I just finished refinancing I just finished refinancing my mortgage on my home with a rate of 3.625% APR. As I would normally do with a refi to a better rate, I maintain the same payments as my previous mortgage, with the goal of saving interest payments, and reducing the term.
I was doing some calculations with an extra payments calculator. While the term gets shorter, the money saved just is not as significant as when my rates were over 4%.
So I ask you, all knowledgeable ones. Extra payments or extra investments/retirement contributions? @3.625, with tax right off on interest paid, that further reduce the effective rate… I believe I can easily do better on the investment side.
recordsclerk
September 19, 2016 @
11:08 AM
If you think you can beat the If you think you can beat the rate, then invest. I prefer the guaranteed return and make extra principle payments.
matt
September 19, 2016 @
10:10 AM
Owning your primary home free Owning your primary home free and clear … Priceless
biggoldbear
September 19, 2016 @
10:34 AM
In the same boat, decided to In the same boat, decided to put the savings into a specific investment account with the goal of paying off the mortgage when the balance is higher. Hopefully we’ll shave off more than the 4 years that the extra payments would.
flu
September 19, 2016 @
11:37 AM
The question you want to ask The question you want to ask yourself is, what would you do with the money if you don’t pay down your house.
For me, I decided to pay off my mortgage because I wasn’t going to be able to buy another rental in SD on he near term, and I wasn’t going to supersize my house if it required selling the current one. And I couldn’t think of what to do with the extra money, since I already had enough flowing into my kids accounts and my own investment accounts from other sources of income.. so I decided to pay of my mortgage earlier. It does feel nice not have to cough up $2700/month .
The only sucky thing is that my tax bill will be pretty large, but I guess that’s a first world problem.
The good news is I don’t think you can lose either way. You are in a better position than you were before and better off than most people… congrats.
no_such_reality
September 19, 2016 @
1:25 PM
How far out are you from How far out are you from conforming @ $417K?
TeCKis300
September 19, 2016 @
11:23 PM
Hugely. As I refi’d and Hugely. As I refi’d and consolidated a rental mortgage completely into my primary homes mortgage so I’m free and clear on the rental.
Curious why you’re asking. The conforming limit doesn’t seem to be much of a threshold as jumbo loan rates are incredibly good.
As to the original question, I guess it’s not a black or white position I have to take. I will certainly pump extra principle payments into my mortgage, but probably no reason to overdo it either.
Coronita
September 20, 2016 @
4:31 AM
TeCKis300 wrote:Hugely. As I [quote=TeCKis300]Hugely. As I refi’d and consolidated a rental mortgage completely into my primary homes mortgage so I’m free and clear on the rental.
[/quote]
I’m just curious the reason for doing this. Was it to get the lowest rate possible versus the higher rate of a mortgage on a rental?
I’m asking because I’m curious what the benefit of consolidating debt to your primary home is, in return for shifting debt and libability on the second income generating property to your primary home. Previously, if for whatever reason your rental doesn’t work out (like it burns down in an earthquake for argument sake), there was the option of just walking on the rental and only being responsible for it. Doesn’t shifting the debt on the rental to your primary now tie your primary indirectly to how well your rental does?
This isn’t a critique of whether this is a good or bad decision, I’m just trying to understand different reasons, pros and cons, for why people do this often.
Also, how are you planning to report this on the IRS? Are you going to split the interest paid on your primary now between a portion on your 1040 Schedule A for a portion of the mortgage interest on your primary that you will carry over and a portion of the mortgage interest on Schedule E of your rental? I think that’s what needs to be done if my understanding is correct.
no_such_reality
September 20, 2016 @
10:02 AM
TeCKis300 wrote:Hugely. As I [quote=TeCKis300]Hugely. As I refi’d and consolidated a rental mortgage completely into my primary homes mortgage so I’m free and clear on the rental.
Curious why you’re asking. The conforming limit doesn’t seem to be much of a threshold as jumbo loan rates are incredibly good.
As to the original question, I guess it’s not a black or white position I have to take. I will certainly pump extra principle payments into my mortgage, but probably no reason to overdo it either.[/quote]
Because the conforming rate is near 3.25% not 3.625%. Granted, near the limit, it’s about $87/month on $417K. But you’re not at $417, so the extra leverage works against you with the higher rate.
That’s the deal I just did (thanks HLS), no costs, $1500 extra credit to reduce principal, dumped my impound, cut an extra 0.5% off my rate.
The catch? Yep, I had to pony up about $20K to reduce my balance to $417. However for that same $20k up front, grabbed $1500 immediately and save an extra $178/month… above the amount I’d save just refi-ing my straight balance. That’s $2136/year which is basically a 10% return.
TeCKis300
September 20, 2016 @
11:03 AM
I reduced the rate on my I reduced the rate on my primary, by .375, and consolidated the condo for a better rate by .875. Reason of course is to save money over the long run and reduce the payback term. As I’ve always kept at least the same payment as prior to the refi.
Conforming or not, at these incredibly low interest rates, the question still stands.
I’ve always made it a habit of overpaying on my mortgages. Just that the rates don’t make paying extra principle payments as advantageous compared to other investment opportunities.
September 19, 2016 @ 9:22 AM
I just finished refinancing
I just finished refinancing my mortgage on my home with a rate of 3.625% APR. As I would normally do with a refi to a better rate, I maintain the same payments as my previous mortgage, with the goal of saving interest payments, and reducing the term.
I was doing some calculations with an extra payments calculator. While the term gets shorter, the money saved just is not as significant as when my rates were over 4%.
So I ask you, all knowledgeable ones. Extra payments or extra investments/retirement contributions? @3.625, with tax right off on interest paid, that further reduce the effective rate… I believe I can easily do better on the investment side.
September 19, 2016 @ 11:08 AM
If you think you can beat the
If you think you can beat the rate, then invest. I prefer the guaranteed return and make extra principle payments.
September 19, 2016 @ 10:10 AM
Owning your primary home free
Owning your primary home free and clear … Priceless
September 19, 2016 @ 10:34 AM
In the same boat, decided to
In the same boat, decided to put the savings into a specific investment account with the goal of paying off the mortgage when the balance is higher. Hopefully we’ll shave off more than the 4 years that the extra payments would.
September 19, 2016 @ 11:37 AM
The question you want to ask
The question you want to ask yourself is, what would you do with the money if you don’t pay down your house.
For me, I decided to pay off my mortgage because I wasn’t going to be able to buy another rental in SD on he near term, and I wasn’t going to supersize my house if it required selling the current one. And I couldn’t think of what to do with the extra money, since I already had enough flowing into my kids accounts and my own investment accounts from other sources of income.. so I decided to pay of my mortgage earlier. It does feel nice not have to cough up $2700/month .
The only sucky thing is that my tax bill will be pretty large, but I guess that’s a first world problem.
The good news is I don’t think you can lose either way. You are in a better position than you were before and better off than most people… congrats.
September 19, 2016 @ 1:25 PM
How far out are you from
How far out are you from conforming @ $417K?
September 19, 2016 @ 11:23 PM
Hugely. As I refi’d and
Hugely. As I refi’d and consolidated a rental mortgage completely into my primary homes mortgage so I’m free and clear on the rental.
Curious why you’re asking. The conforming limit doesn’t seem to be much of a threshold as jumbo loan rates are incredibly good.
As to the original question, I guess it’s not a black or white position I have to take. I will certainly pump extra principle payments into my mortgage, but probably no reason to overdo it either.
September 20, 2016 @ 4:31 AM
TeCKis300 wrote:Hugely. As I
[quote=TeCKis300]Hugely. As I refi’d and consolidated a rental mortgage completely into my primary homes mortgage so I’m free and clear on the rental.
[/quote]
I’m just curious the reason for doing this. Was it to get the lowest rate possible versus the higher rate of a mortgage on a rental?
I’m asking because I’m curious what the benefit of consolidating debt to your primary home is, in return for shifting debt and libability on the second income generating property to your primary home. Previously, if for whatever reason your rental doesn’t work out (like it burns down in an earthquake for argument sake), there was the option of just walking on the rental and only being responsible for it. Doesn’t shifting the debt on the rental to your primary now tie your primary indirectly to how well your rental does?
This isn’t a critique of whether this is a good or bad decision, I’m just trying to understand different reasons, pros and cons, for why people do this often.
Also, how are you planning to report this on the IRS? Are you going to split the interest paid on your primary now between a portion on your 1040 Schedule A for a portion of the mortgage interest on your primary that you will carry over and a portion of the mortgage interest on Schedule E of your rental? I think that’s what needs to be done if my understanding is correct.
September 20, 2016 @ 10:02 AM
TeCKis300 wrote:Hugely. As I
[quote=TeCKis300]Hugely. As I refi’d and consolidated a rental mortgage completely into my primary homes mortgage so I’m free and clear on the rental.
Curious why you’re asking. The conforming limit doesn’t seem to be much of a threshold as jumbo loan rates are incredibly good.
As to the original question, I guess it’s not a black or white position I have to take. I will certainly pump extra principle payments into my mortgage, but probably no reason to overdo it either.[/quote]
Because the conforming rate is near 3.25% not 3.625%. Granted, near the limit, it’s about $87/month on $417K. But you’re not at $417, so the extra leverage works against you with the higher rate.
That’s the deal I just did (thanks HLS), no costs, $1500 extra credit to reduce principal, dumped my impound, cut an extra 0.5% off my rate.
The catch? Yep, I had to pony up about $20K to reduce my balance to $417. However for that same $20k up front, grabbed $1500 immediately and save an extra $178/month… above the amount I’d save just refi-ing my straight balance. That’s $2136/year which is basically a 10% return.
September 20, 2016 @ 11:03 AM
I reduced the rate on my
I reduced the rate on my primary, by .375, and consolidated the condo for a better rate by .875. Reason of course is to save money over the long run and reduce the payback term. As I’ve always kept at least the same payment as prior to the refi.
Conforming or not, at these incredibly low interest rates, the question still stands.
I’ve always made it a habit of overpaying on my mortgages. Just that the rates don’t make paying extra principle payments as advantageous compared to other investment opportunities.