DONT Payoff your Mortgage Club

[jeromedawg]

Sorry if this has already been covered (and or facepunched) but what are your guys' thoughts on purchasing a home all cash or with a really high down-payment (at least 50% or more depending on COL area), doing a cash-out refi, and reinvesting the proceeds right after? The case is that we are pretty intent on staying in our current HCOL for the long-term and we technically have enough to pull off an all-cash or super high down-payment offer (the reason for doing this would be to weed and beat out a majority of the competition). Doing a cash-out refi would just be a means to mitigate/reduce the opportunity cost of tying up funds in the house.

Unless your offer is all cash, I don’t see how this is going to help you, really. Your offer will still be contingent on financing like every other offer that isn’t all cash. The seller won’t know how much you intend to finance unless you tell them. So why not tell them you have a boatload of money and *could* put 50% or 80% down, so financing won’t be an issue, but you will probably use a smaller down payment to keep your money invested.

Are you saying to tell the seller that we have a bunch of money and *could* pay in cash (but actually will put a small down payment down) as a tactic to try to get them to accept the offer? I don't see how this would work unless the other bids on the home were non-competitive. Sure, I could broadcast that I have all cash but only want to put 30% down while another buyer comes in and offers all cash period. Do you really think the seller will pass up the all cash offer in favor of mine just because I told (or showed) them that I have a ton of money and could technically pay all cash but have decided not to?

[SwordGuy]

Sorry if this has already been covered (and or facepunched) but what are your guys' thoughts on purchasing a home all cash or with a really high down-payment (at least 50% or more depending on COL area), doing a cash-out refi, and reinvesting the proceeds right after? The case is that we are pretty intent on staying in our current HCOL for the long-term and we technically have enough to pull off an all-cash or super high down-payment offer (the reason for doing this would be to weed and beat out a majority of the competition). Doing a cash-out refi would just be a means to mitigate/reduce the opportunity cost of tying up funds in the house.

Unless your offer is all cash, I don’t see how this is going to help you, really. Your offer will still be contingent on financing like every other offer that isn’t all cash. The seller won’t know how much you intend to finance unless you tell them. So why not tell them you have a boatload of money and *could* put 50% or 80% down, so financing won’t be an issue, but you will probably use a smaller down payment to keep your money invested.

Are you saying to tell the seller that we have a bunch of money and *could* pay in cash (but actually will put a small down payment down) as a tactic to try to get them to accept the offer? I don't see how this would work unless the other bids on the home were non-competitive. Sure, I could broadcast that I have all cash but only want to put 30% down while another buyer comes in and offers all cash period. Do you really think the seller will pass up the all cash offer in favor of mine just because I told (or showed) them that I have a ton of money and could technically pay all cash but have decided not to?

You don't have to win a bidding war against all POSSIBLE bidders, you only need to win the war against those who are bidding against you on that specific house.

So, showing you have gobs of money you could put down but still want to finance won't win against someone who makes an all cash offer.   Bit it may well win against someone whose financials are a bit iffy because they are buying at the top of what the banks might allow.

We won the bidding war on our second home despite being the LOWEST bid among three bids.  Why?   Because our finances were rock solid and the other two bidders were a bit iffy.   The seller had already gone to the altar twice before and had the deal fail due to the finances of the buyer.    We were a sure thing and they took the deal we offered.

[jeromedawg]

Sorry if this has already been covered (and or facepunched) but what are your guys' thoughts on purchasing a home all cash or with a really high down-payment (at least 50% or more depending on COL area), doing a cash-out refi, and reinvesting the proceeds right after? The case is that we are pretty intent on staying in our current HCOL for the long-term and we technically have enough to pull off an all-cash or super high down-payment offer (the reason for doing this would be to weed and beat out a majority of the competition). Doing a cash-out refi would just be a means to mitigate/reduce the opportunity cost of tying up funds in the house.

Unless your offer is all cash, I don’t see how this is going to help you, really. Your offer will still be contingent on financing like every other offer that isn’t all cash. The seller won’t know how much you intend to finance unless you tell them. So why not tell them you have a boatload of money and *could* put 50% or 80% down, so financing won’t be an issue, but you will probably use a smaller down payment to keep your money invested.

Are you saying to tell the seller that we have a bunch of money and *could* pay in cash (but actually will put a small down payment down) as a tactic to try to get them to accept the offer? I don't see how this would work unless the other bids on the home were non-competitive. Sure, I could broadcast that I have all cash but only want to put 30% down while another buyer comes in and offers all cash period. Do you really think the seller will pass up the all cash offer in favor of mine just because I told (or showed) them that I have a ton of money and could technically pay all cash but have decided not to?

You don't have to win a bidding war against all POSSIBLE bidders, you only need to win the war against those who are bidding against you on that specific house.

So, showing you have gobs of money you could put down but still want to finance won't win against someone who makes an all cash offer.   Bit it may well win against someone whose financials are a bit iffy because they are buying at the top of what the banks might allow.

We won the bidding war on our second home despite being the LOWEST bid among three bids.  Why?   Because our finances were rock solid and the other two bidders were a bit iffy.   The seller had already gone to the altar twice before and had the deal fail due to the finances of the buyer.    We were a sure thing and they took the deal we offered.

That makes sense now that you put it in that light.

Also, I would tend to think that the higher the cost of the house is (and where you still could put all cash down but may not want to), the better chances of weeding out other all cash buyers as well as out-competing other buyers who have questionable financials. The question I have is *when* do you show all your cards? When you submit the preapproval letter? Just slip in your bank accounts showing all the cash you have that would cover the entire cost of the home?


On a different note, in my side-quest on researching cash-out refis, someone whispered "delayed mortgage financing" in my ear which has gotten me pretty curious... it seems like you *can* take deductions as long as you do this type of financing within the first 90 days. But I still think there's opportunity cost with that and taking the mortgage would save more money in the long run.

[dragoncar]

Just look at it like waiving the financing contingency.  It’s not a deal winner by itself but makes the offer slightly more attractive

If they know you aren’t cash strapped they probably think you are less likely to fuss around on other minor stuff

[sisto]

I remember when this thread got started. I had refinanced to a 15yr loan shortly before finding MMM. I had also been adding some to the principal. Then I saw the light but never did find a date good enough to back to a 30 year and I also have a VA loan so would have to keep 15 or go conventional. Fast forward to an accident that has left me disabled and totally changed up my Fire plans. I'm now actually thinking about paying off the mortgage to save on taxes. I know this sounds crazy, but I am getting Ssdi and LTD. This is ordinary income and taxed. I have over $1M in 401K and thinking that it might be better to payoff the mortgage and save myself around $14K per year in payments and have that available to help with Roth conversions so that money doesn't snowball and cause huge RMDs later.

[Dicey]

Sorry if this has already been covered (and or facepunched) but what are your guys' thoughts on purchasing a home all cash or with a really high down-payment (at least 50% or more depending on COL area), doing a cash-out refi, and reinvesting the proceeds right after? The case is that we are pretty intent on staying in our current HCOL for the long-term and we technically have enough to pull off an all-cash or super high down-payment offer (the reason for doing this would be to weed and beat out a majority of the competition). Doing a cash-out refi would just be a means to mitigate/reduce the opportunity cost of tying up funds in the house.

Unless your offer is all cash, I don’t see how this is going to help you, really. Your offer will still be contingent on financing like every other offer that isn’t all cash. The seller won’t know how much you intend to finance unless you tell them. So why not tell them you have a boatload of money and *could* put 50% or 80% down, so financing won’t be an issue, but you will probably use a smaller down payment to keep your money invested.

Are you saying to tell the seller that we have a bunch of money and *could* pay in cash (but actually will put a small down payment down) as a tactic to try to get them to accept the offer? I don't see how this would work unless the other bids on the home were non-competitive. Sure, I could broadcast that I have all cash but only want to put 30% down while another buyer comes in and offers all cash period. Do you really think the seller will pass up the all cash offer in favor of mine just because I told (or showed) them that I have a ton of money and could technically pay all cash but have decided not to?

You don't have to win a bidding war against all POSSIBLE bidders, you only need to win the war against those who are bidding against you on that specific house.

So, showing you have gobs of money you could put down but still want to finance won't win against someone who makes an all cash offer.   Bit it may well win against someone whose financials are a bit iffy because they are buying at the top of what the banks might allow.

We won the bidding war on our second home despite being the LOWEST bid among three bids.  Why?   Because our finances were rock solid and the other two bidders were a bit iffy.   The seller had already gone to the altar twice before and had the deal fail due to the finances of the buyer.    We were a sure thing and they took the deal we offered.

This just happened to my brother. The original buyer ghosted everyone the day before closing, so the house went on the market again. There were three more offers, but my brother's finances were the most solid, and his was the offer the seller accepted. Curiously, another bidder's offer said if they couldn't secure financing in 30 days, they'd pay cash. I thought that was pretty creative, but the once-burned seller thought it meant they weren't sure of their ability to qualify and chose my brother, who already has his financing lined up.

[TempusFugit]

I have a basic question for you experienced refinancers. 

I've got about 12 years left on the 20 year at 3.75% and I'm looking to refi into a 15 yr to take advantage of the lower rates.
The only time I've ever refinanced a mortgage was back in 2012 when my mortgage company (Wells Fargo) offered a low cost refi for existing mortgagees.  That was a trivially easy process, considering that they already held my mortgage.

I've started checking around a few places for refi rates on my home and I'm wondering which of the options folks have been the most pleased with recently. 

- LenderFi / Loan Depot online mortgage lenders
- Using a local mortgage broker
- The big banks directly- Bank Of America, etc
- My existing mortgage holder (Wells Fargo)

LenderFi is showing APR of 3.3% (rate of 2.875) compared to APR 2.612 at Wells Fargo and 2.85 at BofA. 

Seems LenderFi, for me at least, is way high.   I'm also wondering if doing a refi with my existing company would generally be a simpler, lower cost option.

Are you sure you're comparing apples to apples? I don't see how an interest rate of 2.875 could have an APR of 2.6 or even 2.85.
The difference between the interest rate and the APR basically is accounting for the fees involved in the transaction.
I just looked at Lender FI (I still have the app on my phone) and for me at least the 15 year rate of 2.875 has a corresponding APR of 3.031.
The closer the APR is to the interest rate, the lower the fees you are paying.
I found the best deal for me was through the online vendors (Lender FI) in my case. I refinanced at three percent, with a lender credit of $1200 that didn't quite pay all the lender fees, so actual cost was approx $900. 30 year payback. My credit union offered that rate but with costs approx $4000. (costs do not include the tax and insurance escrow pre pays).
B of A was my previous mortgage holder, their offer was similar to my CU.
Also, I think in most cases you will get a better rate if you don't do a cash out, but if your balance is really low you might get a better rate if you do a cash out.

I hope I’m comparing like with like, hence the APR, which as you say accounts for the costs of the refinance.  Thats why i was surprised to see the LenderFi numbers so much higher than the other two.

I have a low balance ~94k on my property valued around 300k, so perhaps that just doesn't get me very good rates.

Just closed last week on a 15 yr refi at just under 3% with LenderFi.  I was down to 12 years so this added 3 years but reduced total interest significantly and also increased monthly cash flow by almost $400. 

The process with LenderFI was pretty easy. It only took about 2 weeks from beginning to close. I may have been able to get a slightly lower rate if I tried harder, but this was about the same as what I was seeing at bankrate, so I went ahead rather than continuing to 'think about it' for another 4-6 months.  Take the win and move on, I say. 

[jeromedawg]

Sorry if this has already been covered (and or facepunched) but what are your guys' thoughts on purchasing a home all cash or with a really high down-payment (at least 50% or more depending on COL area), doing a cash-out refi, and reinvesting the proceeds right after? The case is that we are pretty intent on staying in our current HCOL for the long-term and we technically have enough to pull off an all-cash or super high down-payment offer (the reason for doing this would be to weed and beat out a majority of the competition). Doing a cash-out refi would just be a means to mitigate/reduce the opportunity cost of tying up funds in the house.

Unless your offer is all cash, I don’t see how this is going to help you, really. Your offer will still be contingent on financing like every other offer that isn’t all cash. The seller won’t know how much you intend to finance unless you tell them. So why not tell them you have a boatload of money and *could* put 50% or 80% down, so financing won’t be an issue, but you will probably use a smaller down payment to keep your money invested.

Are you saying to tell the seller that we have a bunch of money and *could* pay in cash (but actually will put a small down payment down) as a tactic to try to get them to accept the offer? I don't see how this would work unless the other bids on the home were non-competitive. Sure, I could broadcast that I have all cash but only want to put 30% down while another buyer comes in and offers all cash period. Do you really think the seller will pass up the all cash offer in favor of mine just because I told (or showed) them that I have a ton of money and could technically pay all cash but have decided not to?

You don't have to win a bidding war against all POSSIBLE bidders, you only need to win the war against those who are bidding against you on that specific house.

So, showing you have gobs of money you could put down but still want to finance won't win against someone who makes an all cash offer.   Bit it may well win against someone whose financials are a bit iffy because they are buying at the top of what the banks might allow.

We won the bidding war on our second home despite being the LOWEST bid among three bids.  Why?   Because our finances were rock solid and the other two bidders were a bit iffy.   The seller had already gone to the altar twice before and had the deal fail due to the finances of the buyer.    We were a sure thing and they took the deal we offered.

Sorry if this has already been covered (and or facepunched) but what are your guys' thoughts on purchasing a home all cash or with a really high down-payment (at least 50% or more depending on COL area), doing a cash-out refi, and reinvesting the proceeds right after? The case is that we are pretty intent on staying in our current HCOL for the long-term and we technically have enough to pull off an all-cash or super high down-payment offer (the reason for doing this would be to weed and beat out a majority of the competition). Doing a cash-out refi would just be a means to mitigate/reduce the opportunity cost of tying up funds in the house.

Unless your offer is all cash, I don’t see how this is going to help you, really. Your offer will still be contingent on financing like every other offer that isn’t all cash. The seller won’t know how much you intend to finance unless you tell them. So why not tell them you have a boatload of money and *could* put 50% or 80% down, so financing won’t be an issue, but you will probably use a smaller down payment to keep your money invested.

Are you saying to tell the seller that we have a bunch of money and *could* pay in cash (but actually will put a small down payment down) as a tactic to try to get them to accept the offer? I don't see how this would work unless the other bids on the home were non-competitive. Sure, I could broadcast that I have all cash but only want to put 30% down while another buyer comes in and offers all cash period. Do you really think the seller will pass up the all cash offer in favor of mine just because I told (or showed) them that I have a ton of money and could technically pay all cash but have decided not to?

You don't have to win a bidding war against all POSSIBLE bidders, you only need to win the war against those who are bidding against you on that specific house.

So, showing you have gobs of money you could put down but still want to finance won't win against someone who makes an all cash offer.   Bit it may well win against someone whose financials are a bit iffy because they are buying at the top of what the banks might allow.

We won the bidding war on our second home despite being the LOWEST bid among three bids.  Why?   Because our finances were rock solid and the other two bidders were a bit iffy.   The seller had already gone to the altar twice before and had the deal fail due to the finances of the buyer.    We were a sure thing and they took the deal we offered.

This just happened to my brother. The original buyer ghosted everyone the day before closing, so the house went on the market again. There were three more offers, but my brother's finances were the most solid, and his was the offer the seller accepted. Curiously, another bidder's offer said if they couldn't secure financing in 30 days, they'd pay cash. I thought that was pretty creative, but the once-burned seller thought it meant they weren't sure of their ability to qualify and chose my brother, who already has his financing lined up.

Thanks for the input and sharing experiences. What markets were these in BTW?

[Dicey]

My brother's north of Phoenix.

[RWD]

We have 14 years left (15 year mortgage) at 3.125%. Too good of a rate to pay down faster. Principal balance is about $178k right now.

Another month, another minimum payment. $133k and 10 years remaining. $24.6k in cumulative interest paid over the last 5 years. That's 13.2% of the initial loan amount.

[talltexan]

@RWD , I have a co-worker who is trying to decide between a 15-year and 30-year loan. Would you be willing to offer 1-2 reasons why you opted for the 15-year term that I can pass on to her? She is about 35 years old, recently engaged, and more of a Bogleheads than Mustachian mindset.

[RWD]

@RWD , I have a co-worker who is trying to decide between a 15-year and 30-year loan. Would you be willing to offer 1-2 reasons why you opted for the 15-year term that I can pass on to her? She is about 35 years old, recently engaged, and more of a Bogleheads than Mustachian mindset.

Sure. It mostly has to do with our time frame. Our plan when we bought the house was that we would stay here for less than 10 years and would not keep the house as a rental afterwards. That makes the lower interest rate (in our case 3.125% vs 3.875%) worthwhile. If the plan were to stay longer than 10 years then having the higher cash flow for investing can make more sense. We were also buying a house that was only ~1.5x our gross income so the higher payments of a 15-year mortgage are barely noticeable and will still be affordable even on half our income (e.g. one of us loses our job).

[Gardo]

On my 14th year of 15 Year Mortgage.  :)

Mortgage Balance:  $13K

[Gardo]

@RWD , I have a co-worker who is trying to decide between a 15-year and 30-year loan. Would you be willing to offer 1-2 reasons why you opted for the 15-year term that I can pass on to her? She is about 35 years old, recently engaged, and more of a Bogleheads than Mustachian mindset.

I was 35 when I bought my house and took 15. 

Reason 1:  I want to fully pay it by the time I am 50. 
Reason 2:  I can opt to make that house the family's ancestral house and I can go for another house for another 15 years and finish it by 65.  Having an ancestral house would be a nice gift to my future generations as they can live there for sometime while they save for their DP for their own house.

[dandarc]

On my 14th year of 15 Year Mortgage.  :)

Mortgage Balance:  $13K

Time to cash-out refinance!

[dandarc]

Anyone else see Collins' latest post or the Alfred Hitchcock episode it references? I think this resonates with this thread's premise.

https://jlcollinsnh.com/2021/05/05/the-alfred-hitchcock-path-to-fi/

[talltexan]

@RWD , I have a co-worker who is trying to decide between a 15-year and 30-year loan. Would you be willing to offer 1-2 reasons why you opted for the 15-year term that I can pass on to her? She is about 35 years old, recently engaged, and more of a Bogleheads than Mustachian mindset.

I was 35 when I bought my house and took 15. 

Reason 1:  I want to fully pay it by the time I am 50. 
Reason 2:  I can opt to make that house the family's ancestral house and I can go for another house for another 15 years and finish it by 65.  Having an ancestral house would be a nice gift to my future generations as they can live there for sometime while they save for their DP for their own house.

While I'm sympathetic to the idea of giving adult children a break on housing, I'm also cautious about a plan like this because I cannot predict that the "ancestral house" will be anywhere near the best work opportunities for those adult children. I suppose you could make a case for that if you're in a city that has historically offered durable economic opportunity--say a world class city like NY or San Francisco--or a city that has a very obvious path to join them like Raleigh or Austin.

[talltexan]

Anyone else see Collins' latest post or the Alfred Hitchcock episode it references? I think this resonates with this thread's premise.

https://jlcollinsnh.com/2021/05/05/the-alfred-hitchcock-path-to-fi/

I appreciate you sharing this post--and indeed I did happen to watch this episode sometime in the 1990s--but, dang, it seems like quite a risk to endure certain prison-time in exhange for that. Maybe prison was just a metaphor?

[dandarc]

Anyone else see Collins' latest post or the Alfred Hitchcock episode it references? I think this resonates with this thread's premise.

https://jlcollinsnh.com/2021/05/05/the-alfred-hitchcock-path-to-fi/

I appreciate you sharing this post--and indeed I did happen to watch this episode sometime in the 1990s--but, dang, it seems like quite a risk to endure certain prison-time in exhange for that. Maybe prison was just a metaphor?

Yeah - 12 years in prison is not quite the interest-free loan implied.

[Dicey]

Anyone else see Collins' latest post or the Alfred Hitchcock episode it references? I think this resonates with this thread's premise.

https://jlcollinsnh.com/2021/05/05/the-alfred-hitchcock-path-to-fi/

Love, love, love it!

This also illustrates another key DPOYM point. To earn those kind of returns, you have to start with a relatively big pile of money. To start investing in real estate, one only needs a relatively small pile of money and the mortgage provides the rest of the ballast.

[robartsd]

Anyone else see Collins' latest post or the Alfred Hitchcock episode it references? I think this resonates with this thread's premise.

https://jlcollinsnh.com/2021/05/05/the-alfred-hitchcock-path-to-fi/

I appreciate you sharing this post--and indeed I did happen to watch this episode sometime in the 1990s--but, dang, it seems like quite a risk to endure certain prison-time in exhange for that. Maybe prison was just a metaphor?

Yeah - 12 years in prison is not quite the interest-free loan implied.

But he kept his spending rate way down while in prison.

[nereo]

I'm actually surprised at the sentence (15 years for a first-time offender, non-violent, educated white male).  Based on other sentences I've seen handed out I'm guessing IRL one might get closer to 6-10 years, out in under 5 with good behavior (all of it served in a low-security "white collar crime" prison).

I',m wondering:  Who amounts us would go to a low-security prison for 4-5 years in their early 30s if they were all but guaranteed to have enough to FIRE upon their release?

At least on paper it's a pretty tempting offer...

[talltexan]

Or what if we were allowed to serve the sentence at home?

Oh, wait, if that happens to you, it probably means you're already rich.

[Gardo]

For that amount of money, banks hire goons to take care of you and your family really nice.

[Gardo]

While I'm sympathetic to the idea of giving adult children a break on housing, I'm also cautious about a plan like this because I cannot predict that the "ancestral house" will be anywhere near the best work opportunities for those adult children. I suppose you could make a case for that if you're in a city that has historically offered durable economic opportunity--say a world class city like NY or San Francisco--or a city that has a very obvious path to join them like Raleigh or Austin.

or Metro Nashville.

[Gardo]

But he kept his spending rate way down while in prison.

You missed dandarc's allusion. :)

[talltexan]

I happen to have grown up near Austin and live in NC, but I hear about Nashville being *blistering hot* as a real estate market right now. I thought it was just hype from the Dave Ramsey show, but now I think it's justified. Check out the 3%-4% growth rate in jobs every year (except of course for 2020) here:

https://www.bls.gov/eag/eag.tn_nashville_msa.htm

(I did glance at the same page for Austin, and it's even faster)

[K-ice]

Anyone else see Collins' latest post or the Alfred Hitchcock episode it references? I think this resonates with this thread's premise.

https://jlcollinsnh.com/2021/05/05/the-alfred-hitchcock-path-to-fi/

That was fun. A form of coast fire I guess. Here is a link to the show.

https://www.dailymotion.com/video/x59ypm0

[mckaylabaloney]

I happen to have grown up near Austin and live in NC, but I hear about Nashville being *blistering hot* as a real estate market right now. I thought it was just hype from the Dave Ramsey show, but now I think it's justified. Check out the 3%-4% growth rate in jobs every year (except of course for 2020) here:

https://www.bls.gov/eag/eag.tn_nashville_msa.htm

(I did glance at the same page for Austin, and it's even faster)

My best friend bought a house in Nashville in 2011 for $130k. Its value is now north of $400k, and that's without taking into account any of the improvements they've made.

[dragoncar]

I happen to have grown up near Austin and live in NC, but I hear about Nashville being *blistering hot* as a real estate market right now. I thought it was just hype from the Dave Ramsey show, but now I think it's justified. Check out the 3%-4% growth rate in jobs every year (except of course for 2020) here:

https://www.bls.gov/eag/eag.tn_nashville_msa.htm

(I did glance at the same page for Austin, and it's even faster)

My best friend bought a house in Nashville in 2011 for $130k. Its value is now north of $400k, and that's without taking into account any of the improvements they've made.

Part of me wishes we bought a bigger house and stretched further while we had a high combined income.  Of course we made the right decision at the time, when housing could either skyrocket or crash, but Just imagine if we bought a house at the maximum the bank was willing to lend and the. Downsize

[Dicey]

I happen to have grown up near Austin and live in NC, but I hear about Nashville being *blistering hot* as a real estate market right now. I thought it was just hype from the Dave Ramsey show, but now I think it's justified. Check out the 3%-4% growth rate in jobs every year (except of course for 2020) here:

https://www.bls.gov/eag/eag.tn_nashville_msa.htm

(I did glance at the same page for Austin, and it's even faster)

My best friend bought a house in Nashville in 2011 for $130k. Its value is now north of $400k, and that's without taking into account any of the improvements they've made.

Part of me wishes we bought a bigger house and stretched further while we had a high combined income.  Of course we made the right decision at the time, when housing could either skyrocket or crash, but Just imagine if we bought a house at the maximum the bank was willing to lend and the. Downsize

I've known a couple of people who did that. Stretched like crazy in hopes of selling for lots more money in a few years. It worked out for some, but another lost it all in the housing crash. I may be perfectly comfortable in a house with a mortgaged roof over my head, but I sure don't want to gamble that way.

[talltexan]

Two years ago the talltexan household was contemplating a move within Charlotte to try to optimize access to kids' activities, school, and family who are in the area. One particularly nice neighborhood was at the top end of our range, although a little farther from all of those activities, and driving distance from my in-laws' instead of walking distance. We opted for the slightly closer, more connected neighborhood, but I checked out the tony one on Zillow last week, and--dang--those houses have really appreciated. I think that neighborhood would be completely out of reach now.

[DadJokes]

I happen to have grown up near Austin and live in NC, but I hear about Nashville being *blistering hot* as a real estate market right now. I thought it was just hype from the Dave Ramsey show, but now I think it's justified. Check out the 3%-4% growth rate in jobs every year (except of course for 2020) here:

https://www.bls.gov/eag/eag.tn_nashville_msa.htm

(I did glance at the same page for Austin, and it's even faster)

My best friend bought a house in Nashville in 2011 for $130k. Its value is now north of $400k, and that's without taking into account any of the improvements they've made.

Our house is in a Nashville suburb. We just got our new property assessment: it went from $259k to $369k.

Appreciation comes with a cost when you don't plan on moving anytime soon...

[dandarc]

Seems like an opportunity for a cash-out refinance where you invest the proceeds @DadJokes

[Dicey]

I happen to have grown up near Austin and live in NC, but I hear about Nashville being *blistering hot* as a real estate market right now. I thought it was just hype from the Dave Ramsey show, but now I think it's justified. Check out the 3%-4% growth rate in jobs every year (except of course for 2020) here:

https://www.bls.gov/eag/eag.tn_nashville_msa.htm

(I did glance at the same page for Austin, and it's even faster)

My best friend bought a house in Nashville in 2011 for $130k. Its value is now north of $400k, and that's without taking into account any of the improvements they've made.

Our house is in a Nashville suburb. We just got our new property assessment: it went from $259k to $369k.

Appreciation comes with a cost when you don't plan on moving anytime soon...

Gotta say, that's one of the beauties of home ownership in sunny California. They can't do that shit. Plenty of other problems, but your tax increases are miniscule and completely predictable.

[TempusFugit]

I happen to have grown up near Austin and live in NC, but I hear about Nashville being *blistering hot* as a real estate market right now. I thought it was just hype from the Dave Ramsey show, but now I think it's justified. Check out the 3%-4% growth rate in jobs every year (except of course for 2020) here:

https://www.bls.gov/eag/eag.tn_nashville_msa.htm

(I did glance at the same page for Austin, and it's even faster)

My best friend bought a house in Nashville in 2011 for $130k. Its value is now north of $400k, and that's without taking into account any of the improvements they've made.

Our house is in a Nashville suburb. We just got our new property assessment: it went from $259k to $369k.

Appreciation comes with a cost when you don't plan on moving anytime soon...

Gotta say, that's one of the beauties of home ownership in sunny California. They can't do that shit. Plenty of other problems, but your tax increases are miniscule and completely predictable.

Lots of counties / municipalities in my area have laws that mandate the tax RATE be reduced after a reassessment cycle if the average property values rose, such that the net tax should (on average) be unchanged.  Of course, the local government can change that by voting on new rates, but that would require an unpopular vote, as opposed to being able to just let the assessors office take the blame for everyone's taxes rising. 

My assessment rose about 30% this year (4 year reassessment cycle) but the tax rate has been reduced so it makes not very much difference in my tax bill.  This time. 

[talltexan]

But property values would rise less if people knew they'd have higher property taxes: it affects the cash flow associated with the property. So this is one more sneaky way in which the spike in values is perpetuating itself (and punishing folks who are still trying to buy into that first home).

[Dicey]

But property values would rise less if people knew they'd have higher property taxes: it affects the cash flow associated with the property. So this is one more sneaky way in which the spike in values is perpetuating itself (and punishing folks who are still trying to buy into that first home).

You'd think so, but Prop. 13 happened in the '70's, people have gotten used to it. Prop. 13 has led to huge disparities, especially when people inherit properties along with their low tax rates, but otherwise hasn't had the effect you assume. To clarify: taxes adjust to market rates when a property is sold and are based on actual purchase price. Supply and Demand is the larger force here.

[couponvan]

But property values would rise less if people knew they'd have higher property taxes: it affects the cash flow associated with the property. So this is one more sneaky way in which the spike in values is perpetuating itself (and punishing folks who are still trying to buy into that first home).

You'd think so, but Prop. 13 happened in the '70's, people have gotten used to it. Prop. 13 has led to huge disparities, especially when people inherit properties along with their low tax rates, but otherwise hasn't had the effect you assume. To clarify: taxes adjust to market rates when a property is sold and are based on actual purchase price. Supply and Demand is the larger force here.

There’s a new revision to prop 13 that will likely cause much higher taxes “eventually” as you can only inherit basis if you actually love in at as your primary residence. Tricky tricky CA.

[Dicey]

But property values would rise less if people knew they'd have higher property taxes: it affects the cash flow associated with the property. So this is one more sneaky way in which the spike in values is perpetuating itself (and punishing folks who are still trying to buy into that first home).

You'd think so, but Prop. 13 happened in the '70's, people have gotten used to it. Prop. 13 has led to huge disparities, especially when people inherit properties along with their low tax rates, but otherwise hasn't had the effect you assume. To clarify: taxes adjust to market rates when a property is sold and are based on actual purchase price. Supply and Demand is the larger force here.

There’s a new revision to prop 13 that will likely cause much higher taxes “eventually” as you can only inherit basis if you actually love in at as your primary residence. Tricky tricky CA.

I'm all for that. One of the side effects of the Inheritance thing is kids inherit and have no means to maintain the property. The house goes to shit and impacts the whole neighborhood. On our walks, we point them out and say, " Prop 13 house."

Recent example: the owner of a house I've been eyeing for years is on hospice. If his kids keep the house when he passes, they will continue to pay $720/year on a house that would sell in the $1.1-$1.2M range. If they sell, the new buyers would get an annual tax bill of at least $12,000/year. How is that equitable?

[Weisass]

But property values would rise less if people knew they'd have higher property taxes: it affects the cash flow associated with the property. So this is one more sneaky way in which the spike in values is perpetuating itself (and punishing folks who are still trying to buy into that first home).

You'd think so, but Prop. 13 happened in the '70's, people have gotten used to it. Prop. 13 has led to huge disparities, especially when people inherit properties along with their low tax rates, but otherwise hasn't had the effect you assume. To clarify: taxes adjust to market rates when a property is sold and are based on actual purchase price. Supply and Demand is the larger force here.

There’s a new revision to prop 13 that will likely cause much higher taxes “eventually” as you can only inherit basis if you actually love in at as your primary residence. Tricky tricky CA.

I'm all for that. One of the side effects of the Inheritance thing is kids inherit and have no means to maintain the property. The house goes to shit and impacts the whole neighborhood. On our walks, we point them out and say, " Prop 13 house."

Recent example: the owner of a house I've been eyeing for years is on hospice. If his kids keep the house when he passes, they will continue to pay $720/year on a house that would sell in the $1.1-$1.2M range. If they sell, the new buyers would get an annual tax bill of at least $12,000/year. How is that equitable?

I grew up in NorCal, and don't live there anymore. My parents and grandparents have a hard time accepting this equity argument, though, because they have benefitted so much from Prop 13. It is *really* hard to help someone appreciate the unfairness of something like that when they are benefiting from the disparity.

[dragoncar]

But property values would rise less if people knew they'd have higher property taxes: it affects the cash flow associated with the property. So this is one more sneaky way in which the spike in values is perpetuating itself (and punishing folks who are still trying to buy into that first home).

You'd think so, but Prop. 13 happened in the '70's, people have gotten used to it. Prop. 13 has led to huge disparities, especially when people inherit properties along with their low tax rates, but otherwise hasn't had the effect you assume. To clarify: taxes adjust to market rates when a property is sold and are based on actual purchase price. Supply and Demand is the larger force here.

I’ve seen a study that showed prop 13 had the effect of people staying slightly longer in their homes.  Something like 7 years avg vs 5 years in other states

[talltexan]

Moving is costly, so reducing the number of times someone has to do it is okay, I guess. I suppose what's hard to see is if there are economic opportunities that someone could take advantage of by moving, but risk aversion keeps them in a house too long.

[August26th]

Seems like an appropriate place to ask this question.... and I have not read every post in this very long thread so I apologize if this scenario has been covered. Would you do this refinance?

Current loan: purchased March 2020, original loan 592K at 3.25% 30-year fixed. Principal and interest payment $2,576. Current balance is $584,181.

With the new conforming loan limits now at $548,250 I am considering a refinance into 2.375% with about $2,000 in closing costs. I’d have to bring 36-38K to do this, but the result is that my principal and interest payment would drop to $2,130. Monthly savings of $446.

Would you bring almost 38K to save $446 per month? If I did this, I’d let this loan ride for the long term and put the extra into investments. Or is this silly thinking? I have a bunch of cash piled up, waiting to buy an investment property, so the 40K wouldn’t hurt.   

Best guess is that I am 8-10 years away from FIRE.

Circling back to say that I finally refinanced from 3.25% to 2.74% with $1285 in total closing costs. I brought 36K to closing to pay the loan down to the conforming loan limit. Wish I had done it back in December when I first posted this so that I could have refi’d into a lower rate than I ultimately got, but we decided at the time to instead purchase a second home/vacation rental (no regrets.) So now I have 2 mortgages at 2.74% and 2.625% respectively.  I plan to let these ride for a long time, and possibly pay off one or both at our RE date. Feeling good about this but will also dump my extra into the market according to my (not yet on paper) ISP.

ALSO - I no longer escrow for taxes and insurance, so my overall monthly payment drop is $900.

[talltexan]

I was a fan of not-escrowing, as I could make an easy walk in early December to the County assessor's office and write them a fat check in person.

But then they moved the office out of foot (or scooter) distance for me, and my newest mortgage didn't allow it anyway, so I'm sending $00's a month to some bank to do it for me now. Sigh.

[Telecaster]

But then they moved the office out of foot (or scooter) distance for me, and my newest mortgage didn't allow it anyway, so I'm sending $00's a month to some bank to do it for me now. Sigh.

Bastards.  Although these days you usually get a slightly lower rate if you escrow. 

[dragoncar]

Still hate escrowing.  My processing was transferred to Flagstar and their online capabilities are kinda trash w/ no app.  Now they want me to make an extra escrow payment of like $1k to cover a supposed deficiency, but there is no deficiency they just want to max out their legally allowed buffer/slush fund.  At least they have to pay me 2% interest which ain't to shabby RN.

I'm going to request removal of escrow as soon as my refi hits 365 days.  I don't know if they will allow it but worth a shot.  They might also require 12 months of actual payments (so more like 14 months from closing date) or 12 months from when the loan was transferred (which would be almost another year)

At least in my state they aren't allowed to charge a fee for this (in most other states they charge 0.25% of the principal balance (!!!)

[Dicey]

Still hate escrowing.  My processing was transferred to Flagstar and their online capabilities are kinda trash w/ no app.  Now they want me to make an extra escrow payment of like $1k to cover a supposed deficiency, but there is no deficiency they just want to max out their legally allowed buffer/slush fund.  At least they have to pay me 2% interest which ain't to shabby RN.

I'm going to request removal of escrow as soon as my refi hits 365 days.  I don't know if they will allow it but worth a shot.  They might also require 12 months of actual payments (so more like 14 months from closing date) or 12 months from when the loan was transferred (which would be almost another year)

At least in my state they aren't allowed to charge a fee for this (in most other states they charge 0.25% of the principal balance (!!!)

Crikey!

[talltexan]

2% interest on escrowed funds when your mortgage rate is 2.625% seems...not very strategic.

[dragoncar]

2% interest on escrowed funds when your mortgage rate is 2.625% seems...not very strategic.

Nobody is doing it for the 2%, it’s basically a consolation prize.  You have to consider that most of it is allocated to biannual payments so most people are already going to build up a property tax buffer in their savings account over 6 mo which will earn less than 2% (sure some people will just sell stocks a few days before they pay their property taxes)

But I saved around $1k in costs by doing escrow so as long as I can get out of it relatively soon I come out way ahead on lost opportunity cost