Author Topic: DONT Payoff your Mortgage Club  (Read 538164 times)

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2550 on: January 11, 2021, 06:40:45 AM »
Beginning when the Democrats won the Georgia Senate seats last week ten-year yields have risen 20 basis points. The window may quickly close to get these remarkable rates.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #2551 on: January 12, 2021, 10:41:18 AM »
Beginning when the Democrats won the Georgia Senate seats last week ten-year yields have risen 20 basis points. The window may quickly close to get these remarkable rates.
aw man!  We couldn't refinance because we are in the process of selling, and we won't be ready to buy again for several months.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2552 on: January 12, 2021, 03:12:49 PM »
If you're already under contract, your selling price was higher because of the low rates.

kenmoremmm

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Re: DONT Payoff your Mortgage Club
« Reply #2553 on: January 12, 2021, 09:16:16 PM »
If you're already under contract, your selling price was higher because of the low rates.
the housing market is most definitely not as dynamic as the daily interest rate changes.

Vapour

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Re: DONT Payoff your Mortgage Club
« Reply #2554 on: January 14, 2021, 10:23:39 PM »
Happy New Year All!

This month was my first mortgage payment on my brand new 30 year mortgage.  Back to square one and happy about it :)

Not paying off my mortgage over that last 8+ years has been great!  I'm almost FI and will probably quit my day job sometime next year.  I wouldn't have gotten there quite so fast if I'd paid down the mortgage.  Mostly luck.  The stock market has been pretty damn great over the last 8 years.  Definitely better than my 3.5% mortgage.  Which is now refinanced at an even lower 3.125%.

For anyone that may be worried about a mortgage in retirement, don't forget that the 4% rule doesn't really apply for mortgages because you don't need to adjust for inflation annually, and also the mortgage will eventually be paid off (unless you keep refinancing!).  The way I think of it, I have my estimate of all expenses excluding the mortgage.  These are all expenses affected by inflation, so I calculate my FIRE number based on these expenses at ~3.5% WR (since I have a long potential retirement so 4% is a little too risky for me).  Then I add my expected remaining mortgage balance at planned FIRE date to this number, which I think should be pretty conservative.  I could theoretically pay off the mortgage in a lump sum on my FIRE date.  Or I could keep the money invested and be better off approximately 98% of the time (according to cFIREsim).  I think I'll take my chances.  :)

Example: $250k loan at 3%.  Payment is $1054/mo or $12,648/yr.
Plug this in cFIREsim for 30 years with "Not Inflation Adjusted" checked for spending plan.  Result is 98% success rate (2 of 118 failed), with a median balance of $409k, highest balance of $1.5M.  I think I'd rather have $409k and a paid off mortgage in 30 years rather than just a paid off mortgage now!
https://www.cfiresim.com/8daadb27-0d6a-496f-9506-5c48ffee4ed9

I'm sure I'm mostly preaching to the choir at this point, but I hope maybe some newcomers can be helped by thinking about mortgages in retirement in this way.  It sure helped me when I read it here on this forum somewhere many years ago!

couponvan

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Re: DONT Payoff your Mortgage Club
« Reply #2555 on: January 15, 2021, 08:47:32 AM »
@Vapour I really like your thinking about the mortgage and how it doesn't go up with inflation. 

I definitely think many retirees underestimate the amount of repairs and the cost of repairs for their homes.  My grandmother (95) bought a brand new house with a 50 year terra cotta tile roof in 1985 when they retired.  They assumed they'd NEVER have to replace the roof. Well, guess what?  50 year roofs really only last about 35 years. She's been patching it here and there, but she's going to need a new roof.  Her kitchen is 1985 come to call.  Her carpet is blue, and she still loves it.  But as the appliances die, it's hard to find replacements that fit 1985 cabinetry. Luckily she's got plenty of cash to pay for her roof and grandchildren that would help her out. BUT, a kitchen renovation is not something many retirees have in their budgets - which is why grandma's houses generally look like time warp photos.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2556 on: January 15, 2021, 08:58:26 AM »
Roof replacements are simply much less disruptive to the family routine than a kitchen renovation.

Especially during COVID, I cannot contemplate having to work around no access to food storage or appliances for even a week.

SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #2557 on: January 15, 2021, 09:11:31 AM »
Roof replacements are simply much less disruptive to the family routine than a kitchen renovation.

Especially during COVID, I cannot contemplate having to work around no access to food storage or appliances for even a week.

You can't move the fridge into another room?     Us an electric skillet, a slow cooker and/or a grill?

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2558 on: January 15, 2021, 09:41:10 AM »
Old people's houses look the way because people stop seeing them and because humans like the familiar. Also, as energy wanes, one channels it to more mundane things like grocery shopping and meal prep. Then there's the fear of being ripped off by unscrupulous contractors. My 96-yead-old friend's kitchen still has the indoor/outdoor carpeting and Formica countertops she selected when they redid their kitchen in the mid-nineties. She's a multi-millionaire and more mustachian than me. She says the next owner can do whatever they want.

UnleashHell

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Re: DONT Payoff your Mortgage Club
« Reply #2559 on: January 22, 2021, 07:07:39 AM »
My old mortgage has just worked out that we are underpaying the escrow by about 150 a month and want us to increase payments by nearly 200 a month.

How about we get a new mortgage, get the escrow amount right, drop the rate and pay less per month than when we were underfunding it.

done and signed this morning - new 30 year mortgage.

I'm ok with this outcome.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #2560 on: January 22, 2021, 07:12:36 AM »
My old mortgage has just worked out that we are underpaying the escrow by about 150 a month and want us to increase payments by nearly 200 a month.

How about we get a new mortgage, get the escrow amount right, drop the rate and pay less per month than when we were underfunding it.

done and signed this morning - new 30 year mortgage.

I'm ok with this outcome.

Searching for potential downsides...  .... ...  none found.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2561 on: January 22, 2021, 03:35:43 PM »
Way to go, Hellboy!

Vapour

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Re: DONT Payoff your Mortgage Club
« Reply #2562 on: January 22, 2021, 08:54:40 PM »
Nice work!

I'm glad I've never had to deal with escrow.  Twice a year, the county automatically deducts property taxes from my bank account.  They e-mail me a reminder so I can make sure I have enough in the account.  I always do since I don't like to let it get too low.  Once a year, I review my homeowners insurance policy and pay online via credit card which earns me cash back.  While I know escrow works for a lot of people, I much prefer to manage my money and payments myself.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2563 on: January 23, 2021, 11:06:34 PM »
Well this is interesting. I had to share it with my DPOYM friends:

https://www.yahoo.com/finance/news/heres-celebrities-mortgages-build-wealth-230000559.html

Naomi

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Re: DONT Payoff your Mortgage Club
« Reply #2564 on: January 25, 2021, 01:56:42 AM »
We are in the process of refinancing from 3.75% to 2.25%. Honestly, I didn't do any research into this other than what I've read on here. My co-worker told me he did it and our loans are about the same so I just called his guy and have done, I think, everything so far except for actually closing. Soon, I hope to have exact #s. Looks like our principal and interest is going to decrease from $1069 to $816.
Our monthly payment now, including escrow for insurance and taxes, is $1350.

We were a little over 3 years into this loan and have no plans on moving any time soon. It hurt a little bit to see the loan increase from $210,500 to $213,562 with the closing costs and fees, but I know that it makes sense in the long term (or I hope it does anyway).
The one part I really didn't understand was the payoff amount, I just assumed it would be the $210,500, but it was actually this:

Principal Balance: $210,500.00
Interest Due As Of 02/15/2021 $960.58
Recording Fees: $28.00
Release Costs: $22.50

I had already paid January's payment in December. I'm not sure when the first payment on the new loan will be. My co-worker ended up deferring 2 payments, so am guessing we will be told we can also.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2565 on: January 25, 2021, 07:40:37 AM »
Thanks for the celebrity article.  It's interesting that it sounds as though these celebritues often finance something like 60% of the value of the property, far less than the amount of leverage us regular folks seem to be taking out.

When we were at the height of our leverage--already living in the new house and still preparing the old house for market--we had:

Assets:
$310,000 house
$465,000 house
$300,000 taxable investment account

Liabilities:
$372,000 mortgage
$175,000 mortgage
$90,000 margin loan against the taxable investment account

Just eye-balling the numbers, I guess that puts us in the neighborhood of 60% leverage. Perhaps Harry and Meghan and company would welcome us into their rarified club after all!

simonsez

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Re: DONT Payoff your Mortgage Club
« Reply #2566 on: January 25, 2021, 10:02:45 AM »
Have lived in my current house coming up on 3 years and have refinanced twice (4.625 -> 3.750 -> 2.875).  I am guessing I will be keeping this mortgage for awhile.  2 payments down, 358 to go and in no hurry to speed up the process!

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2567 on: January 25, 2021, 10:36:17 AM »
Have lived in my current house coming up on 3 years and have refinanced twice (4.625 -> 3.750 -> 2.875).  I am guessing I will be keeping this mortgage for awhile.  2 payments down, 358 to go and in no hurry to speed up the process!
Slow and steady wins the race...

mistymoney

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Re: DONT Payoff your Mortgage Club
« Reply #2568 on: January 25, 2021, 02:04:18 PM »
@Vapour I really like your thinking about the mortgage and how it doesn't go up with inflation. 

I definitely think many retirees underestimate the amount of repairs and the cost of repairs for their homes.  My grandmother (95) bought a brand new house with a 50 year terra cotta tile roof in 1985 when they retired.  They assumed they'd NEVER have to replace the roof. Well, guess what?  50 year roofs really only last about 35 years. She's been patching it here and there, but she's going to need a new roof.  Her kitchen is 1985 come to call.  Her carpet is blue, and she still loves it.  But as the appliances die, it's hard to find replacements that fit 1985 cabinetry. Luckily she's got plenty of cash to pay for her roof and grandchildren that would help her out. BUT, a kitchen renovation is not something many retirees have in their budgets - which is why grandma's houses generally look like time warp photos.

She's spry!

mistymoney

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Re: DONT Payoff your Mortgage Club
« Reply #2569 on: January 25, 2021, 02:37:39 PM »
Feb is my first mortgage payment, closed right before christmas, so I am joining this group as well. my rate is 2.75% and I remember being happy at one point with a 7.75% rate. 90's.

Will be 83 when this is paid off, and I don't plan on getting another mortgage likely ever.

Not sure how I will plan on this? Either as a perma-payment in my fire number, or more likely as a lump sum equal to the mortgage balance as a separate bucket in my numbers and see how that plays out. Would love to have a separate account so I could watch that go up while balance goes down. Is anyone doing something like that?



doggyfizzle

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Re: DONT Payoff your Mortgage Club
« Reply #2570 on: January 25, 2021, 02:43:50 PM »
Have lived in my current house coming up on 3 years and have refinanced twice (4.625 -> 3.750 -> 2.875).  I am guessing I will be keeping this mortgage for awhile.  2 payments down, 358 to go and in no hurry to speed up the process!

We've been in ours since 2013 and have followed a nearly identical interest rate trajectory of 4.75%/2013, 3.75%/2015, 2.875%/2020.  Monthly difference in payment has just been dumped into our taxable account and the results have been pretty incredible.  Looking forward to seeing the compounding of the extra $$ into the taxable over the next 355 payments.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2571 on: January 26, 2021, 07:08:49 AM »
I had a nice phone call with a college friend. He was remarkably open about his finances (considering that we talk twice a year) and told me about his refinance (on a house that he'd bought in 2010).

Basically, he compared his payments to what he thought would be the rental revenue on the house if they were to move. I suppose this isn't novel, and probably carries downside risk if your forecast of rental values under-performs because of the same bad economy that's forcing you to move.

He's in the Austin area, so there's been nice appreciation as well. I'm sure he'll be fine.


SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #2572 on: January 26, 2021, 06:55:31 PM »
I had a nice phone call with a college friend. He was remarkably open about his finances (considering that we talk twice a year) and told me about his refinance (on a house that he'd bought in 2010).

Basically, he compared his payments to what he thought would be the rental revenue on the house if they were to move. I suppose this isn't novel, and probably carries downside risk if your forecast of rental values under-performs because of the same bad economy that's forcing you to move.

He's in the Austin area, so there's been nice appreciation as well. I'm sure he'll be fine.

FYI, that's a lousy way to decide whether a rental makes money or not.   It carries a lot more downside risk than that -- short and long term repairs, tax increases, vacancy, etc.   Rent should be compared against all expenses, not just PITI.

Psychstache

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Re: DONT Payoff your Mortgage Club
« Reply #2573 on: January 26, 2021, 08:18:03 PM »
Have lived in my current house coming up on 3 years and have refinanced twice (4.625 -> 3.750 -> 2.875).  I am guessing I will be keeping this mortgage for awhile.  2 payments down, 358 to go and in no hurry to speed up the process!

IT would seem that I made a new account and posted in my sleep. Strange.

Congrats SS!

Vapour

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Re: DONT Payoff your Mortgage Club
« Reply #2574 on: January 27, 2021, 07:36:16 PM »
We are in the process of refinancing from 3.75% to 2.25%. Honestly, I didn't do any research into this other than what I've read on here. My co-worker told me he did it and our loans are about the same so I just called his guy and have done, I think, everything so far except for actually closing. Soon, I hope to have exact #s. Looks like our principal and interest is going to decrease from $1069 to $816.
Our monthly payment now, including escrow for insurance and taxes, is $1350.

We were a little over 3 years into this loan and have no plans on moving any time soon. It hurt a little bit to see the loan increase from $210,500 to $213,562 with the closing costs and fees, but I know that it makes sense in the long term (or I hope it does anyway).
The one part I really didn't understand was the payoff amount, I just assumed it would be the $210,500, but it was actually this:

Principal Balance: $210,500.00
Interest Due As Of 02/15/2021 $960.58
Recording Fees: $28.00
Release Costs: $22.50

I had already paid January's payment in December. I'm not sure when the first payment on the new loan will be. My co-worker ended up deferring 2 payments, so am guessing we will be told we can also.

2.25% is a great rate if this is a 30 year loan!  Congrats!

Mortgage interest is paid in arrears.  So if you make a payment Jan 1st, it is for interest accrued in December.  That's why when you re-finance you essentially skip a month of payments but do pay some pre-paid interest at closing.  Sounds like you might skip 2 months if you're not making a Feb payment on your current mortgage but closing on your re-finance in mid Feb.

You can calculate the daily interest on your loan by taking the principal amount and multiplying it by the interest rate, then dividing by 365.  This is valid until you make another principal payment.  So $210,500 * 3.75% / 365 = $21.63.  If you're not making a Feb payment, I think you'd have 31 days (Jan) + 15 days (Feb) = 46 days of interest accrued by 2/15/21.  So I think your interest due should be $21.63 * 46 = $995.  If you are making a Feb payment to your existing mortgage, their quoted interest is way too high, but otherwise looks pretty close for closing mid Feb.  Maybe it's because you're closing/payoff is planned for the 15th which is the end of the grace period usually, but I'm surprised you're not making a Feb 1 payment to your current mortgage.  I closed on Nov 13 (payoff ~Nov 18) and still made a Nov 1 payment to my old mortgage.

I would assume your first payment on the new mortgage would be April 1 if you close mid Feb.  You'll pay pre-paid interest for Feb 15-28 as part of closing.  Then all of March's interest will be included in the April 1 payment.

Vapour

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Re: DONT Payoff your Mortgage Club
« Reply #2575 on: January 27, 2021, 07:45:00 PM »
Feb is my first mortgage payment, closed right before christmas, so I am joining this group as well. my rate is 2.75% and I remember being happy at one point with a 7.75% rate. 90's.

Will be 83 when this is paid off, and I don't plan on getting another mortgage likely ever.

Not sure how I will plan on this? Either as a perma-payment in my fire number, or more likely as a lump sum equal to the mortgage balance as a separate bucket in my numbers and see how that plays out. Would love to have a separate account so I could watch that go up while balance goes down. Is anyone doing something like that?

I talked about this not too long ago in this thread: https://forum.mrmoneymustache.com/throw-down-the-gauntlet/dont-payoff-your-mortgage-club/msg2774144/#msg2774144
I plan on the bucket approach like you mentioned.  FIRE # = (All expenses other than mortgage / SWR) + Mortgage balance at FIRE. I do not plan on literally having a separate account for the mortgage balance.  It's more of a mental bucket approach for me.  I have too many different accounts (pre-tax, Roth, taxable) that it doesn't make sense to try and pull the mortgage payments only from one.  I should conveniently have enough Roth principal that I can pull out to pay my mortgage until I'm 59.5 and can withdraw earnings.  This is important because the Roth principal I'm allowed to pull out will not adjust with inflation and neither will my mortgage.  Then I can focus on keeping the rest of my expenses/withdrawals under 200% FPG so I can get cheap healthcare.  Of course, that's only until I move or go back to work or something and it all goes out the window...

Naomi

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Re: DONT Payoff your Mortgage Club
« Reply #2576 on: January 29, 2021, 02:49:53 AM »
Thanks @Vapour for that additional information. Yes, it is a 30 year loan. I didn't make the February payment because I just got paid today
and we signed this ppw on the 27th.

Closing Date 02/01/2021
Disbursement Date 02/05/2021

It looks like we are closing very soon and I didn't want to have the ppw need to be adjusted again. Like I said this is my first time doing this and I've done everything through texting and e-mail, so I'm just kind of going with it.
The way you explained the interest makes sense. The #s changed  little since I first posted. The loan is still $213,562.

Closing Costs went from $2121 to $1789 and payoff $211,511 to $211, 403.
Cash to Close From Borrower box was checked for $70 and now To Borrower box is checked for $370.

Does that mean we will get $370?

We got the closing paperwork yesterday through e-mail and the #s changed just a little bit more. We close today at 4 pm.

Closing Costs went from $1789 to $1750 and payoff $211,511 to $211, 467.
Cash to Close From Borrower box was checked for $70 and now To Borrower box is checked for $345.

And it looks like our first payment is due 1 Apr.

« Last Edit: February 03, 2021, 03:14:16 AM by Naomi »

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2577 on: January 29, 2021, 11:40:33 AM »
Thanks @Vapour for that additional information. Yes, it is a 30 year loan. I didn't make the February payment because I just got paid today
and we signed this ppw on the 27th.

Closing Date 02/01/2021
Disbursement Date 02/05/2021

It looks like we are closing very soon and I didn't want to have the ppw need to be adjusted again. Like I said this is my first time doing this and I've done everything through texting and e-mail, so I'm just kind of going with it.
The way you explained the interest makes sense. The #s changed  little since I first posted. The loan is still $213,562.

Closing Costs went from $2121 to $1789 and payoff $211,511 to $211, 403.
Cash to Close From Borrower box was checked for $70 and now To Borrower box is checked for $370.

Does that mean we will get $370?
Don't spend it yet, but most likely yes, somewhere in that ballpark. Typically during a re-fi, interest collected is for the next month's payment, allowing you to "skip" one. Be sure to clarify at closing. Surprise! Try not to spend that either, lol.

Vapour

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Re: DONT Payoff your Mortgage Club
« Reply #2578 on: January 29, 2021, 01:07:59 PM »
Thanks @Vapour for that additional information. Yes, it is a 30 year loan. I didn't make the February payment because I just got paid today
and we signed this ppw on the 27th.

Closing Date 02/01/2021
Disbursement Date 02/05/2021

It looks like we are closing very soon and I didn't want to have the ppw need to be adjusted again. Like I said this is my first time doing this and I've done everything through texting and e-mail, so I'm just kind of going with it.
The way you explained the interest makes sense. The #s changed  little since I first posted. The loan is still $213,562.

Closing Costs went from $2121 to $1789 and payoff $211,511 to $211, 403.
Cash to Close From Borrower box was checked for $70 and now To Borrower box is checked for $370.

Does that mean we will get $370?

Yes, you should get paid the $370.  I also had some cash paid to me in my last refinance.  The title company sent a check out about a week or so after everything went through.  I also got a little bit back from my old mortgage because the payoff was too high from the new lender.  I think they wanted to make sure they paid enough and it's hard to be sure exactly what day it's going to go through.  It all worked out in the end.  The old mortgage co. sent me a check as well for the overage and confirmation that it was paid off.

Just be careful to review everything thoroughly at closing.  The night before my closing, my lender sent me a new Closing Disclosure that differed from the one I signed 3 days before closing.  It had a different balance for my new loan and required me to bring some money to closing vs. having money paid to me with a slightly higher loan balance.  Nothing important really changed (interest rate, closing costs were the same), but I didn't want to deal with wiring money and wasn't sure if they'd accept a personal check.  I got it changed, but it did delay my closing by several hours.  That was the only minor hiccup I experienced.  I otherwise had a very easy and fairly quick re-fi.  I wish I could've gotten 2.25% though!  That's an awesome rate.

Naomi

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Re: DONT Payoff your Mortgage Club
« Reply #2579 on: January 30, 2021, 04:04:44 AM »
Thanks all, I will be sure to review everything before we sign. We have a VA loan if that makes a difference as far as the rate we got.
We did a VA IRRL for the refinance.

TomTX

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Re: DONT Payoff your Mortgage Club
« Reply #2580 on: February 02, 2021, 01:22:04 PM »
He's in the Austin area, so there's been nice appreciation as well. I'm sure he'll be fine.

Austin SFH prices have gone absolutely nuts in the past few months, far above the rapid appreciation we have seen since spring. I've heard numerous firsthand reports from people putting in an all-cash, zero inspection, zero contingency offer $50k above asking - and being seriously overbid. One was from a RE agent who also put in the tidbit that the listing was already $50k over comps, they bid $50k higher than ask for their client and still lost it by a large margin.

Tesla, Oracle, etc coming to Austin - and now Samsung is talking about spending $10B on fab expansions here. Prices are still cheap to people used to "Bay Area" pricing.

TomTX

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Re: DONT Payoff your Mortgage Club
« Reply #2581 on: February 02, 2021, 01:25:40 PM »
A 20 minute call to my credit union, and they're going to knock down the rate on my existing HEL by 0.7%, no closing costs - just some DocuSign next week. I could go lower, but that would require a full refi and some version of in-person signing.

SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #2582 on: February 02, 2021, 01:41:52 PM »
A 20 minute call to my credit union, and they're going to knock down the rate on my existing HEL by 0.7%, no closing costs - just some DocuSign next week. I could go lower, but that would require a full refi and some version of in-person signing.

That belongs in the Celebrations! thread!

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2583 on: February 02, 2021, 06:04:02 PM »
A 20 minute call to my credit union, and they're going to knock down the rate on my existing HEL by 0.7%, no closing costs - just some DocuSign next week. I could go lower, but that would require a full refi and some version of in-person signing.
Yippee!

In related news, we seem to have found a compromise between rate and fees, so we're getting things rolling on the rental re-fis. Fingers crossed.

KiloRomeo

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Re: DONT Payoff your Mortgage Club
« Reply #2584 on: February 04, 2021, 02:25:03 PM »
Shopping around now for a refi, I will report back what I find. Currently at 3.875% and still owe $129k for the next 25 years.


So far I've found 2.375% with approximately $4k in closing costs. 2.75% with Aimloans (current servicer which I've had good experience with) and it says $973 in lender fees (which I assume means I need to figure out the other title/doc stamp type costs?) and then  2.99% with 50k cash out and 3000 in fees but this broker wants to roll the fees into the loan (i guess this is a good thing?).

I want to talk to the first guy and aimloans to explore the cash out refi options, seems to make sense if you want to be part of the dont payoff your mortgage club right? Plus in 5-10 years when we move I would like to make this a rental and aimloans already told me they dont think I would need to refi when I convert it to a rental property.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2585 on: February 04, 2021, 02:40:56 PM »
Man, cashing out is nice, but is it 63 basis points nice? That'd be a difficult call for me.


kenmoremmm

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Re: DONT Payoff your Mortgage Club
« Reply #2586 on: February 04, 2021, 03:46:35 PM »
just completed a cash out refi.
took out about $110k
new loan total = $230k
LTV ~28%

30 years
2.625%
about $3.5k in fees that were rolled into new loan balance
accelin loans

TomTX

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Re: DONT Payoff your Mortgage Club
« Reply #2587 on: February 04, 2021, 08:48:37 PM »
A 20 minute call to my credit union, and they're going to knock down the rate on my existing HEL by 0.7%, no closing costs - just some DocuSign next week. I could go lower, but that would require a full refi and some version of in-person signing.
Yippee!

In related news, we seem to have found a compromise between rate and fees, so we're getting things rolling on the rental re-fis. Fingers crossed.
DocuSign completed, along with a note that they will float down the rate (upon request) if it drops between now and when it's finished being processed - no more than 10 days.

I like my CU.

Goldy

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Re: DONT Payoff your Mortgage Club
« Reply #2588 on: February 06, 2021, 07:49:51 PM »
Just locked my cash out refi pulling about 100k of equity out at 2.75% with $1700 closing costs.  Excited to put this money to work!

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2589 on: February 08, 2021, 09:31:38 AM »
Nice work, @Goldy ! What types of investments do you plan to buy with that money?

KiloRomeo

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Re: DONT Payoff your Mortgage Club
« Reply #2590 on: February 08, 2021, 12:12:30 PM »
Just locked my cash out refi pulling about 100k of equity out at 2.75% with $1700 closing costs.  Excited to put this money to work!

That includes all the government and recording fees? I can't find closing costs for anything less than $3500 and most are closer to $4500.

KiloRomeo

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Re: DONT Payoff your Mortgage Club
« Reply #2591 on: February 08, 2021, 12:27:19 PM »
Man, cashing out is nice, but is it 63 basis points nice? That'd be a difficult call for me.

That was through a different broker. First guy got back to me and it would be around 22 basis points +$900 or so to go with him,

Hurts me to pay more fees for a worse rate and more debt but the math seems to say this is a good deal

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #2592 on: February 08, 2021, 03:10:31 PM »
"To cash out or not to cash out". Approaching 1% lower rates from our refinance in October 2019 and I've been wondering how to factor this in for months. Our refinance not even 2 years ago corrected a massive error (I should have listened to Cheddar Stacker back in the day . . .) in that we paid this house off in 2016. The situation now that we already have a 30 year fixed rate mortgage working for us is murkier - not going to be able to cash out $100K now (relatively inexpensive house in a LCOL carrier - may be a very long time.

So we probably should refinance just due to the lower rate, but should we be just refinancing our current balance or taking cash out?

So I came up with this back-of-the-napkin math to help my thinking:

No-Cash-out loan amount * (difference between the cash out and no cash out interest rate)

+

Full Cash-out rate * (amount of cash out)

= Expected "cost" of cash-out


Then compute break-even investment return as:

Expected "cost" of cash-out / amount of cash out

Then decide how that looks within in your risk calculus.

An example:

Current mortgage about $122K - refinance rate 2.875%

Could cash out $14K, but the rate is 3.125%

So if I cashed out, that would be 0.25% * 122K + 3.125% * 14K = $742.50. Which puts my breakeven investment return at $742.50 / $14000 = 5.3%.

If the rates were the same but I could only cash out $5K, all of sudden that breakeven return becomes 9.2%. Obviously I'm more confident our investments would beat 5.3% than 9.2% (and yeah, this whole idea is pretty hand-wavy, but I think gets into a reasonable enough number to help evaluate the options).

I'm ignoring closing costs because it happens they are within about $200 on these two options for me right now, but if those were widely divergent, I think I'd adjust loan principal on each option to get a better feel for the situation.

FIreDrill

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Re: DONT Payoff your Mortgage Club
« Reply #2593 on: February 15, 2021, 11:32:36 AM »
So I am starting to feel a little crazy because we keep on refinancing... I think this is our 4th refi in 2.5 years now.  Details on the rate we just locked in below.

585k
30yr
2.5%
0 points
0 lender fees
Appraisal waiver
Washington state
Current payment - 3170 - 30yr 2.75%
New payment - 2960
Fees not covered by lender - 1600
Break even - 8 months

What made this refinance really worth it was the appraisal waiver we received which put us across the 80% ltv threshold in order to drop PMI.  Next step 2%? Lol

Closed on the refinance above and got my first sub 3k mortgage payment :D

I have a hard time seeing rates go much lower but who knows.  I would be tempted to entertain another refinance at 2% if they happen to get there.

On the investments front, our total stock portfolio has surpassed 800k and our NW has cleared 900k.  The last 18 months have been crazy for our accounts and 1M is coming up rather quickly....

Keep it up everyone!

Pizzabrewer

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Re: DONT Payoff your Mortgage Club
« Reply #2594 on: February 15, 2021, 02:24:04 PM »
I thought I was set with the 2.75% 15-year mortgage we took out 4+ years ago.  Today I just saw an ad for 1.98% 15-year term. 

I don't really want to go thru the hassle of a refi.  But damn.

Telecaster

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Re: DONT Payoff your Mortgage Club
« Reply #2595 on: February 15, 2021, 03:05:11 PM »
Anyone done a cash-out for a lot?  My primary mortgage is pretty small, like borderline too small to refi.   But I have a huge amount of equity.   I'd like to pull out like $400K or so (to buy another property)  but the rates go up at lot.  At least where I'm looking.   

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2596 on: February 16, 2021, 07:05:11 AM »
I suppose there are three options to compare:

    • Extract as much cash from the first property as you need to buy the investment property mortgage free
    • Use a HELOC to extract only enough cash for the down payment on the new property
    • Limited cash out refinance combined with financing on the new property

    I suppose knowing the cost of the new property matters quite a bit, you want to be able to put enough down that the new property cash-flows.

BlueHouse

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Re: DONT Payoff your Mortgage Club
« Reply #2597 on: February 16, 2021, 07:07:47 AM »
 I usually agree that not pre-paying the mortgage the right path for most.  But now I'm seriously considering paying off my mortgage and I want to know if there's a good reason NOT to pay it off at this point and under my circumstances:

1.  I just quit my job and don't plan on going back.  I guess I'm FIREd
2.  I have $170K in a savings account that I could use to pay for my next 2 years of living expenses.
3.  Or I could use $140k of that to pay off the mortgage on my loan and reduce cash flow needs by $2200 each month.
4.  I plan to stay in this home for 3-10 more years.
5.  I also have $70K in my investment accounts that are not invested.  They're just in cash.  So if I need more than the $30k in cash over the next year, I can start using the cash in the taxable investment account. 
6.  It is unlikely that I will actually invest any of the $170K that is sitting in savings unless the market crashes and I see a great opportunity for "on sale" equities. 
7.  My mortgage rate is 3.875%

Should I just pay this off and save 300-400/month on interest charges for the next few years?
Why should I keep the mortgage?

SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #2598 on: February 16, 2021, 07:51:11 AM »
@BlueHouse ,

Well, investing instead of paying off a low interest, fixed rate mortgage will get you to FIRE sooner.  But you're already FIRED so that doesn't matter.

You'll still end up with more wealth over the next several decades if you invest instead of pay off the mortgage.   But you're FIRED with an obviously high margin of safety (all that cash just loafing around), so you already have enough.

If you were planning to stay in the house "forever" instead of maybe just 3 years, I wouldn't question doing it at all.
In 3 years you could find yourself needing a down payment for another house plus moving expenses before you've sold the old house.     Then again, the cash savings of $2200 a month ($26,400 annually) lets you build up a down payment in a year, assuming that's not including taxes and insurance.  Plus you'll still have cash reserves to draw on.

It's not the choice that will most likely lead to more wealth over the next few decades.  But that's not the biggest concern unless you're doing a leanFIRE.   

So unless your total stash is small enough that you're really stretching to make FIRE work, I wouldn't think you're crazy to just pay the damn thing off.     Did the same thing myself. :)

BlueHouse

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Re: DONT Payoff your Mortgage Club
« Reply #2599 on: February 16, 2021, 09:44:52 AM »
@BlueHouse ,

Well, investing instead of paying off a low interest, fixed rate mortgage will get you to FIRE sooner.  But you're already FIRED so that doesn't matter.

You'll still end up with more wealth over the next several decades if you invest instead of pay off the mortgage.   But you're FIRED with an obviously high margin of safety (all that cash just loafing around), so you already have enough.

If you were planning to stay in the house "forever" instead of maybe just 3 years, I wouldn't question doing it at all.
In 3 years you could find yourself needing a down payment for another house plus moving expenses before you've sold the old house.     Then again, the cash savings of $2200 a month ($26,400 annually) lets you build up a down payment in a year, assuming that's not including taxes and insurance.  Plus you'll still have cash reserves to draw on.

It's not the choice that will most likely lead to more wealth over the next few decades.  But that's not the biggest concern unless you're doing a leanFIRE.   

So unless your total stash is small enough that you're really stretching to make FIRE work, I wouldn't think you're crazy to just pay the damn thing off.     Did the same thing myself. :)
Thanks @SwordGuy
Yeah, making a downpayment on another house was the one thing I hadn't considered, but I think I'm okay along those lines.  Right now, I'm not sure I'd want to own another house after this one.  I'll probably rent for a while until I figure out where my next location will be.  And of that, I have NO IDEA except, not here. So really really glad for the feedback.  I'll write that one down to make sure I don't overlook it in case it becomes an issue later.