Author Topic: Refi 3 loans to one to save on monthly payments  (Read 696 times)

kato

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Refi 3 loans to one to save on monthly payments
« on: May 13, 2020, 02:45:18 PM »
In years past always went for lowest APR to save interest costs, but now with a 5 yr, 8 yr, 15yr, and 30 year loan, the monthly payments of the 4 properties are quite sizeable.  Looking at refi rates, I can refi my 15 yr primary residence along with the 5 yr loan both along with paying off car into a 30 year, and payoff another 401k loan, and reduce monthly expenses by $2300/month.  Should I go through the hassle of refinancing, and extend my terms to 30 years, all just to put $2300 more in my pocket each month?  IF I didn't do it, I would have 2 loans paid off in 6 years anyway, but i like the idea if less cash outflow now in case we did FIRE sooner and it helps get closer to fire goals by reducing monthly expenses.

Any thoughts or impacts to financial future I should consider?

srad

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Re: Refi 3 loans to one to save on monthly payments
« Reply #1 on: May 13, 2020, 03:06:22 PM »
Personally, i don't like the idea of putting consumer goods on a 30 mortgage.  30 years of interest makes those goods very expensive...

This would also be easier to answer if you put the amounts of each loan and time remaining.  If the majority of the the 2300 in savings is purely stretching out the car and 401k loan, then its an easy answer, no.

Another thing to think of is what is your end goal?

You looking to leverage your capital for more properties?  then yes refi (and i'd also take some money out) to buy more.
You looking to be debt free soon?  then stay the course with your 5/8/15 and get them paid off.





Dicey

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Re: Refi 3 loans to one to save on monthly payments
« Reply #2 on: May 13, 2020, 09:01:13 PM »
Re-fi the properties, but don't use any of that money to pay off the car. Srad is 100% right. It will make that car the most expensive one you ever bought. The only way I'd even consider it is if I was planning on selling off the encumbered property in the same length of time as you have left on the car loan. Dragging it out further obliterates any interest/tax savings.

Yes, I would totally clean up and streamline those loans now. The hourly return on your effort is astronomical! Once your payments go down, you'll be able to pay that car off like a boss.

kenmoremmm

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Re: Refi 3 loans to one to save on monthly payments
« Reply #3 on: May 13, 2020, 10:34:36 PM »
Re-fi the properties, but don't use any of that money to pay off the car. Srad is 100% right. It will make that car the most expensive one you ever bought. The only way I'd even consider it is if I was planning on selling off the encumbered property in the same length of time as you have left on the car loan. Dragging it out further obliterates any interest/tax savings.

Yes, I would totally clean up and streamline those loans now. The hourly return on your effort is astronomical! Once your payments go down, you'll be able to pay that car off like a boss.
doesn't the DPOYM principal also apply to car loans assuming they're wrapped into a low rate loan and you're investing the delta in savings in the stock market?

Dicey

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Re: Refi 3 loans to one to save on monthly payments
« Reply #4 on: May 13, 2020, 11:06:09 PM »
Re-fi the properties, but don't use any of that money to pay off the car. Srad is 100% right. It will make that car the most expensive one you ever bought. The only way I'd even consider it is if I was planning on selling off the encumbered property in the same length of time as you have left on the car loan. Dragging it out further obliterates any interest/tax savings.

Yes, I would totally clean up and streamline those loans now. The hourly return on your effort is astronomical! Once your payments go down, you'll be able to pay that car off like a boss.
doesn't the DPOYM principal also apply to car loans assuming they're wrapped into a low rate loan and you're investing the delta in savings in the stock market?
Not really. A car is a depreciating "asset". I use quotes, because anything that's guaranteed to depreciate can hardly be called an asset. (Please, I know some people buy beaters and fix them up, but that's small potatoes and the exception.) A house far more typically appreciates over time.

HOWEVER, to an extent, you are right because historically the market returns more than a really low interest auto loan costs. BUT, wrapping a car loan into a mortgage that is going to run for fifteen or thirty years means that you're going to pay a shitload more than you have to, and at the end, you will have no appreciated asset. That car will be long gone.

I hope that makes sense. It's time like this that I really miss @boarder42. He was much better at explaining this stuff than I am.

srad

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Re: Refi 3 loans to one to save on monthly payments
« Reply #5 on: May 14, 2020, 10:41:01 AM »
IF I didn't do it, I would have 2 loans paid off in 6 years anyway.


This is what i would like to know, when those 2 are gone in 6 years, how much will they bring in?   This answers your question, what is the break even.  And you can't use $2300, you need to take the car loan out of the amount you'll save.  I don't now anyone who has gotten rich by financing cars through their mortgage.. 


RWD

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Re: Refi 3 loans to one to save on monthly payments
« Reply #6 on: May 14, 2020, 12:24:23 PM »
Re-fi the properties, but don't use any of that money to pay off the car. Srad is 100% right. It will make that car the most expensive one you ever bought. The only way I'd even consider it is if I was planning on selling off the encumbered property in the same length of time as you have left on the car loan. Dragging it out further obliterates any interest/tax savings.

Yes, I would totally clean up and streamline those loans now. The hourly return on your effort is astronomical! Once your payments go down, you'll be able to pay that car off like a boss.
doesn't the DPOYM principal also apply to car loans assuming they're wrapped into a low rate loan and you're investing the delta in savings in the stock market?
It does apply. Though if you buy a more expensive car because of financing than you would otherwise then you'll be worse off. I have two car loans right now at sub-2% (both for cars purchased used). Could have paid cash but I'd rather keep my money invested.

kato

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Re: Refi 3 loans to one to save on monthly payments
« Reply #7 on: May 15, 2020, 09:44:01 AM »
The thinking here was to have less monthly spending so FIRE sooner(income covers expenses), but $4k a month of current expenses pays down principal, so that $4K could be considered not "expenses".

For analysis, the Car loan is $9K @ 1.9% apr. Could pay it off from high interest savings, but would reduce emergency fund.

The 2 loans paid off eventually will alleviate $900/mo in 3.5 years and $1400/mo in 6 years.. (5 yr and 8 yr loan)

After reviewing with banks, any cash out refi would increase interest rate so the 30 yr new loan would be higher interest (3.75 vs 3.25)

That points to stay the course and pay off the debts one by one..

« Last Edit: May 15, 2020, 10:32:42 AM by kato »

Dicey

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Re: Refi 3 loans to one to save on monthly payments
« Reply #8 on: May 15, 2020, 10:05:10 AM »
Maybe I'm missing something, feel free to clarify if I am. Rent is what pays the mortgage payments and other expenses on investment properties. Mortgage interest is tax deductible. Real estate is an illiquid asset. Why tie up so much of your own money in an illiquid asset that is paying for itself? Doesn't it make more sense to put those dollars into other tax-advantaged investments so you get the most bang for your hard-earned bucks?

kato

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Re: Refi 3 loans to one to save on monthly payments
« Reply #9 on: May 26, 2020, 11:23:48 AM »
Maybe I'm missing something, feel free to clarify if I am. Rent is what pays the mortgage payments and other expenses on investment properties. Mortgage interest is tax deductible. Real estate is an illiquid asset. Why tie up so much of your own money in an illiquid asset that is paying for itself? Doesn't it make more sense to put those dollars into other tax-advantaged investments so you get the most bang for your hard-earned bucks?

Hi Dicey, Believe you are suggesting don't pay down mortgage using 15 year note, but refi it to 30 yr even if a little higher interest to use the monthly savings to invest/earn elsewhere, correct?

Dicey

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Re: Refi 3 loans to one to save on monthly payments
« Reply #10 on: May 26, 2020, 03:31:32 PM »
Ding Ding Ding, we have a winner here! Yes indeedy, that's exactly what I'm suggesting. Feel free to come hang out over at the DPOYM clubhouse. There are a lot of people smarter than me that will patiently walk you through it and answer your questions in great detail.

I think I've posted the link before, but one good turn deserves another...
https://forum.mrmoneymustache.com/throw-down-the-gauntlet/dont-payoff-your-mortgage-club/


kato

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Re: Refi 3 loans to one to save on monthly payments
« Reply #11 on: May 29, 2020, 07:37:17 AM »
So about to lock in a 3.00% refi 30yr fixed with $3000 closing costs (including points/fee) instead if staying the course on my 15 year 2.75% that only has 11.5 years remaining.. 

So costs me 3000 fee plus 60 per month additional interest to save 950 a month in payment(expenses). 

Dicey

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Re: Refi 3 loans to one to save on monthly payments
« Reply #12 on: May 29, 2020, 08:30:40 AM »
Holy cow, that is awesome! Now the trick is to automate the savings to avoid lifestyle creep. Your future self is going to love you for it! Well done!
« Last Edit: May 29, 2020, 08:32:15 AM by Dicey »

Gronnie

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Re: Refi 3 loans to one to save on monthly payments
« Reply #13 on: May 29, 2020, 10:01:23 AM »
Wow that's a great rate and cheap closing costs! Mind sharing what bank or broker it is through, I'm looking to refi as well.

kato

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Re: Refi 3 loans to one to save on monthly payments
« Reply #14 on: June 02, 2020, 01:51:27 PM »
home point mortgage.

Now decision is do we refi only first mortgage balance at 2.875?  Or do cash out refi and take an extra 50k out to pay toward other higher rental property mortgage..  Difference is 1 point, same APR..