principal in addition to the interest due.

The question is does it make sense.

I have had people tell me that they are paying their mortgage debt down faster, yet they have consumer debt, which is not tax deductible at rates of 7%-25%. Assuming that they don’t plan on BK and will pay it off someday, they are being foolish.

IF history repeats itself, you will pay off a 30 YR mortgage with cheaper inflated dollars.

I also believe that in a few years, CD rates could be 8%-10% or higher. Paying off a 5% mortgage will look foolish if that happens.

There are pros and cons, and no one right answer for everyone.

Choice is to opt for more cash in your pocket now, with debt for a longer period of time as opposed to less cash in the pocket now, with less debt service later in life.

Managed debt isn’t so crazy.

Many people today have equity in their house but cannot get to it because they don’t qualify for a loan. In many cases this is because they paid their mortgage down faster than perhaps they should have.

I can make an argument for both sides. It depends on your personal situation, and understanding the projections…. HLS

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