DONT Payoff your Mortgage Club

[nereo]

Bought our first place in July 2021, financed $410K @ 2.75% for 30 years.  I really am not trying to pay this off early, but am so naturally debt averse that the first thing I did was make a principal only payment in August before the 1st payment was even due in September.  IDK, I couldn't help myself?!  Here to try to keep myself on the mathematically smarter track, I guess?!

You recognize that there’s a strong mathematical advantage towards not paying down your fixed very low interest loans early. Fantastic - you are well ahead of most. What’s prompting you to make early payments is emotional, and as every economist will tell you, one shouldn’t let emotion dictate your finances.

Now you can reflect on why you feel compelled to do something you realize is not in your best interests, and find ways to address that. For me it was the realization that it was always “either/or” - I could have less mortgage or more money to deploy whenever and however was needed. If I spent the money on the mortgage it couldn’t (easily) be used for anything else, and ultimately it became apparent there were *many* more productive places for that money for me.

Others (like my sister) feel compelled to follow the herd advice. It’s social pressure. So she set up a home sinking fund and to the outside world pretends that her mortgage balance is whatever it is minus the sinking fund. Social pressure managed.

Many others just want “the good feeling” of no mortgage payment. Strategies there can be broad - one I’ve seen as effective is to ask what excites more: a $450K home with ‘only monthly T&I payments (still substantial), or an investment account with $600,000+ in it.

Up to you to find out what works, but good that you recognize it’s not a rational desire.

[talltexan]

Bought our first place in July 2021, financed $410K @ 2.75% for 30 years.  I really am not trying to pay this off early, but am so naturally debt averse that the first thing I did was make a principal only payment in August before the 1st payment was even due in September.  IDK, I couldn't help myself?!  Here to try to keep myself on the mathematically smarter track, I guess?!

@catccc , Now that you've enjoyed the adrenaline rush of accelerating your paydown by several months, we're asking you to recommit to our DNPYM way of living by making a sacrifice. Scour your couch cushions for whatever you can find and entrust it to Vanguard like this week! Only by enlarging the investment account can the DNPYM traditions be fully honored.

I'd do it myself, but payday isn't until Thursday, and my mortgage payments have to be sent by mail.

[bryan995]

Just signed the paperwork for our cash out refi.  2.99% 30yr w/ $126k out.  Looking at investment properties now.  Torn between furnished-medium-term in FL vs a unfurnished-long-term in AL vs a furnished-short-term in CA.

~3 months ago, we had tesla solar+powerwalls w/ financing added to the home.  Apparently the loan does not show up until Tesla receives PTO from the energy provider, so the bank was none the wiser.  Luckily that has not yet happened yet, so we were able to complete this refi without any issue.  Solar loan is at 0.99% APR so it was a no brainer.

Next time we refi we may run into some issues though as it seems having a solar loan/lean on the home can block some refis.

As long as you're buying it and not leasing, the hassle should be minimal. Leased solar is a whole other can of worms.

Yes, purchase (via financing), would never lease ... yuck! 

And good to know - it came up often enough during that closing that it made me wonder.  Glad to hear that my next refi (with financed solar) should be mostly hassle free, assuming rates stay low!

Would still like to refinance once more, in an attempt to lock in a even lower rate due to not having the cash out portion...  Assuming of course we stay at ~60% LTV and rates stay sub 3%.  gulp.

[JJ-]

Just signed the paperwork for our cash out refi.  2.99% 30yr w/ $126k out.  Looking at investment properties now.  Torn between furnished-medium-term in FL vs a unfurnished-long-term in AL vs a furnished-short-term in CA.

~3 months ago, we had tesla solar+powerwalls w/ financing added to the home.  Apparently the loan does not show up until Tesla receives PTO from the energy provider, so the bank was none the wiser.  Luckily that has not yet happened yet, so we were able to complete this refi without any issue.  Solar loan is at 0.99% APR so it was a no brainer.

Next time we refi we may run into some issues though as it seems having a solar loan/lean on the home can block some refis.

As long as you're buying it and not leasing, the hassle should be minimal. Leased solar is a whole other can of worms.

Yes, purchase (via financing), would never lease ... yuck! 

And good to know - it came up often enough during that closing that it made me wonder.  Glad to hear that my next refi (with financed solar) should be mostly hassle free, assuming rates stay low!

Would still like to refinance once more, in an attempt to lock in a even lower rate due to not having the cash out portion...  Assuming of course we stay at ~60% LTV and rates stay sub 3%.  gulp.

I too want to refinance to drop to a lower rate after having done cash out, but if rates go up in the short term I'm not going to sweat it. The rate we refi'd at (3.125%) I was comfortable holding 30 years because it's 3.125% for cryin out loud. We bought this property 4 years ago at 4.75%. I think our PI payment now after pulling out 100k at current rates is about where it was back when we bought at the earlier rates, +/- $50.

[catccc]

Bought our first place in July 2021, financed $410K @ 2.75% for 30 years.  I really am not trying to pay this off early, but am so naturally debt averse that the first thing I did was make a principal only payment in August before the 1st payment was even due in September.  IDK, I couldn't help myself?!  Here to try to keep myself on the mathematically smarter track, I guess?!

@catccc , Now that you've enjoyed the adrenaline rush of accelerating your paydown by several months, we're asking you to recommit to our DNPYM way of living by making a sacrifice. Scour your couch cushions for whatever you can find and entrust it to Vanguard like this week! Only by enlarging the investment account can the DNPYM traditions be fully honored.

I'd do it myself, but payday isn't until Thursday, and my mortgage payments have to be sent by mail.

Ha!  Funny, I just vacuumed and flipped couch cushions yesterday.  11 cents going to VG, I guess?!  For funsies, I did just throw $20 into VTSAX after reading your reply.  Thanks for helping me honor the DNPYM code.  This is the way.

[Dicey]

For the record, this is the "DONT Payoff your Mortgage Club" [stet], started by our Forum Friend B42. The terms of his parole do not allow him to post in this thread, but his legacy continues. The established acronym is DPOYM.

It's difficult enough to get some folks to see the wisdom of DPOYM, let's not confuse them with multiple acronyms, please.

We welcome all who wish to learn and partake of this magical force with open arms. Safely socially distanced, of course.

[Dicey]

Just signed the paperwork for our cash out refi.  2.99% 30yr w/ $126k out.  Looking at investment properties now.  Torn between furnished-medium-term in FL vs a unfurnished-long-term in AL vs a furnished-short-term in CA.

~3 months ago, we had tesla solar+powerwalls w/ financing added to the home.  Apparently the loan does not show up until Tesla receives PTO from the energy provider, so the bank was none the wiser.  Luckily that has not yet happened yet, so we were able to complete this refi without any issue.  Solar loan is at 0.99% APR so it was a no brainer.

Next time we refi we may run into some issues though as it seems having a solar loan/lean on the home can block some refis.

As long as you're buying it and not leasing, the hassle should be minimal. Leased solar is a whole other can of worms.

Yes, purchase (via financing), would never lease ... yuck! 

And good to know - it came up often enough during that closing that it made me wonder.  Glad to hear that my next refi (with financed solar) should be mostly hassle free, assuming rates stay low!

Would still like to refinance once more, in an attempt to lock in a even lower rate due to not having the cash out portion...  Assuming of course we stay at ~60% LTV and rates stay sub 3%.  gulp.

I too want to refinance to drop to a lower rate after having done cash out, but if rates go up in the short term I'm not going to sweat it. The rate we refi'd at (3.125%) I was comfortable holding 30 years because it's 3.125% for cryin out loud. We bought this property 4 years ago at 4.75%. I think our PI payment now after pulling out 100k at current rates is about where it was back when we bought at the earlier rates, +/- $50.

I wanted to comment on this while I have a moment at a real keyboard. Posts like this make me nuts so jelly. FOMO is real, man, and we have it big time. DH and I paid cash for our house eight years ago and still we kick ourselves. It just gets worse as rates continue to drop and fellow mustachians post stuff like this. Okay, it's actually Fear That We Missed Out, but let's still call it FOMO.

You'd think it would be no big deal because we're FI/RE and statistically it's probably less of a big deal because of our advanced ages (Ha!), but dang it, we still feel like we're missing out! There's a lesson here. DPOYM Rules!!!

Congratulations to everyone who has locked in a cheap-ass, fixed rate mortgage on a reasonably priced (for your area) house! Your future selves are going to be ecstatic!

[dragoncar]

I prefer DNPYM (do not pay your mortgage) Because it saves me a ton of money every month!0

[Dicey]

I prefer DNPYM (do not pay your mortgage) Because it saves me a ton of money every month!0

You forgot the "off" part. Missing mortgage payments (assuming you're smarter than me and still have one) can be very expensive.

(There's always a wag. Why, oh why, does it have to be the great, scaly one that I have little hope of matching wits with?)

[dreadmoose]

To further confuse this mess I got carte blanche last year during the first 9 months of the pandemic to postpone all mortgage payments no questions asked (made very sure there were no qualifiers before signing up).

This would put me squarely in the DNPYM camp, though only for a short while before rejoining the DPOYM team.

I also am trying to sell my only property and rent... meaning I'll be in the DNEGAM corner soon.

Do Not Even Get A Mortgage

[dragoncar]

You forgot the "off" part. Missing mortgage payments (assuming you're smarter than me and still have one) can be very expensive.

That sounds like a problem for future me

[Dicey]

To further confuse this mess I got carte blanche last year during the first 9 months of the pandemic to postpone all mortgage payments no questions asked (made very sure there were no qualifiers before signing up).

This would put me squarely in the DNPYM camp, though only for a short while before rejoining the DPOYM team.

I also am trying to sell my only property and rent... meaning I'll be in the DNEGAM corner soon.

Do Not Even Get A Mortgage

I almost added a disclaimer that my input only applied to the good old US of A. As with so very, very many things, other countries do it better than we do. Sigh.

I hope you didn't spend those nine unmade payments on Hookers & Blow...

[dreadmoose]

No Hookers and Blow
Sad to say I only did
Transfers to VGRO

[JJ-]

Just signed the paperwork for our cash out refi.  2.99% 30yr w/ $126k out.  Looking at investment properties now.  Torn between furnished-medium-term in FL vs a unfurnished-long-term in AL vs a furnished-short-term in CA.

~3 months ago, we had tesla solar+powerwalls w/ financing added to the home.  Apparently the loan does not show up until Tesla receives PTO from the energy provider, so the bank was none the wiser.  Luckily that has not yet happened yet, so we were able to complete this refi without any issue.  Solar loan is at 0.99% APR so it was a no brainer.

Next time we refi we may run into some issues though as it seems having a solar loan/lean on the home can block some refis.

As long as you're buying it and not leasing, the hassle should be minimal. Leased solar is a whole other can of worms.

Yes, purchase (via financing), would never lease ... yuck! 

And good to know - it came up often enough during that closing that it made me wonder.  Glad to hear that my next refi (with financed solar) should be mostly hassle free, assuming rates stay low!

Would still like to refinance once more, in an attempt to lock in a even lower rate due to not having the cash out portion...  Assuming of course we stay at ~60% LTV and rates stay sub 3%.  gulp.

I too want to refinance to drop to a lower rate after having done cash out, but if rates go up in the short term I'm not going to sweat it. The rate we refi'd at (3.125%) I was comfortable holding 30 years because it's 3.125% for cryin out loud. We bought this property 4 years ago at 4.75%. I think our PI payment now after pulling out 100k at current rates is about where it was back when we bought at the earlier rates, +/- $50.

I wanted to comment on this while I have a moment at a real keyboard. Posts like this make me nuts so jelly. FOMO is real, man, and we have it big time. DH and I paid cash for our house eight years ago and still we kick ourselves. It just gets worse as rates continue to drop and fellow mustachians post stuff like this. Okay, it's actually Fear That We Missed Out, but let's still call it FOMO.

You'd think it would be no big deal because we're FI/RE and statistically it's probably less of a big deal because of our advanced ages (Ha!), but dang it, we still feel like we're missing out! There's a lesson here. DPOYM Rules!!!

Congratulations to everyone who has locked in a cheap-ass, fixed rate mortgage on a reasonably priced (for your area) house! Your future selves are going to be ecstatic!

Yeah chasing the bottom can often feel like trying to sell at the top (did somebody say top is in?), but stepping back you get a really good idea about where things are if you don't fixate on the here and now.

Sorry to make you feel jelly, but hopefully others learn from your jelliness and my awesome sauce low rate.

[Dicey]

No Hookers and Blow
Sad to say I only did
Transfers to VGRO

I see what you did there ;-)

[Dicey]

Sorry to make you feel jelly, but hopefully others learn from your jelliness and my awesome sauce low rate.

Ha! Making it easier for others to reach their goals faster, with a lot less effort, is one of the main reasons I've hung around this place so long after FIRE.

When I started my FIRE journey, it didn't have an acronym and information was much less readily available, and like-minded community nearly impossible to find.

Heck, the internet didn't even exist.

Somehow, I stumbled my way through, but with support such as MMM et al, I probably could have shaved a decade of my working career. Happily, it all worked out for the best (with a tip of the hat to Voltaire).

[dragoncar]

I did consider taking COVID deferrals but I wanted to refinance and that’s harder if you haven’t made the last 12 monthly payments

[bryan995]

Just signed the paperwork for our cash out refi.  2.99% 30yr w/ $126k out.  Looking at investment properties now.  Torn between furnished-medium-term in FL vs a unfurnished-long-term in AL vs a furnished-short-term in CA.

~3 months ago, we had tesla solar+powerwalls w/ financing added to the home.  Apparently the loan does not show up until Tesla receives PTO from the energy provider, so the bank was none the wiser.  Luckily that has not yet happened yet, so we were able to complete this refi without any issue.  Solar loan is at 0.99% APR so it was a no brainer.

Next time we refi we may run into some issues though as it seems having a solar loan/lean on the home can block some refis.

As long as you're buying it and not leasing, the hassle should be minimal. Leased solar is a whole other can of worms.

Yes, purchase (via financing), would never lease ... yuck! 

And good to know - it came up often enough during that closing that it made me wonder.  Glad to hear that my next refi (with financed solar) should be mostly hassle free, assuming rates stay low!

Would still like to refinance once more, in an attempt to lock in a even lower rate due to not having the cash out portion...  Assuming of course we stay at ~60% LTV and rates stay sub 3%.  gulp.

I too want to refinance to drop to a lower rate after having done cash out, but if rates go up in the short term I'm not going to sweat it. The rate we refi'd at (3.125%) I was comfortable holding 30 years because it's 3.125% for cryin out loud. We bought this property 4 years ago at 4.75%. I think our PI payment now after pulling out 100k at current rates is about where it was back when we bought at the earlier rates, +/- $50.

I wanted to comment on this while I have a moment at a real keyboard. Posts like this make me nuts so jelly. FOMO is real, man, and we have it big time. DH and I paid cash for our house eight years ago and still we kick ourselves. It just gets worse as rates continue to drop and fellow mustachians post stuff like this. Okay, it's actually Fear That We Missed Out, but let's still call it FOMO.

You'd think it would be no big deal because we're FI/RE and statistically it's probably less of a big deal because of our advanced ages (Ha!), but dang it, we still feel like we're missing out! There's a lesson here. DPOYM Rules!!!

Congratulations to everyone who has locked in a cheap-ass, fixed rate mortgage on a reasonably priced (for your area) house! Your future selves are going to be ecstatic!

Yeah chasing the bottom can often feel like trying to sell at the top (did somebody say top is in?), but stepping back you get a really good idea about where things are if you don't fixate on the here and now.

Sorry to make you feel jelly, but hopefully others learn from your jelliness and my awesome sauce low rate.

We also ended up bringing our montage balance up to exactly $750k, to maximize that lovely lovely mortgage interest deduction ;)

The good old days with no limits must have been quite something to see.  On top of having no SALT limits.  GOODNESS GRACIOUS

See y'all in 2051!

[talltexan]

For the record, this is the "DONT Payoff your Mortgage Club" [stet], started by our Forum Friend B42. The terms of his parole do not allow him to post in this thread, but his legacy continues. The established acronym is DPOYM.

It's difficult enough to get some folks to see the wisdom of DPOYM, let's not confuse them with multiple acronyms, please.

We welcome all who wish to learn and partake of this magical force with open arms. Safely socially distanced, of course.

It now seems that I, too, have angered the spirit of leverage and better find some money to throw into index funds fast to atone!

[Radagast]

Woot! Got a message saying my docs were approved and funds would be dispersed within 24 hours. Not the waiting type, I checked anyhow. +131 large in the bank at 2.75% (and like 2.779% APY)! Haven't had this much cash since I was trying to buy the place.

I have to remind myself that this isn't quite as amazing as $130k cash. After all, we need to pay $6,400 per year on this. Even just the interest will be a sizable monthly payment at first. It is really only effectively half as effective as a real$130,000.

Still, it feels like a big win. Worst case, if we hate having a liquid hundred G's making money, the amount is nearly exactly what we have left on the rental unit mortgage at 3%, we could just pay that off.

[Dicey]

Woot! Got a message saying my docs were approved and funds would be dispersed within 24 hours. Not the waiting type, I checked anyhow. +131 large in the bank at 2.75% (and like 2.779% APY)! Haven't had this much cash since I was trying to buy the place.

I have to remind myself that this isn't quite as amazing as $130k cash. After all, we need to pay $6,400 per year on this. Even just the interest will be a sizable monthly payment at first. It is really only effectively half as effective as a real$130,000.

Still, it feels like a big win. Worst case, if we hate having a liquid hundred G's making money, the amount is nearly exactly what we have left on the rental unit mortgage at 3%, we could just pay that off.

Noooooooo! on the bolded part. Don't shoot yourself in the foot.

Who did you go with for the re-fi?

[Radagast]

Woot! Got a message saying my docs were approved and funds would be dispersed within 24 hours. Not the waiting type, I checked anyhow. +131 large in the bank at 2.75% (and like 2.779% APY)! Haven't had this much cash since I was trying to buy the place.

I have to remind myself that this isn't quite as amazing as $130k cash. After all, we need to pay $6,400 per year on this. Even just the interest will be a sizable monthly payment at first. It is really only effectively half as effective as a real$130,000.

Still, it feels like a big win. Worst case, if we hate having a liquid hundred G's making money, the amount is nearly exactly what we have left on the rental unit mortgage at 3%, we could just pay that off.

Noooooooo! on the bolded part. Don't shoot yourself in the foot.

Who did you go with for the re-fi?

Just kidding! I might be a bit dull, but I'm not obtuse enough to pay off a 3% loan with inflation running near 6% :D

We followed through with Sebonic "dba Cardinal Financial".

[talltexan]

You did a good job pulling @Radagast back from the brink, but I imagine many of our DPOYM fellows are looking at the stock market's recent pullback and having second thoughts about diving in.

Here's a thought experiment: suppose you buy a conservative ETF like Vanguard Wellington, which is roughly 3/8 stocks and the rest bonds. You have a lot less downside in times like this, AND you still have a good chance of lapping your mortgage long term if your rate is <3%. You can make one more commitment, which is that--in one year--you'll check your statement, and 100% of any gains on the Wellington you move over to $VTI.

The point of the mortgage is to allow greater market exposure.

[Dicey]

You did a good job pulling @Radagast back from the brink, but I imagine many of our DPOYM fellows are looking at the stock market's recent pullback and having second thoughts about diving in.

Here's a thought experiment: suppose you buy a conservative ETF like Vanguard Wellington, which is roughly 3/8 stocks and the rest bonds. You have a lot less downside in times like this, AND you still have a good chance of lapping your mortgage long term if your rate is <3%. You can make one more commitment, which is that--in one year--you'll check your statement, and 100% of any gains on the Wellington you move over to $VTI.

The point of the mortgage is to allow greater market exposure.

Radagast was only joking. Are you calling the top?

A mortgage is effectively a bond, but better, IMO. Why would you want to load up on more by buying Wellington?

Another way to frame a "market pullback" is "On Sale". If this really is one, what excellent timing for Radagast!

[talltexan]

Dicey, you make an interesting point about a mortgage being a sort of negative bond. I'm trying to offer an option with some stock exposure for people who might be wavering (and reading the comments). Someone with more sophistication could always sell puts on $VTI with the cash supporting the puts.

I cannot offer a credible prediction about the immediate direction of the market, although I struggle with worry as do all of us. I certainly wouldn't want to give someone investment advice, only to have the unpredictability of the market make it a bad outcome (even if my advice was sound).

People who cash out their mortgages should follow their investment policy statements with the money. Sometimes, having an extra five or six digits of cash is a clue to people to re-evaluate those IPSs.

[PathtoFIRE]

We also ended up bringing our montage balance up to exactly $750k, to maximize that lovely lovely mortgage interest deduction ;)

I believe your deduction may be limited to the amount going towards the original loan if you didn't use the cashout to make qualified improvements to the home. We did a cashout refi in 2015, and have never been able to deduct the full interest payments, in part because for the first few years after we fell under the AMT which eliminated deductions for home equity, and more recently because we ultimately used the money to pay off student loans with the rest going into Vanguard; we did use $7.5k to replace and stain our fence, but it was clear to me that it qualified, and even then I would only have been able to add that part of the new mortgage back into the deduction calculation starting in 2018 and decided it wasn't worth being possibly wrong on including it.

[Psychstache]

We also ended up bringing our montage balance up to exactly $750k, to maximize that lovely lovely mortgage interest deduction ;)

Wait, we can deduct montage interest now? Think of all the skills I could learn, the workouts I could finish. =)

[ChpBstrd]

Just signed the paperwork for our cash out refi.  2.99% 30yr w/ $126k out.  Looking at investment properties now.  Torn between furnished-medium-term in FL vs a unfurnished-long-term in AL vs a furnished-short-term in CA.

~3 months ago, we had tesla solar+powerwalls w/ financing added to the home.  Apparently the loan does not show up until Tesla receives PTO from the energy provider, so the bank was none the wiser.  Luckily that has not yet happened yet, so we were able to complete this refi without any issue.  Solar loan is at 0.99% APR so it was a no brainer.

Next time we refi we may run into some issues though as it seems having a solar loan/lean on the home can block some refis.

As long as you're buying it and not leasing, the hassle should be minimal. Leased solar is a whole other can of worms.

Yes, purchase (via financing), would never lease ... yuck! 

And good to know - it came up often enough during that closing that it made me wonder.  Glad to hear that my next refi (with financed solar) should be mostly hassle free, assuming rates stay low!

Would still like to refinance once more, in an attempt to lock in a even lower rate due to not having the cash out portion...  Assuming of course we stay at ~60% LTV and rates stay sub 3%.  gulp.

I too want to refinance to drop to a lower rate after having done cash out, but if rates go up in the short term I'm not going to sweat it. The rate we refi'd at (3.125%) I was comfortable holding 30 years because it's 3.125% for cryin out loud. We bought this property 4 years ago at 4.75%. I think our PI payment now after pulling out 100k at current rates is about where it was back when we bought at the earlier rates, +/- $50.

I wanted to comment on this while I have a moment at a real keyboard. Posts like this make me nuts so jelly. FOMO is real, man, and we have it big time. DH and I paid cash for our house eight years ago and still we kick ourselves. It just gets worse as rates continue to drop and fellow mustachians post stuff like this. Okay, it's actually Fear That We Missed Out, but let's still call it FOMO.

You'd think it would be no big deal because we're FI/RE and statistically it's probably less of a big deal because of our advanced ages (Ha!), but dang it, we still feel like we're missing out! There's a lesson here. DPOYM Rules!!!

Congratulations to everyone who has locked in a cheap-ass, fixed rate mortgage on a reasonably priced (for your area) house! Your future selves are going to be ecstatic!

Bought a house with a 30y mortgage at 4.25% in late 2018.
Refinanced in late 2019 to a 15y mortgage at 3.25% at a cost of ~$3,000. Payoff on that investment was to occur in about 2.5 years.
Thought I was smart. Thought "this HAS to be near the bottom".
Today, 15y rates are 2.6%, and were as low as 2.25% a couple of weeks ago.
If I refinanced for a second time in as many years, the $3k investment would break even in 6y.
But OTOH, I only have 13 years remaining on the mortgage, so not a long runway to benefit after breakeven.
And am I going to end up chucking down yet another $3k when 15y rates go down to 1.25%? How many times do I pay these people?

THIS is some deep-ass FOMO/Regret.

[JJ-]

Just signed the paperwork for our cash out refi.  2.99% 30yr w/ $126k out.  Looking at investment properties now.  Torn between furnished-medium-term in FL vs a unfurnished-long-term in AL vs a furnished-short-term in CA.

~3 months ago, we had tesla solar+powerwalls w/ financing added to the home.  Apparently the loan does not show up until Tesla receives PTO from the energy provider, so the bank was none the wiser.  Luckily that has not yet happened yet, so we were able to complete this refi without any issue.  Solar loan is at 0.99% APR so it was a no brainer.

Next time we refi we may run into some issues though as it seems having a solar loan/lean on the home can block some refis.

As long as you're buying it and not leasing, the hassle should be minimal. Leased solar is a whole other can of worms.

Yes, purchase (via financing), would never lease ... yuck! 

And good to know - it came up often enough during that closing that it made me wonder.  Glad to hear that my next refi (with financed solar) should be mostly hassle free, assuming rates stay low!

Would still like to refinance once more, in an attempt to lock in a even lower rate due to not having the cash out portion...  Assuming of course we stay at ~60% LTV and rates stay sub 3%.  gulp.

I too want to refinance to drop to a lower rate after having done cash out, but if rates go up in the short term I'm not going to sweat it. The rate we refi'd at (3.125%) I was comfortable holding 30 years because it's 3.125% for cryin out loud. We bought this property 4 years ago at 4.75%. I think our PI payment now after pulling out 100k at current rates is about where it was back when we bought at the earlier rates, +/- $50.

I wanted to comment on this while I have a moment at a real keyboard. Posts like this make me nuts so jelly. FOMO is real, man, and we have it big time. DH and I paid cash for our house eight years ago and still we kick ourselves. It just gets worse as rates continue to drop and fellow mustachians post stuff like this. Okay, it's actually Fear That We Missed Out, but let's still call it FOMO.

You'd think it would be no big deal because we're FI/RE and statistically it's probably less of a big deal because of our advanced ages (Ha!), but dang it, we still feel like we're missing out! There's a lesson here. DPOYM Rules!!!

Congratulations to everyone who has locked in a cheap-ass, fixed rate mortgage on a reasonably priced (for your area) house! Your future selves are going to be ecstatic!

Bought a house with a 30y mortgage at 4.25% in late 2018.
Refinanced in late 2019 to a 15y mortgage at 3.25% at a cost of ~$3,000. Payoff on that investment was to occur in about 2.5 years.
Thought I was smart. Thought "this HAS to be near the bottom".
Today, 15y rates are 2.6%, and were as low as 2.25% a couple of weeks ago.
If I refinanced for a second time in as many years, the $3k investment would break even in 6y.
But OTOH, I only have 13 years remaining on the mortgage, so not a long runway to benefit after breakeven.
And am I going to end up chucking down yet another $3k when 15y rates go down to 1.25%? How many times do I pay these people?

THIS is some deep-ass FOMO/Regret.

I have a hard time paying for a lower rate when the alternative is putting the $ into the market. However it depends on whether it's $500 per 0.125% vs $2500 for example. I'm sure I'm under thinking it, but even if it pays off in 6 years the money is still available in the market with some growth, assumedly.

[bryan995]

We also ended up bringing our montage balance up to exactly $750k, to maximize that lovely lovely mortgage interest deduction ;)

I believe your deduction may be limited to the amount going towards the original loan if you didn't use the cashout to make qualified improvements to the home. We did a cashout refi in 2015, and have never been able to deduct the full interest payments, in part because for the first few years after we fell under the AMT which eliminated deductions for home equity, and more recently because we ultimately used the money to pay off student loans with the rest going into Vanguard; we did use $7.5k to replace and stain our fence, but it was clear to me that it qualified, and even then I would only have been able to add that part of the new mortgage back into the deduction calculation starting in 2018 and decided it wasn't worth being possibly wrong on including it.

Say what?  After 5 seconds of googling, this indeed looks to true...  Sort of a weird rule.  So I should have never put 20% down and optimized the purchase to carry 750k in mortgage balance from the get-go.   Then I could have cash-out refi'd above that (today).  I wonder if the 'improvements' can be backdated.   We did have 50k worth of landscaping and 30k worth of solar added... Maybe I will add some gold bar flooring to our entryway?  And then later decide it was a bit too much?  Or buy a second home, and use that to fill the interest-deduction gap...  Lame!

We also ended up bringing our montage balance up to exactly $750k, to maximize that lovely lovely mortgage interest deduction ;)

Wait, we can deduct montage interest now? Think of all the skills I could learn, the workouts I could finish. =)

Please don't scare me :)

[Radagast]

You did a good job pulling @Radagast back from the brink, but I imagine many of our DPOYM fellows are looking at the stock market's recent pullback and having second thoughts about diving in.

Here's a thought experiment: suppose you buy a conservative ETF like Vanguard Wellington, which is roughly 3/8 stocks and the rest bonds. You have a lot less downside in times like this, AND you still have a good chance of lapping your mortgage long term if your rate is <3%. You can make one more commitment, which is that--in one year--you'll check your statement, and 100% of any gains on the Wellington you move over to $VTI.

The point of the mortgage is to allow greater market exposure.

As per earlier in the thread, I'm planning to put most of it in VEA (Vanguard International Developed) and either SCHX (Schwab US Large Company) or MGC (Vanguard US Megacap). The rest goes to VWALX (Vanguard High Yield Tax Exempt Bond). I also have a lot of RZV already (S&P600 Pure Small-Cap Value). I will then have a roughly even split in taxable: VEA, SCHX, VWALX, RZV. I'm not sure if that is conservative!

I hope the dip expands to 10% before I buy. Fat chance.

[talltexan]

On the one hand, I feel smart when the market goes up because it means that I made the right decision throwing money in the market earlier.

On the other hand, I love the excitement of being able to buy cheap when the market goes down.

I don't know which to root for anymore!

[catccc]

Bought our first place in July 2021, financed $410K @ 2.75% for 30 years.  I really am not trying to pay this off early, but am so naturally debt averse that the first thing I did was make a principal only payment in August before the 1st payment was even due in September.  IDK, I couldn't help myself?!  Here to try to keep myself on the mathematically smarter track, I guess?!

You recognize that there’s a strong mathematical advantage towards not paying down your fixed very low interest loans early. Fantastic - you are well ahead of most. What’s prompting you to make early payments is emotional, and as every economist will tell you, one shouldn’t let emotion dictate your finances.

Now you can reflect on why you feel compelled to do something you realize is not in your best interests, and find ways to address that. For me it was the realization that it was always “either/or” - I could have less mortgage or more money to deploy whenever and however was needed. If I spent the money on the mortgage it couldn’t (easily) be used for anything else, and ultimately it became apparent there were *many* more productive places for that money for me.

Others (like my sister) feel compelled to follow the herd advice. It’s social pressure. So she set up a home sinking fund and to the outside world pretends that her mortgage balance is whatever it is minus the sinking fund. Social pressure managed.

Many others just want “the good feeling” of no mortgage payment. Strategies there can be broad - one I’ve seen as effective is to ask what excites more: a $450K home with ‘only monthly T&I payments (still substantial), or an investment account with $600,000+ in it.

Up to you to find out what works, but good that you recognize it’s not a rational desire.

Yes to all your points!  I already feel like my mortgage was a smart financial decision we made, since the seller made us prove we could pay cash for it (this market) before agreeing to accept our offer that didn't have a financing contingency.  And at these rates in the current inflation environment, it seemed like a mortgage was clearly the right move.  I definitely tell myself that the $410K mortgage is our choice, especially since we sit on a 1.8M portfolio (that excludes home equity, too).

The only actual advantage I can pinpoint would be a lower drawdown in retirement (and the tax mitigation that can come with it.)  But until we are in the drawdown phase, that's not really worth thinking about.

Speaking of desires, I was recently introduced to the idea of mimetic desires via a Paula Pant podcast.  Almost everything we want is based on a model of desire, with the exception of biological wants/needs.  It makes you think hard about whether you really want what you think you want, or you think you want it because you've seen others model that desire.

[dandarc]

I'm just stoked my SoloK purchase went through on 9/28 - wasn't sure if I got the order entered in time or not. Because the price I pay on that 1/3 of 1 percent of the portfolio is gonna be THE KEY to retirement success for me.

[talltexan]

Bought our first place in July 2021, financed $410K @ 2.75% for 30 years.  I really am not trying to pay this off early, but am so naturally debt averse that the first thing I did was make a principal only payment in August before the 1st payment was even due in September.  IDK, I couldn't help myself?!  Here to try to keep myself on the mathematically smarter track, I guess?!

You recognize that there’s a strong mathematical advantage towards not paying down your fixed very low interest loans early. Fantastic - you are well ahead of most. What’s prompting you to make early payments is emotional, and as every economist will tell you, one shouldn’t let emotion dictate your finances.

Now you can reflect on why you feel compelled to do something you realize is not in your best interests, and find ways to address that. For me it was the realization that it was always “either/or” - I could have less mortgage or more money to deploy whenever and however was needed. If I spent the money on the mortgage it couldn’t (easily) be used for anything else, and ultimately it became apparent there were *many* more productive places for that money for me.

Others (like my sister) feel compelled to follow the herd advice. It’s social pressure. So she set up a home sinking fund and to the outside world pretends that her mortgage balance is whatever it is minus the sinking fund. Social pressure managed.

Many others just want “the good feeling” of no mortgage payment. Strategies there can be broad - one I’ve seen as effective is to ask what excites more: a $450K home with ‘only monthly T&I payments (still substantial), or an investment account with $600,000+ in it.

Up to you to find out what works, but good that you recognize it’s not a rational desire.

Yes to all your points!  I already feel like my mortgage was a smart financial decision we made, since the seller made us prove we could pay cash for it (this market) before agreeing to accept our offer that didn't have a financing contingency.  And at these rates in the current inflation environment, it seemed like a mortgage was clearly the right move.  I definitely tell myself that the $410K mortgage is our choice, especially since we sit on a 1.8M portfolio (that excludes home equity, too).

The only actual advantage I can pinpoint would be a lower drawdown in retirement (and the tax mitigation that can come with it.)  But until we are in the drawdown phase, that's not really worth thinking about.

Speaking of desires, I was recently introduced to the idea of mimetic desires via a Paula Pant podcast.  Almost everything we want is based on a model of desire, with the exception of biological wants/needs.  It makes you think hard about whether you really want what you think you want, or you think you want it because you've seen others model that desire.

I've been listening to Paula a lot lately. She took the pro-leverage side against Laurence Kotlikoff, but I listened to the replay of her Rich Carey interview yesterday, and she isn't just a maximalist when it comes to leveraging, either.

[Mako52]

Would anyone NOT do this refi?

Currently a year into a 2.625 / 30yr with Lenderfi.  443k balance.
Looking at a 1.75 7yr ARM with Loan Depot.  (30 year amortization schedule) Total costs are ~2k so balance will become 445k.  Total interest savings over next 7 years are 25k.  We plan to move/downsize/retire at that time. 

[talltexan]

Sounds like an excellent move, good luck with the switch!

[Radagast]

I would do it.

[Joe Schmo]

350 @2.625 for 14 more years. Thinking about jumping on the NOT PAYING IT OFF EARLY wagon🤔

[nereo]

350 @2.625 for 14 more years. Thinking about jumping on the NOT PAYING IT OFF EARLY wagon🤔

What’s holding you back?

[JJ-]

350 @2.625 for 14 more years. Thinking about jumping on the NOT PAYING IT OFF EARLY wagon🤔

Refi @ 30 years and invest the difference. That's the wagon to jump on

[Joe Schmo]

Nothing stopping. Actually just started. Just gonna let it happen naturally in 13ish years…

[JJ-]

Just signed the paperwork for our cash out refi.  2.99% 30yr w/ $126k out.  Looking at investment properties now.  Torn between furnished-medium-term in FL vs a unfurnished-long-term in AL vs a furnished-short-term in CA.

~3 months ago, we had tesla solar+powerwalls w/ financing added to the home.  Apparently the loan does not show up until Tesla receives PTO from the energy provider, so the bank was none the wiser.  Luckily that has not yet happened yet, so we were able to complete this refi without any issue.  Solar loan is at 0.99% APR so it was a no brainer.

Next time we refi we may run into some issues though as it seems having a solar loan/lean on the home can block some refis.

As long as you're buying it and not leasing, the hassle should be minimal. Leased solar is a whole other can of worms.

Yes, purchase (via financing), would never lease ... yuck! 

And good to know - it came up often enough during that closing that it made me wonder.  Glad to hear that my next refi (with financed solar) should be mostly hassle free, assuming rates stay low!

Would still like to refinance once more, in an attempt to lock in a even lower rate due to not having the cash out portion...  Assuming of course we stay at ~60% LTV and rates stay sub 3%.  gulp.

I too want to refinance to drop to a lower rate after having done cash out, but if rates go up in the short term I'm not going to sweat it. The rate we refi'd at (3.125%) I was comfortable holding 30 years because it's 3.125% for cryin out loud. We bought this property 4 years ago at 4.75%. I think our PI payment now after pulling out 100k at current rates is about where it was back when we bought at the earlier rates, +/- $50.

I wanted to comment on this while I have a moment at a real keyboard. Posts like this make me nuts so jelly. FOMO is real, man, and we have it big time. DH and I paid cash for our house eight years ago and still we kick ourselves. It just gets worse as rates continue to drop and fellow mustachians post stuff like this. Okay, it's actually Fear That We Missed Out, but let's still call it FOMO.

You'd think it would be no big deal because we're FI/RE and statistically it's probably less of a big deal because of our advanced ages (Ha!), but dang it, we still feel like we're missing out! There's a lesson here. DPOYM Rules!!!

Congratulations to everyone who has locked in a cheap-ass, fixed rate mortgage on a reasonably priced (for your area) house! Your future selves are going to be ecstatic!

Here's a twist. I cashed out and refi'd. My plan was to refi later to drop the rates because cash out rates were higher.

I started paperwork last night and discovered I don't qualify to refi because my income isn't high enough because I went to 3/4 time last month. DW is self employed currently and I'm not ready to dive into that headache. If she ever goes back to FT W2 work

My reaction last night? Oh well. I got a sweet mortgage rate anyway.

[rmorris50]

So we are in the process of doing a cash out refinance and the appraisal came in $115k below what Zillow shows the value to be. I’ll be canceling that cashout.


Sent from my iPhone using Tapatalk

[nereo]

So we are in the process of doing a cash out refinance and the appraisal came in $115k below what Zillow shows the value to be. I’ll be canceling that cashout.


Sent from my iPhone using Tapatalk

You can contest an appraisal, fyi.

[rmorris50]

So we are in the process of doing a cash out refinance and the appraisal came in $115k below what Zillow shows the value to be. I’ll be canceling that cashout.


Sent from my iPhone using Tapatalk

You can contest an appraisal, fyi.

Yes, but that’ll be hard to close the gap between Zillow and the appraisal. The market is so hot here in Charlotte that prices have risen 30% in the past year, but nothing has sold in the past six months in my neighborhood, that’s how tight supply is. Older homes are still getting cash offers off market and being torn down and rebuilt.

Also I’m not trading in my 2.5% for a 3% rate unless I can get a large amount of money out.


Sent from my iPhone using Tapatalk

[bryan995]

Just signed the paperwork for our cash out refi.  2.99% 30yr w/ $126k out.  Looking at investment properties now.  Torn between furnished-medium-term in FL vs a unfurnished-long-term in AL vs a furnished-short-term in CA.

~3 months ago, we had tesla solar+powerwalls w/ financing added to the home.  Apparently the loan does not show up until Tesla receives PTO from the energy provider, so the bank was none the wiser.  Luckily that has not yet happened yet, so we were able to complete this refi without any issue.  Solar loan is at 0.99% APR so it was a no brainer.

Next time we refi we may run into some issues though as it seems having a solar loan/lean on the home can block some refis.

As long as you're buying it and not leasing, the hassle should be minimal. Leased solar is a whole other can of worms.

Yes, purchase (via financing), would never lease ... yuck! 

And good to know - it came up often enough during that closing that it made me wonder.  Glad to hear that my next refi (with financed solar) should be mostly hassle free, assuming rates stay low!

Would still like to refinance once more, in an attempt to lock in a even lower rate due to not having the cash out portion...  Assuming of course we stay at ~60% LTV and rates stay sub 3%.  gulp.

I too want to refinance to drop to a lower rate after having done cash out, but if rates go up in the short term I'm not going to sweat it. The rate we refi'd at (3.125%) I was comfortable holding 30 years because it's 3.125% for cryin out loud. We bought this property 4 years ago at 4.75%. I think our PI payment now after pulling out 100k at current rates is about where it was back when we bought at the earlier rates, +/- $50.

I wanted to comment on this while I have a moment at a real keyboard. Posts like this make me nuts so jelly. FOMO is real, man, and we have it big time. DH and I paid cash for our house eight years ago and still we kick ourselves. It just gets worse as rates continue to drop and fellow mustachians post stuff like this. Okay, it's actually Fear That We Missed Out, but let's still call it FOMO.

You'd think it would be no big deal because we're FI/RE and statistically it's probably less of a big deal because of our advanced ages (Ha!), but dang it, we still feel like we're missing out! There's a lesson here. DPOYM Rules!!!

Congratulations to everyone who has locked in a cheap-ass, fixed rate mortgage on a reasonably priced (for your area) house! Your future selves are going to be ecstatic!

Here's a twist. I cashed out and refi'd. My plan was to refi later to drop the rates because cash out rates were higher.

I started paperwork last night and discovered I don't qualify to refi because my income isn't high enough because I went to 3/4 time last month. DW is self employed currently and I'm not ready to dive into that headache. If she ever goes back to FT W2 work

My reaction last night? Oh well. I got a sweet mortgage rate anyway.

Dang, that's too bad.  Temporarily go back full-time to qualify? Or work some 'extra time' for a few weeks to boost on-paper income?

I am looking into buying a rental with our cash-out proceeds (may only put 10% down).  I want more 'pro-inflation-bank-sponsored-leverage' :)  Most homes I am considering need a ton of work.  It may just be too much for our first foray into real estate investing. I assume an additional home improvement / construction loan would have wildly high rates.  Need to look into which to do first.  Re-fi the primary or purchase rental home or procure construction loan (if we need it).  I'm also hoping that that county conventional limits will increase massively in 2022, which again should help some with their refi. 
SS benefits just increased 5.9%!  If that's not a sure sign of looming inflation, then we are truly living in a bizarro world.

So we are in the process of doing a cash out refinance and the appraisal came in $115k below what Zillow shows the value to be. I’ll be canceling that cashout.

Prices do seem to be flattening but that is wild!   We came in about $110k over the zestimate.  And since the re-finance, the zestimate now shows +30k over our appraisal.  Granted there are quite a few neighbors listing pushing the price/sqft higher and higher (almost $500 now). 

[JJ-]

 
Dang, that's too bad.  Temporarily go back full-time to qualify? Or work some 'extra time' for a few weeks to boost on-paper income?

That is soooooo not worth ~100 hours of my time 😊

[bryan995]

 
Dang, that's too bad.  Temporarily go back full-time to qualify? Or work some 'extra time' for a few weeks to boost on-paper income?

That is soooooo not worth ~100 hours of my time 😊

The FED just signaled that they will not taper anytime soon. What if we hit 2.25%, 30yr? Surely a fresh cash out + reset of the clock is worth 100 hours :)

[JJ-]

 
Dang, that's too bad.  Temporarily go back full-time to qualify? Or work some 'extra time' for a few weeks to boost on-paper income?

That is soooooo not worth ~100 hours of my time 😊

The FED just signaled that they will not taper anytime soon. What if we hit 2.25%, 30yr? Surely a fresh cash out + reset of the clock is worth 100 hours :)

Maybe. I'd probably consider and be like..... Nahhhhhh. It's nice having time.