Author Topic: DONT Payoff your Mortgage Club  (Read 538137 times)

joe189man

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Re: DONT Payoff your Mortgage Club
« Reply #2800 on: August 10, 2021, 03:27:00 PM »
Who has the best rates/terms these days?  Will start some quotes now with costco, loandepot etc.

check out amerisave
« Last Edit: August 11, 2021, 08:57:55 AM by joe189man »

bryan995

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Re: DONT Payoff your Mortgage Club
« Reply #2801 on: August 10, 2021, 03:39:35 PM »
how much more can U improve on 2.75% if you stick with 30-year?

Good question. Maybe not much at all? But if I can also cash out refi the 135k to maximize cheap leverage AND interest tax deduction etc, it may still be worth it, even at the same 2.75% rate?

I sort of want as much cheap leverage as absolutely possible..
« Last Edit: August 10, 2021, 03:51:12 PM by bryan995 »

joe189man

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Re: DONT Payoff your Mortgage Club
« Reply #2802 on: August 10, 2021, 03:58:16 PM »
how much more can U improve on 2.75% if you stick with 30-year?

Good question. Maybe not much at all? But if I can also cash out refi the 135k to maximize cheap leverage AND interest tax deduction etc, it may still be worth it, even at the same 2.75% rate?

I sort of want as much cheap leverage as absolutely possible..

you should be in that ball park, i think i am quoted at 2.875% 30 yr 70% LTV cashout with ~$2600 in lender credits (so basically no cost) but as always YMMV

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2803 on: August 10, 2021, 06:09:39 PM »
I always forget about Costco.
We Love Costco, but have checked them repeatedly for re-fi and homeowner's insurance and they've never been even remotely competitive, alas.

dragoncar

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Re: DONT Payoff your Mortgage Club
« Reply #2804 on: August 11, 2021, 01:24:54 AM »
I always forget about Costco.
We Love Costco, but have checked them repeatedly for re-fi and homeowner's insurance and they've never been even remotely competitive, alas.

Same... never found a good deal on travel either.  Found an OK deal on a car once (not the best price but hassle free)

edit: actually I take it back for car rentals costco has been really good to me.  I play the "book and rebook" game where I book a new reservation whenever I see the price drop.  There's also a website that will track those price drops for you


Flyingstache

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Re: DONT Payoff your Mortgage Club
« Reply #2805 on: August 12, 2021, 12:01:56 PM »
Hello, was recommended to post in this thread to learn from the experts!

Curious about if we should do a cash out refi back to 30yrs & invest the $$$ from the refi. Here are some details

Us -  30yr old teachers with 2 kids under 3 (hope to have more in the future). No debt other than house. Have $60k in savings currently & about $200k in investments. Living in one of the fastest growing counties in OH

House - Purchased in 2018 for $167,500. Refinanced in March 2020 to 15yr at 2.75%. Current balance on the loan is about $97k. Due to crazy housing market, home would currently appraise for $225-250k based on similar homes selling in our neighborhood. Paying $1,100/month with insurance & taxes

Will likely move within the next 2-5yrs. Will either sell the house or keep it as our first rental property. Similar homes are renting for $1,600/month with some up to $2k due to limited options.

So, knowing we will likely move in the next few years, does it make sense to refinance & do a cash out to have more money to invest or do we just keep doing what we are doing?

Thanks for any insights & have a great day!

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #2806 on: August 12, 2021, 12:08:55 PM »
With the short time frame, I'm thinking "eh either way". If you knew for sure you'd keep it for a long time, either living in it or eventually rent it out, then seems like a no-brainer to me to do the refinance. If you might sell in 2 years, that reduces the certainty the market will do better than your interest rate vs. just getting a larger check when you close on the sale.

Have you gotten detailed quotes on refinancing? What terms are available to you?

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2807 on: August 12, 2021, 12:21:38 PM »
Hello, was recommended to post in this thread to learn from the experts!

Curious about if we should do a cash out refi back to 30yrs & invest the $$$ from the refi. Here are some details

Us -  30yr old teachers with 2 kids under 3 (hope to have more in the future). No debt other than house. Have $60k in savings currently & about $200k in investments. Living in one of the fastest growing counties in OH

House - Purchased in 2018 for $167,500. Refinanced in March 2020 to 15yr at 2.75%. Current balance on the loan is about $97k. Due to crazy housing market, home would currently appraise for $225-250k based on similar homes selling in our neighborhood. Paying $1,100/month with insurance & taxes

Will likely move within the next 2-5yrs. Will either sell the house or keep it as our first rental property. Similar homes are renting for $1,600/month with some up to $2k due to limited options.

So, knowing we will likely move in the next few years, does it make sense to refinance & do a cash out to have more money to invest or do we just keep doing what we are doing?

Thanks for any insights & have a great day!
I would do it. My younger brother ignored ignored my advice (surprise, right?) and re-fied to a 15 year loan. A few years later, they decided to buy a bigger house and keep the current one. It was a huge scramble to re-fi back to a 30 year loan. He shoulda listened to his big sister...

A 30 year loan gives you the most options, even if you don't end up keeping it. Find a loan where the lender pays most or all of the fees. They're out there. Oh, wait. They're out there for owner occupied properties. You'll never get these rock-bottom, low-or-no fee re-fis on investment properties, #askmehowiknow.

Do it now. We know you won't blow the money on shiny shit or individual stocks, 'cuz you're a Mustachian, right?

Flyingstache

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Re: DONT Payoff your Mortgage Club
« Reply #2808 on: August 12, 2021, 07:04:16 PM »
@dandarc & @Dicey thanks so much for the input & advice!

Assuming we do the refinance, would you suggest doing a pure refinance or doing the cash out refi? If doing the cash out refi would you suggest going all the way back to 80% LTV? If doing so, it would be best to invest all the money correct?

Thank you again for your help!

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2809 on: August 12, 2021, 10:53:20 PM »
@dandarc & @Dicey thanks so much for the input & advice!

Assuming we do the refinance, would you suggest doing a pure refinance or doing the cash out refi? If doing the cash out refi would you suggest going all the way back to 80% LTV? If doing so, it would be best to invest all the money correct?

Thank you again for your help!
I can't tell you what to do with it*. A lot would depend on the way your other $200k is invested**, but I can give you something that might be more valuable. Check with Rate Plus. DH was very favorably impressed with their rates and fee schedule, until they found out we were looking to re-fi our rentals, whomp, whomp. I'm not sure you can get 80% LTV on a re-fi, but if you are good with money and have the nerves to ride through a market downturn without freaking out, I'd take as much as I could get.

*Well, I sort of can: Always, always read JLCollinsNH for investment strategies and use Vanguard.

**I'm huge a fan of big, fat emergency funds, but if that's the $60k "savings" you also listed, I'd be tempted to put some of that to work. In your circumstances, I think it's way too much. I think 6 months of net pay (not gross earnings) is sufficient, and it looks like you're well beyond that. Having so much idle cash is really a drag on your growth.


ender

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Re: DONT Payoff your Mortgage Club
« Reply #2810 on: August 13, 2021, 06:13:04 AM »
Anyone doing cash out refinances recently?

Zillow's appraisal (different than zestimate) pegs our house value high enough that if we wanted to we could keep 20% equity and withdraw almost $50k.

Fire2025

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Re: DONT Payoff your Mortgage Club
« Reply #2811 on: August 13, 2021, 08:16:13 AM »
I'm thinking about doing a cash out refi and pulling 50k from my home equity. 

I've always been a DPOYM person, but the mental game of pulling equity, to invest, is very different. 

I have 235k in equity so this would only be a blip.  But I'm still having a hard time pulling the trigger.

joe189man

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Re: DONT Payoff your Mortgage Club
« Reply #2812 on: August 13, 2021, 08:44:11 AM »
My cashout refi closes next week, i stayed below a 70%LTV and the lender waived the appraisal, i am not sure where they got the home value. According to them the value went up $135k in about 8 months.

The cost of the increased monthly payments vs the cash we are getting has a 20 year break even point. i am 90% certain by that time we will have either moved or have the cash to payoff the mortgage

bryan995

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Re: DONT Payoff your Mortgage Club
« Reply #2813 on: August 13, 2021, 09:09:55 AM »
What’s the sweet spot for a cash out refi?

70% LTV or up to jumbo limits? 

Just saw a few folks on WCI lock a 2.375% 30 year, wild !

Weisass

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Re: DONT Payoff your Mortgage Club
« Reply #2814 on: August 13, 2021, 11:56:25 AM »
What’s the sweet spot for a cash out refi?

70% LTV or up to jumbo limits? 

Just saw a few folks on WCI lock a 2.375% 30 year, wild !

We locked a 2.25% 30 year last week.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2815 on: August 13, 2021, 01:29:08 PM »
What’s the sweet spot for a cash out refi?

70% LTV or up to jumbo limits? 

Just saw a few folks on WCI lock a 2.375% 30 year, wild !

We locked a 2.25% 30 year last week.
Wow! What were the fees? Did you have to pay any points?

bryan995

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Re: DONT Payoff your Mortgage Club
« Reply #2816 on: August 13, 2021, 01:59:38 PM »
What’s the sweet spot for a cash out refi?

70% LTV or up to jumbo limits? 

Just saw a few folks on WCI lock a 2.375% 30 year, wild !

We locked a 2.25% 30 year last week.

Yes tell more ! I’m about to take out as much as the bank will legally let me at 2.25 :)

joe189man

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Re: DONT Payoff your Mortgage Club
« Reply #2817 on: August 13, 2021, 04:00:53 PM »
i could have gotten 2.00% but it was ~$17k in lender points
My 2.875%, where i locked, had ~$2600 in lender credits

sonofsven

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Re: DONT Payoff your Mortgage Club
« Reply #2818 on: August 13, 2021, 05:40:04 PM »
What’s the sweet spot for a cash out refi?

70% LTV or up to jumbo limits? 

Just saw a few folks on WCI lock a 2.375% 30 year, wild !

From what I saw to lock that low on a 30 would require quite a bit of cost.
I locked @ 2.75 with credit back. I believe the max you can get back in credits is $2000 (this is for a non cash out); my lender is tweaking the loan amount slightly so I hit that max.
Better than no cost, they are paying you.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2819 on: August 13, 2021, 10:46:46 PM »
i could have gotten 2.00% but it was ~$17k in lender points
My 2.875%, where i locked, had ~$2600 in lender credits
Seventeen grand! How big is the loan?

Weisass

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Re: DONT Payoff your Mortgage Club
« Reply #2820 on: August 14, 2021, 11:36:40 AM »
So, we locked a 2.25 30 year last week. We did have to pay a point, but we have no plans to move at any point, and the payoff on point is a little over a year. In return our monthly goes down significantly, which will allow us to dollar cost average more on a rolling basis into the market. We have the cash to be able to pay the point without taking anything out of the market, so we felt this was more than worth it.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2821 on: August 14, 2021, 07:37:25 PM »
So, we locked a 2.25 30 year last week. We did have to pay a point, but we have no plans to move at any point, and the payoff on point is a little over a year. In return our monthly goes down significantly, which will allow us to dollar cost average more on a rolling basis into the market. We have the cash to be able to pay the point without taking anything out of the market, so we felt this was more than worth it.
I'd probably do the same under the circumstances. Congratulations!

Radagast

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Re: DONT Payoff your Mortgage Club
« Reply #2822 on: August 15, 2021, 09:33:25 PM »
I notice I can likely do a cash out of $100k+ at either my current rate of 2.75% or maybe even 2.625%. The goal would to be maximize the "conforming loan" limit, and then I would be free to pursue lower interest rates exclusively for a few years. But I would probably restrain any future refinances to the greater of 70% and the conforming limit unless something amazing popped up. I ran it by the wife, who says "I don't know much about investing. Did you ask that mustache?" Consider yourselves asked :).

The money would probably go to 60% VEA 40% VWALX*, giving a total taxable split 1/3 RZV, 1/3 VEA, 1/3 VWALX. Doing my best to backtest that allocation, it gives a pleasant combo of better returns than all but a 100% VTI stock allocation, but better worse case scenarios that most "guru" allocations. Also, a mixture of VEA and VWALX distributes a yield of about 2.625%, similar to the mortgage rate. Monthly mortgage payments are higher because of principal, but the investments (stocks anyhow) are likely to grow dividends over time.

Of course we could just try for a rate reduction. Nothing wrong with a lower monthly payment by a few dozen dollars either.

*unless I try to get a $500 brokerage bonus from etrade or somewhere.


bryan995

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Re: DONT Payoff your Mortgage Club
« Reply #2823 on: August 16, 2021, 11:27:04 AM »
Loandepot is quoting 2.75%, 68% LTV @ 14K in points, to maximize loan amount to the conforming limits (750k).
If my appraisal can bring us to 60% LTV, could save another ~$3k in costs. (unlikely)

3.125% with no points with the 135k cash out. Eek not great.


Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2824 on: August 16, 2021, 01:01:23 PM »
Loandepot is quoting 2.75%, 68% LTV @ 14K in points, to maximize loan amount to the conforming limits (750k).
If my appraisal can bring us to 60% LTV, could save another ~$3k in costs. (unlikely)

3.125% with no points with the 135k cash out. Eek not great.
Can you please explain what isn't great about that?

joe189man

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Re: DONT Payoff your Mortgage Club
« Reply #2825 on: August 16, 2021, 02:40:20 PM »
i could have gotten 2.00% but it was ~$17k in lender points
My 2.875%, where i locked, had ~$2600 in lender credits
Seventeen grand! How big is the loan?

its about 2 points i think, loan of ~$465k

bryan995

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Re: DONT Payoff your Mortgage Club
« Reply #2826 on: August 16, 2021, 04:35:49 PM »
Loandepot is quoting 2.75%, 68% LTV @ 14K in points, to maximize loan amount to the conforming limits (750k).
If my appraisal can bring us to 60% LTV (1.25M), could save another ~$3k in costs. (unlikely)

3.125% with no points with the 135k cash out. Eek not great.
Can you please explain what isn't great about that?

Ha, the rate!  We are at 2.75% now, 30yr. 

All of this talk of 2.2, 2.3, ... 2.6 has spoiled me.
I will have to call a few other lenders to compare.

We'd likely either invest the cash-out into taxable or buy our first rental property (looking seriously as airbnb short term rentals as something fun to do during FIRE).

Also looked into a 15yr.
2.375 no points.  Increase loan amount to max conforming of 752,350, for a total monthly payment of $6079.

Can you explain to me why you think it is GREAT? :)




Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2827 on: August 17, 2021, 05:31:38 AM »
Because I'm much older than you are. I remember having excellent credit and being elated to get an "only" 7% rate mortgage on a new purchase. The difference between 2.75 and 3.125% is negligible, especially with so much cash out. Don't let the perfect be the enemy of the good.

bryan995

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Re: DONT Payoff your Mortgage Club
« Reply #2828 on: August 17, 2021, 05:55:43 AM »
I notice I can likely do a cash out of $100k+ at either my current rate of 2.75% or maybe even 2.625%. The goal would to be maximize the "conforming loan" limit, and then I would be free to pursue lower interest rates exclusively for a few years. But I would probably restrain any future refinances to the greater of 70% and the conforming limit unless something amazing popped up. I ran it by the wife, who says "I don't know much about investing. Did you ask that mustache?" Consider yourselves asked :).

The money would probably go to 60% VEA 40% VWALX*, giving a total taxable split 1/3 RZV, 1/3 VEA, 1/3 VWALX. Doing my best to backtest that allocation, it gives a pleasant combo of better returns than all but a 100% VTI stock allocation, but better worse case scenarios that most "guru" allocations. Also, a mixture of VEA and VWALX distributes a yield of about 2.625%, similar to the mortgage rate. Monthly mortgage payments are higher because of principal, but the investments (stocks anyhow) are likely to grow dividends over time.

Of course we could just try for a rate reduction. Nothing wrong with a lower monthly payment by a few dozen dollars either.

*unless I try to get a $500 brokerage bonus from etrade or somewhere.

Which lender?
Planning to do exactly the same.

Confirming limit where I live is $752,350. Will cash out refi up to that amount to maximize leverage. That would put us at ~63% LTV.

The lender I spoke to today expects a massive increase to the confirming limit for next year (jan1). So assuming rates stay low, and housing keeps appreciating, could likely redo this again. And then even one final time a few months later  to lock in a low (non cash out) rate. :)
Rates seem to be a bit higher for cash-outs.

Folks on bogleheads are all using better.com to match rates and then receive a $2000 AMEX statement upon close. Will look into this.

bryan995

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Re: DONT Payoff your Mortgage Club
« Reply #2829 on: August 17, 2021, 06:15:57 AM »
Because I'm much older than you are. I remember having excellent credit and being elated to get an "only" 7% rate mortgage on a new purchase. The difference between 2.75 and 3.125% is negligible, especially with so much cash out. Don't let the perfect be the enemy of the good.

Agreed - you are right. Plus I can likely refinance again :)

Planning to hit FI  in ~5 years. I still need to do a bit more reading in this thread…  Not sure if carrying a large mortage (4-6k/mo) into FIRE is wise. Was also considering how nice it would be to not have a payment on our primary … and to instead, carry a mortgage on 3-4 rentals into FIRE. Then we’d hedge our bets a bit and could always unwind the rentals in the event of some major retractions. 

But then again, these historically low rates and inflation fears make debt look …  so very good.  Very much want to load up to my ‘safe limit’.
« Last Edit: August 17, 2021, 06:20:37 AM by bryan995 »

Weisass

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Re: DONT Payoff your Mortgage Club
« Reply #2830 on: August 17, 2021, 06:29:15 AM »
Because I'm much older than you are. I remember having excellent credit and being elated to get an "only" 7% rate mortgage on a new purchase. The difference between 2.75 and 3.125% is negligible, especially with so much cash out. Don't let the perfect be the enemy of the good.

I was talking to my parents about our mortgage refinance recently, and my dad reminded me that when they bought their land in the 80s in NorCal, they were stuck with a mortgage with a rate that was nearly 18% *(they had excellent credit, too).

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2831 on: August 17, 2021, 07:40:31 AM »
Because I'm much older than you are. I remember having excellent credit and being elated to get an "only" 7% rate mortgage on a new purchase. The difference between 2.75 and 3.125% is negligible, especially with so much cash out. Don't let the perfect be the enemy of the good.

I was talking to my parents about our mortgage refinance recently, and my dad reminded me that when they bought their land in the 80s in NorCal, they were stuck with a mortgage with a rate that was nearly 18% *(they had excellent credit, too).
Sometimes I kick my past self for not investing in equities sooner. Then I remember that I was buying CD's that were paying up to 16% for as long as 60 months. That became the down payment on my first house when mortgage rates finally started coming down. Ah yes, the olden days, lol. I don't remember what the rate was, but it was obviously more than the 7% I was happy to get on the next property.

dandarc

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Re: DONT Payoff your Mortgage Club
« Reply #2832 on: August 17, 2021, 08:12:04 AM »
Rather than increasing rate on whole loan, you might see if you can get a 30 year fixed-rate home equity loan at a "good enough" interest rate just for the cash out. Depends on the details, but keeping existing balance at 2.75% and only paying a higher rate on the cash-out might work out better than 3.125% on the whole amount.

bryan995

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Re: DONT Payoff your Mortgage Club
« Reply #2833 on: August 17, 2021, 09:38:36 AM »
Rather than increasing rate on whole loan, you might see if you can get a 30 year fixed-rate home equity loan at a "good enough" interest rate just for the cash out. Depends on the details, but keeping existing balance at 2.75% and only paying a higher rate on the cash-out might work out better than 3.125% on the whole amount.

Great point.  Will look into this. 

Though I don't entirely have a pressing need for the cash-out - my main goal was to hedge a bit and increase the amount of 'good' debt I am carrying forward.  Maybe that alone is crazy :)

A heloc may then also make a future refi more difficult (assuming I use the cash up)?  Hoping to even do this again in 2022 when the conforming limits increase.
If I do proceed, I would likely use the cash to make my first cash-flow-producing investment into RE (short or long term rental).

Working on other quotes now to see if I can't get closer to 2.75% (w/ either no points or discounted points).
~70% LTV seems like a fairly safe space to be.

« Last Edit: August 17, 2021, 09:48:41 AM by bryan995 »

sonofsven

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Re: DONT Payoff your Mortgage Club
« Reply #2834 on: August 17, 2021, 11:55:17 AM »
Just closed with Better on a thirty year at 2.75, cash back at closing $1996.00, loan amount $220,749 (tweaked slightly from $220,348 payoff amount for maximum cash back)
Applied for the Cash Magnet (spend $2000 in six months for a $200 bonus) card from Amex before closing for an additional $2,000 statement credit.
19 days from rate lock to closing.
Signed docs with mobile notary on my front porch, done in thirty minutes.
It is very easy to refi right now.

Radagast

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Re: DONT Payoff your Mortgage Club
« Reply #2835 on: August 17, 2021, 10:33:04 PM »
I notice I can likely do a cash out of $100k+ at either my current rate of 2.75% or maybe even 2.625%. The goal would to be maximize the "conforming loan" limit, and then I would be free to pursue lower interest rates exclusively for a few years. But I would probably restrain any future refinances to the greater of 70% and the conforming limit unless something amazing popped up. I ran it by the wife, who says "I don't know much about investing. Did you ask that mustache?" Consider yourselves asked :).

The money would probably go to 60% VEA 40% VWALX*, giving a total taxable split 1/3 RZV, 1/3 VEA, 1/3 VWALX. Doing my best to backtest that allocation, it gives a pleasant combo of better returns than all but a 100% VTI stock allocation, but better worse case scenarios that most "guru" allocations. Also, a mixture of VEA and VWALX distributes a yield of about 2.625%, similar to the mortgage rate. Monthly mortgage payments are higher because of principal, but the investments (stocks anyhow) are likely to grow dividends over time.

Of course we could just try for a rate reduction. Nothing wrong with a lower monthly payment by a few dozen dollars either.

*unless I try to get a $500 brokerage bonus from etrade or somewhere.

Which lender?
Planning to do exactly the same.

Confirming limit where I live is $752,350. Will cash out refi up to that amount to maximize leverage. That would put us at ~63% LTV.

The lender I spoke to today expects a massive increase to the confirming limit for next year (jan1). So assuming rates stay low, and housing keeps appreciating, could likely redo this again. And then even one final time a few months later  to lock in a low (non cash out) rate. :)
Rates seem to be a bit higher for cash-outs.

Folks on bogleheads are all using better.com to match rates and then receive a $2000 AMEX statement upon close. Will look into this.
Sebonic is the one I am leaning toward (of the few I did more than a few seconds research on). As of this morning they said 2.75%, with a small lender points credit. Better doesn't serve my type, so they were never an option here.

In the mean time I am triple checking my assumptions before I yoink $100,000+. But, even investing in the S&P500 from the Y2K top, starting with $100,000 would have given much better results ($57,051) at the 2009 market bottom than DCA $408 per month* after starting with a $3,000 saved lender cost would have ($34,876). And if it was better at the bottom, it was definitely better after. And other asset allocations better yet.

*monthly payment on a $100,000 mortgage at 2.75%

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2000&firstMonth=4&endYear=2009&lastMonth=2&calendarAligned=true&includeYTD=false&initialAmount=3000&annualOperation=1&annualAdjustment=408&inflationAdjusted=false&annualPercentage=0.0&frequency=2&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=VFINX&allocation1_1=100

ender

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Re: DONT Payoff your Mortgage Club
« Reply #2836 on: August 18, 2021, 06:21:51 AM »
Just closed with Better on a thirty year at 2.75, cash back at closing $1996.00, loan amount $220,749 (tweaked slightly from $220,348 payoff amount for maximum cash back)
Applied for the Cash Magnet (spend $2000 in six months for a $200 bonus) card from Amex before closing for an additional $2,000 statement credit.
19 days from rate lock to closing.
Signed docs with mobile notary on my front porch, done in thirty minutes.
It is very easy to refi right now.

I did a preliminary thing with them for a cash out refi and it's... expensive to do a 30 year cash out refi.

For the same interest rate we have (2.875%) it'd be close to $5k in loan costs to cash out. Meh.

firelight

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Re: DONT Payoff your Mortgage Club
« Reply #2837 on: August 22, 2021, 05:00:41 PM »
We are buying a house for 1.68M in Bay area with 25% downpayment and 1.75% interest rate(APR 2.175%) at 10/6 ARM. Currently, our principal + interest comes to $4501.27 per month. When we include hoa, insurance and property taxes, it goes up to $6200 per month. DH and I can afford to do extra principal-only payments on mortgage.

We are not sure how to calculate that on ARM and how to make sure we are using the full interest deductions.
1) What does $750,000 interest deductions mean? Is it 750k per year of deduction or is it over the life of the loan? For example, our loan is for 1.26M. Can we only deduct interest for 750k of that loan? How to calculate what that number is?

2) When does paying off early vs not make sense?

3) Is there any way to reduce the APR of the property? This is from Wells Fargo and they already gave their best for interest rate. I'm wondering if APR is just a formula result or is there any leeway in reducing it?

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2838 on: August 23, 2021, 05:56:09 AM »
@firelight we wish you the utmost success with this new property!

Here at the DNPYM club, we celebrate the flexibility that responsible use of mortgage debt can give you over the life of the loan. At its most basic, that means taking the extra money (you made it sound like you have some that you're considering for extra principal payments toward the mortgage), and instead investing it according to your investor policy statement.

In my own case, keeping liquid investments set aside--and that's the key, it's critical to save the extra--from my primary residence for 2013-2019 gave me the flexibility to move our household on our own time-table two years ago, as we bought the new property before selling the old one, and didn't need to go through the routine of living in a property while showing it. At the moment, we don't have a mortgage with anything like the low rates you're describing, but our payments are low enough that we're benefitting from the flexibility to set aside additional money for college planning for the kids and health care costs.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #2839 on: August 23, 2021, 06:19:25 AM »
@firelight we wish you the utmost success with this new property!

Here at the DNPYM club, we celebrate the flexibility that responsible use of mortgage debt can give you over the life of the loan. At its most basic, that means taking the extra money (you made it sound like you have some that you're considering for extra principal payments toward the mortgage), and instead investing it according to your investor policy statement.

In my own case, keeping liquid investments set aside--and that's the key, it's critical to save the extra--from my primary residence for 2013-2019 gave me the flexibility to move our household on our own time-table two years ago, as we bought the new property before selling the old one, and didn't need to go through the routine of living in a property while showing it. At the moment, we don't have a mortgage with anything like the low rates you're describing, but our payments are low enough that we're benefitting from the flexibility to set aside additional money for college planning for the kids and health care costs.

Echoing talltexan - we were uprooted due to COVID and job reassignments. I was amazed at how much of a benefit being able to purchase a new home without it being contingent on the sale of an existing home had in this hot housing market. It instantly put us right behind the 'cash buyers' and ahead of everyone else (especially since we could bring more cash to the table in the form of earnest money and a larger down payment).


Malcat

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Re: DONT Payoff your Mortgage Club
« Reply #2840 on: August 23, 2021, 06:34:18 AM »
@firelight we wish you the utmost success with this new property!

Here at the DNPYM club, we celebrate the flexibility that responsible use of mortgage debt can give you over the life of the loan. At its most basic, that means taking the extra money (you made it sound like you have some that you're considering for extra principal payments toward the mortgage), and instead investing it according to your investor policy statement.

In my own case, keeping liquid investments set aside--and that's the key, it's critical to save the extra--from my primary residence for 2013-2019 gave me the flexibility to move our household on our own time-table two years ago, as we bought the new property before selling the old one, and didn't need to go through the routine of living in a property while showing it. At the moment, we don't have a mortgage with anything like the low rates you're describing, but our payments are low enough that we're benefitting from the flexibility to set aside additional money for college planning for the kids and health care costs.

Echoing talltexan - we were uprooted due to COVID and job reassignments. I was amazed at how much of a benefit being able to purchase a new home without it being contingent on the sale of an existing home had in this hot housing market. It instantly put us right behind the 'cash buyers' and ahead of everyone else (especially since we could bring more cash to the table in the form of earnest money and a larger down payment).

OMG yes, I would never ever buy and sell at the same time. That's just nuts.

Weisass

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Re: DONT Payoff your Mortgage Club
« Reply #2841 on: August 23, 2021, 07:56:47 AM »
@firelight we wish you the utmost success with this new property!

Here at the DNPYM club, we celebrate the flexibility that responsible use of mortgage debt can give you over the life of the loan. At its most basic, that means taking the extra money (you made it sound like you have some that you're considering for extra principal payments toward the mortgage), and instead investing it according to your investor policy statement.

In my own case, keeping liquid investments set aside--and that's the key, it's critical to save the extra--from my primary residence for 2013-2019 gave me the flexibility to move our household on our own time-table two years ago, as we bought the new property before selling the old one, and didn't need to go through the routine of living in a property while showing it. At the moment, we don't have a mortgage with anything like the low rates you're describing, but our payments are low enough that we're benefitting from the flexibility to set aside additional money for college planning for the kids and health care costs.

Echoing talltexan - we were uprooted due to COVID and job reassignments. I was amazed at how much of a benefit being able to purchase a new home without it being contingent on the sale of an existing home had in this hot housing market. It instantly put us right behind the 'cash buyers' and ahead of everyone else (especially since we could bring more cash to the table in the form of earnest money and a larger down payment).

OMG yes, I would never ever buy and sell at the same time. That's just nuts.

can't agree with that more. Watching my good friends take a HELOC to tide them over when they bought a new house and before selling their old one was so stressful, and it wasn't even me doing it. They still talk about how much that sucked.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2842 on: August 23, 2021, 08:14:59 AM »
I hope this came out of my original post (for any newcomers) that this isn't a group in which we celebrate slow paydown of the mortgage so that you're spraying money out in the world with ridiculous consumption. The purpose of the slow paydown is to locate other investments and commit to them for a long enough horizon that they can overtake the mortgage rate.

And learning how to locate those investments is part of the journey.

firelight

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Re: DONT Payoff your Mortgage Club
« Reply #2843 on: August 23, 2021, 12:41:00 PM »
I totally agree on keeping the money working in stock market vs early payoff of mortgage at such low rates.

I'm only wondering if there is a time/scenario where it makes sense to do early payments. I've not found any so far (except for peace of mind, of course). So, I'm curious what I'm missing. I'd love to know your thoughts.

Radagast

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Re: DONT Payoff your Mortgage Club
« Reply #2844 on: August 23, 2021, 09:41:55 PM »
I totally agree on keeping the money working in stock market vs early payoff of mortgage at such low rates.

I'm only wondering if there is a time/scenario where it makes sense to do early payments. I've not found any so far (except for peace of mind, of course). So, I'm curious what I'm missing. I'd love to know your thoughts.
Nope, never does :) pay it off all at once, or not at all, aka the bare minimum. Especially at 1.75%. Inflation will destroy that. 90% of a house is the worst amount to own, because you have all of the payments and none of the cash.

Edit:
3) Is there any way to reduce the APR of the property? This is from Wells Fargo and they already gave their best for interest rate. I'm wondering if APR is just a formula result or is there any leeway in reducing it?
That is a crazy high APR difference. You must be paying a boat load of points for that, or else fees extraordinaire. Probably not a good idea. Your APR should be within, like, 0.1% of the rate for example 1.75% --> 1.85% APR. Shop around. Even if you need WF to make closing, absolutely do not pay extra points or fees, make those go away. You can refinance later, but you can't get back the overpaid fees and points. Better to get a higher rate and lower upfront costs.
« Last Edit: August 23, 2021, 10:27:51 PM by Radagast »

Fire2025

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Re: DONT Payoff your Mortgage Club
« Reply #2845 on: August 24, 2021, 09:45:33 AM »
Hey all,
I have a question.  I'm doing a refi with a 50,000 cash out, going from 3.75/ 30yrs to 2.7/ 30yrs, 2000 in fees. Total loan 280K, 31% of house value.  Payment stays the same.  Original loan 273K in 2017. 

Cash out will go into the market in keeping with my current AA.

My partner, who is extremely debt averse, said I'm flushing the interest I've paid in the last 4 years down the toilet, with the refi.  And asked when the lower interest rate would cover that loss?
 
Sorry if I'm asking a stupid question.  But, what is the answer to the question of "what about the interest you've already paid when you refi"? 

Kem

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Re: DONT Payoff your Mortgage Club
« Reply #2846 on: August 24, 2021, 10:18:21 AM »
Calculate interest paid and principal paid over the ‘lost’ period.

 

1.       The total interest paid over the life of the loan actually will go down x$.

2.       I am converting x$ of interest and x$ of principal in a non-productive asset into a productive asset tax free.

3.       50K in VTI will likely grow to a total return of at least 660K at the end of the 30 year period.  On the low end it could be 475K, on the upper end it could be 1.2M. 

4.       The only cost being the $2,000 now, the x$ of converted interest, plus the x$* years of remaining P&I payment.

5.       The opportunity cost is $26K (based on the $2K now) + the (additional $ noted above) reduced by 1.5x due to inflation adjustments.

6.       The increased productive liquidity actually reduces our financial risk.   

7.       That 660K pool will then provide 26K/year until our end of days.


Edit:  these are shoot from the hip off the top of my head numbers.... Please run actual return scenarios that you're comfortable with.
 
« Last Edit: August 24, 2021, 11:55:29 AM by Kem »

Flyingstache

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Re: DONT Payoff your Mortgage Club
« Reply #2847 on: August 25, 2021, 05:37:18 AM »
@dandarc & @Dicey thanks so much for the input & advice!

Assuming we do the refinance, would you suggest doing a pure refinance or doing the cash out refi? If doing the cash out refi would you suggest going all the way back to 80% LTV? If doing so, it would be best to invest all the money correct?

Thank you again for your help!
I can't tell you what to do with it*. A lot would depend on the way your other $200k is invested**, but I can give you something that might be more valuable. Check with Rate Plus. DH was very favorably impressed with their rates and fee schedule, until they found out we were looking to re-fi our rentals, whomp, whomp. I'm not sure you can get 80% LTV on a re-fi, but if you are good with money and have the nerves to ride through a market downturn without freaking out, I'd take as much as I could get.

*Well, I sort of can: Always, always read JLCollinsNH for investment strategies and use Vanguard.

**I'm huge a fan of big, fat emergency funds, but if that's the $60k "savings" you also listed, I'd be tempted to put some of that to work. In your circumstances, I think it's way too much. I think 6 months of net pay (not gross earnings) is sufficient, and it looks like you're well beyond that. Having so much idle cash is really a drag on your growth.

Thanks so much for the advice.

I also think the $60k in savings (Ally) is too much but we have kept it there thinking we can use it as a down payment on our next home if we keep our current home as a rental. This $60k is something we need to re-evaluate!

The rest of our money is in Vanguard with some in a Traditional IRA (previous biz job 401k rollover) & Roth IRAs with the rest in the VTSAX fund.

Both of us come from families that were all about paying off your house as quickly as possible so this is all a big change of mindset for us!

Fire2025

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Re: DONT Payoff your Mortgage Club
« Reply #2848 on: August 25, 2021, 08:16:53 AM »
Calculate interest paid and principal paid over the ‘lost’ period.

 

1.       The total interest paid over the life of the loan actually will go down x$.

2.       I am converting x$ of interest and x$ of principal in a non-productive asset into a productive asset tax free.

3.       50K in VTI will likely grow to a total return of at least 660K at the end of the 30 year period.  On the low end it could be 475K, on the upper end it could be 1.2M. 

4.       The only cost being the $2,000 now, the x$ of converted interest, plus the x$* years of remaining P&I payment.

5.       The opportunity cost is $26K (based on the $2K now) + the (additional $ noted above) reduced by 1.5x due to inflation adjustments.

6.       The increased productive liquidity actually reduces our financial risk.   

7.       That 660K pool will then provide 26K/year until our end of days.


Edit:  these are shoot from the hip off the top of my head numbers.... Please run actual return scenarios that you're comfortable with.

Kem thanks for this info.  I ran a bunch of numbers yesterday, from info here and around interwebs/ and tubes. 

I think what I'm seeing from his argument is a type of "sunk cost" issue.  Overtime this looks like the best choice, but time will reveal all.

dragoncar

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Re: DONT Payoff your Mortgage Club
« Reply #2849 on: August 25, 2021, 03:27:47 PM »
Hey all,
I have a question.  I'm doing a refi with a 50,000 cash out, going from 3.75/ 30yrs to 2.7/ 30yrs, 2000 in fees. Total loan 280K, 31% of house value.  Payment stays the same.  Original loan 273K in 2017. 

Cash out will go into the market in keeping with my current AA.

My partner, who is extremely debt averse, said I'm flushing the interest I've paid in the last 4 years down the toilet, with the refi.  And asked when the lower interest rate would cover that loss?
 
Sorry if I'm asking a stupid question.  But, what is the answer to the question of "what about the interest you've already paid when you refi"?

Interest is what you pay each month to keep the loan.  Every month you choose to either repay the loan entirely or pay interest.  Each month you “flush the interest down the toilet”…. It’s gone when you pay it.  Is it worth it?  To most here, yes, because flushing the interest allows us to turn on the fire hose of investment returns. 

But refinancing doesn’t re-flush the previously paid interest.  As already discussed it’s long gone.  Like you said, sunk cost fallacy.

An analogy.  Tell your partner you found a cheaper wireless carrier — you could even get an extra line for the same price if you wanted to — but don’t want to flush all your previous bill payments down the drain.  See if it feels the same.