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 ...
Public schools are as outdated as dinosaurs.
They only exist because we have not yet figured out how to get rid of them.
Hopefully with Trump deporting illegals that will help the school expense problem.
No more need for ESL teachers and special services for illegals who contribute nothing.
We started off with a big national bank. Then went to a small local bank. Finally ended up with this boutique bank in Ohio. We had a credit union for years and used then for our car loans, but never got a mortgage from them.
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.
The article is right, there are pros and cons, AND THE DECISION IS PARTICULAR to the situation.
Now do the state you are in and the amount of property taxes you pay every month.
If you pay a high percentage (2% or more) of property taxes, you are renting forever...
My last mortgage was with DCU. Short for Digital Credit Union. Which was the credit union started for the employees of Digital Equipment Corporation. Digital Equipment(mainframe computers) is long gone but their credit union is still doing well.
a set of diversified investments that yields an average annual return of 7%.
= = =
And that 7% may be taxed as ordinary income, at your marginal rate, or maybe long term capital gains, if you can keep it long term.
So, a marginal rate of 18% fed, and 9%s state (depends on your state), would take that 7% down to maybe a little over 5%.
My company in Palo Alto was on the Stanford Industrial Park. Every company there (and Stanford University) was eligible to join the Stanford Federal Credit Union. Today they allow members of the Palo Alto Library to join. If you don’t live in Palo Alto, all you have to do is become a “Friend of the Library” for $10!
There are a lot of things that can happen over the time you live in a home and pay off the mortgage. One thing that DOES NOT change -- for a fixed-rate mortgage, at least -- is the interest rate on the loan. If it's a low interest rate, then why would you ever accelerate the payments? It would make far more sense to give yourself as much flexibility as possible and use your extra cash to build up an asset base that is far more liquid and far more diversified than your home.
I always paid extra principal when I COULD-—Where if only $50. Average single family home in So CAL-—62 X 125 lot.
I ONLY refied my first mortgage once-—and I used that $$$$$ to buy another property out of foreclosure-—5 acres & 2553 sq ft LOG house in N Calif.
Moved to N Cal house 4 years later——— had rented it in between—and sold 1st house before it become ‘rental property for capital gains taxes. Rented it for 2 years& sold it to my renters.
Cleaned up N Cal acreage & sold it in 2004 for 3.5 times +++
what I paid for it.
Had enough TAX free profit to buy current property for CASH. NEW house/well/septic.power. Added EXTENSIVE fencing & garage.
NO MORTGAGE FOR 20 years.
VERY COMFORTABLE feeling with current ups & downs of economy & costs. ESPECIALLY on SOC SEC income.
This property worth over 2 times my investment.
lots of ideas here - some good. I’ll keep my 2.5% rate for 12 more years just for bragging rights. I still remember my first 10 3/4% 30 yr thanks to Jimma’ Carter.
Look at the amount of interest you will pay over the term of the loan. It is generally equal or more of the amount you borrowed. It is very doubtful you will make that much return on any investment.
I agree about paying off the house.
If things go to crap, not only do you not lose that stock market money, your house has no lien to foreclose on.
While the sheer numbers may point toward investing over mortgage payoff, they don’t factor in the peace of mind around not having a mortgage hanging over your head or the market risk. As the delta between mortgage interest rates and investment returns widen, so does the risk.
Pay off the mortgage, THEN invest whatever your former mortgage payment was.
Or course if you have other debt at higher interest rates, that should be attacked first.
Lots of replies here. Some good. Some not so good.
But they all failed to factor in the most important aspect in deciding whether or not to pay a mortgage off early.
And that factor depends on retirement.
Financial analysts agree that you should not enter retirement unless your mortgage is paid in full.
I paid off my mortgage when I was 47, what a relief. But it emboldened me such that I was able to retire at 56. I have since taken 2 additional mortgages both under 3% and both are paid off. Makes being retired easy.
Thanks.
I tell people this, and get opposition.
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