Posted on 11/15/2024 4:43:48 AM PST by where's_the_Outrage?
A little over a year after my husband and I bought our house, we refinanced our mortgage.
Refinancing means paying closing costs again, but we'll break even after just four years.
We could pay off our 30-year mortgage in just 23 years with the money we save, but we're putting it in a brokerage account......
The pros and cons of refinancing our mortgage
Refinancing has pros and cons, and the decision to do so was one we didn't take lightly. One of the cons is that you typically have to repay closing costs. Anyone who has closed on a home knows that closing costs are typically thousands of dollars.
To justify paying closing costs again, our mortgage broker informed us that we would break even in four years. This meant the amount we paid in closing costs wrapped into our mortgage payment would be "paid off" in four years. Because we plan on living in our home for much longer than four years, we knew that we would benefit from a lower rate and increased monthly savings over the course of the mortgage.
On the flip side, one of the pros of refinancing is applying a lower interest rate to the duration of the mortgage. Since we are only 16 months into our 30-year mortgage, we will have a long time to take advantage of the lower rate. This lower rate, in turn, means a lower payment.
(Excerpt) Read more at businessinsider.com ...
If he’s listening to her, he’ll work ‘till he drops.
Most financially astute people will tell you never to pay off your mortgage ahead of time if it has a very low interest rate. This is even more applicable if you are itemizing your tax deductions and the mortgage interest is tax deductible.
I don’t care about all those theories out there suggesting not to pay off the mortgage.
We’ve been totally debt free for years and years. The only bills are paying off in full the credit card statements each month.
As a result we always have cash to spend because we don’t pay out gobs and gobs of interest.
Regarding mortgages, I know a guy that refinanced his home 3 years in a row just to get equity out and blow it.
Sure, there’s the money saved by refinancing and paying closing costs again can rot, however, I would think that taking what would have been your mortgage payment and investing it each month in a high interest account, would reap more benefits.
You come out ahead by paying less interest and then on all the money you would have spent on the mortgage, you can earn interest on the investments.
The problem is, most people don’t have the kind of self-discipline to rein in their finances and will spend the extra they’re saving.
I agree with you. Most financially astute people will die with the yoke around their neck. You should plan for more than the size of the Pyramid that will be built over your grave.
I paid off my 30 year 6.75% mortgage in 16 years in 2019, thanks to Trump!......................
We always shopped for and got zero-cost refis. No points and no costs. We refi’d several times and snagged a 2.25% rate a few years ago. I found the ridiculously low rate on bankrate.com and it was with a small boutique bank in Ohio. They were easy to work with and we pushed paper electronically. We never met anybody in person. People on FR thought it was a scam and we’d never really get that rate, but we succeeded. A lot depends on finding a lender who is eager to deploy money.
Refinancing takes a bit of work, but is worth it. Don’t think of it as a one-time event. Shop for the best rate. Don’t be concerned about working with an out-of-state lender or doing everything via email and internet. Look for low- or no-cost deals. Preserve your cash and don’t pay points or costs. Years ago, we used a mortgage broker (again no cost) to find us a low rate and zero costs.
Being debt free has been great the last several years. Especially as someone who works on straight commission.
I ended up paying off my mortgage a couple years early even though the interest rate was 2.375%. I did it because the previous year the interest I wrote off on my mortgage was only about $2000. So, there was no more tax benefit to have it. At the time I did not want to put anymore money in the stock market than I already was.
However, I do live in NH where we fund our local government primarily through real estate taxes. Those are almost $800/month. I do not live in a big house either. I do not pay state income tax or sales taxes except in restaurants.
In simple terms … paying off a 3% mortgage ahead of time and giving up the opportunity to earn 7% on your money makes no sense unless you really just have an aversion to being in debt under any circumstances.
Pay no attention to those hawkingt DEBT over Independence. I have been debt free for many years with 3 paid for houses and will NEVER go in debt again.
Whent the SHTF, those with Debt will get BURNED
That is not correct anymore. When you get to the end of your mortgage you are paying 80% principal or more. Only 10%-20% interest. The tax benefit is minimal. The last year or two I had a mortgage my CPA said we were better off taking the standard deduction as opposed to itemizing. That includes the fact that my real estate taxes are $9400/year.
The only argument you could make is that you are better investing the money in something like the stock market, 5% TBills or Money Markets/CDs.
Yes, I sure wish I had bought INVIDIA as opposed to paying off my 2.375% mortgage.
This seems simpler to me than people make it.
If you are paying a lower mortgage interest rate than you earn on the investment, it seems like a simple question. But then the question moves to real cost. This writer at least seems to understand that to make the decision you have to include ALL the costs on both sides of the equation. This must include the taxes.
If you can honestly answer that question, then the next issue is risk. I hard all this before from the guys who put their money into flipping houses. It was smart investing right up until 2008! They lost that money and still owe on the mortgages. You simply do not “earn a higher interest rate” without considerable risk.
All of my mortgages were with local credit unions. I always found them to be the lowest rates. In addition, those some of those same credit unions did NOT sell the note to Fannie or Freddie. IF they did, they kept the servicing in house. I always sent the payment to the same place.
“unless you really just have an aversion to being in debt under any circumstances.”
That is me—the pleasure of having no debt is worth a billion bucks to me.
I don’t need to be rich—but I do want to be happy.
What are you smoking?
So CONTINUING to pay your mortgage with a 3% penalty while investing any EXTRA money you have, to try to earn, MAYBE 7% but LESS CAPITAL GAINS TAX, if the market doesn’t crash....
is better than....
Pay off the mortgage, keep your 3% penalty, invest THAT money you would have been paying for the mortgage and interest, PLUS any extra money, to try to earn 7% yada yada.
Really?
Really poor math.
“the pleasure of having no debt is worth a billion bucks to me.”
Amen!
Being debt free makes working for a living OPTIONAL.
When you have paid off all debt and saved enough to live until you are 90 years old you can CHOOSE to work or not.
I know several people who CHOOSE to go to work. Most of them are self employed. They own their own business. It is just what they do. It keeps them getting up in the morning and having a purpose. One is 89.
My YOUNGER brother is retired now. He works a couple days a week at the local golf course. Then he gets to play there for free. He WANTS TO WORK there.
The money that I’ve put into stock, vs paying off my mortgage, has translated into being able to pay off my home at any moment....but at 2.8% interest rate I don’t have any urgency, each payment is 50% principal.
As I enter retirement I’ll probably just pay off the remaining balance.
In the Northeast it the property taxes that are killing us not the mortgage....If we could abolish these “Unconstitutional” taxes, we’d be MUCH better off.
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