Author Topic: DONT Payoff your Mortgage Club  (Read 414823 times)

Kierun

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Re: DONT Payoff your Mortgage Club
« Reply #2350 on: September 09, 2020, 12:33:50 PM »
I've been mulling this over.  We are not a high-income household.  In fact, relative to where we live, we would be considered a low-income household.  Dh is in non-profit and I am retired, gross income is $80k per year and we live in a very HCOL area.  We are okay on retirement savings.  The fear on our end is that we would not be able to qualify for a decent mortgage if dh leaves his job and we have to qualify with a similar salary but with a brand new job, I understand that length of employment is a big issue on new loans.
I think lenders also will look at new employment as continuous if it's within the same field. They understand people change jobs frequently for career progression etc. It may not be as big an issue just because he's at company B for < 1 year, but has been in the same career field for 20+ years.

wildbeast

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Re: DONT Payoff your Mortgage Club
« Reply #2351 on: September 09, 2020, 01:45:16 PM »
I've been mulling this over.  We are not a high-income household.  In fact, relative to where we live, we would be considered a low-income household.  Dh is in non-profit and I am retired, gross income is $80k per year and we live in a very HCOL area.  We are okay on retirement savings.  The fear on our end is that we would not be able to qualify for a decent mortgage if dh leaves his job and we have to qualify with a similar salary but with a brand new job, I understand that length of employment is a big issue on new loans.
I think lenders also will look at new employment as continuous if it's within the same field. They understand people change jobs frequently for career progression etc. It may not be as big an issue just because he's at company B for < 1 year, but has been in the same career field for 20+ years.

That's interesting.  If that's the case, it would solve a lot of our concerns. 

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #2352 on: September 09, 2020, 02:20:56 PM »
I've been mulling this over.  We are not a high-income household.  In fact, relative to where we live, we would be considered a low-income household.  Dh is in non-profit and I am retired, gross income is $80k per year and we live in a very HCOL area.  We are okay on retirement savings.  The fear on our end is that we would not be able to qualify for a decent mortgage if dh leaves his job and we have to qualify with a similar salary but with a brand new job, I understand that length of employment is a big issue on new loans.
I think lenders also will look at new employment as continuous if it's within the same field. They understand people change jobs frequently for career progression etc. It may not be as big an issue just because he's at company B for < 1 year, but has been in the same career field for 20+ years.

That's interesting.  If that's the case, it would solve a lot of our concerns.

Having been through this recently (see above), what the banks seem to care about is whether you've been employed, not the number of times you have changed jobs.  If you have 5+ years where you can show on your taxes that you have earned above whatever threshold they want for a loan of a particular size, that's what matters.  It can be one job for 5 solid years or 10 different jobs over 5 years that collectively earned you a decent annual income.

Our problem was that, of the previous 5 years, we only had US taxable income in the most recent two.  We had foreign income and even tried to show that on our US taxes (Foreign Taxble Income Exemption) but that didn't fit their boxes.

wildbeast

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Re: DONT Payoff your Mortgage Club
« Reply #2353 on: September 10, 2020, 09:42:27 AM »
I've been mulling this over.  We are not a high-income household.  In fact, relative to where we live, we would be considered a low-income household.  Dh is in non-profit and I am retired, gross income is $80k per year and we live in a very HCOL area.  We are okay on retirement savings.  The fear on our end is that we would not be able to qualify for a decent mortgage if dh leaves his job and we have to qualify with a similar salary but with a brand new job, I understand that length of employment is a big issue on new loans.
I think lenders also will look at new employment as continuous if it's within the same field. They understand people change jobs frequently for career progression etc. It may not be as big an issue just because he's at company B for < 1 year, but has been in the same career field for 20+ years.

That's interesting.  If that's the case, it would solve a lot of our concerns.

Having been through this recently (see above), what the banks seem to care about is whether you've been employed, not the number of times you have changed jobs.  If you have 5+ years where you can show on your taxes that you have earned above whatever threshold they want for a loan of a particular size, that's what matters.  It can be one job for 5 solid years or 10 different jobs over 5 years that collectively earned you a decent annual income.

Our problem was that, of the previous 5 years, we only had US taxable income in the most recent two.  We had foreign income and even tried to show that on our US taxes (Foreign Taxble Income Exemption) but that didn't fit their boxes.

This is excellent news!  Thank you, guys.  I've confirmed with a realtor that it's the case.  Huge relief.  So since we don't need to have cash on hand for that, it might not be wise to take out the loan.  Since no one said it's a good idea, I'm guessing people are just to polite to say it's a stupid idea.  I never knew mustachians to be so polite!  :)

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Re: DONT Payoff your Mortgage Club
« Reply #2354 on: September 10, 2020, 11:09:00 AM »
I wouldn’t skip a payment entirely, but most mortgages have a 15 day grace period where you aren’t considered to have missed the payment.  I might not pay on the 1st, and make sure the loan is paid off before the 15th.  If on the 10th or so you’ve run into closing issues make the payment electronically.  That’s just me though

The point being, if the mortgage is paid off on September 5th, the bank will treat the incoming funds first as a payment for September and then apply the remaining funds to the mortgage balance.  You won’t have actually missed the payment, it will just have come from the title company, and within the grace period

Hmm, so I looked into this and I do have the 15 day grace period. I checked my account and compared to the closing disclosure and it would seem you're correct, the projected payoff amount for my loan is equal to my Sept payment + the remaining balance, so it would seem that the Sept payment is rolled into the refi. Interesting.

Thought I would provide an update for posterity: I went ahead and followed @dragoncar s plan and cancelled the ACH for the September payment. Closing was completed on 9/3 and I kept watch and see that my previous mortgage was paid off (after applying the 9/1 payment) on 9/8. There is an escrow balance that mostly matches what i expected to get back after the closing (minus small fees from OG lender) and the new mortgage is active and ready to start on 11/1. Woo!

terrifictim

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Re: DONT Payoff your Mortgage Club
« Reply #2355 on: September 10, 2020, 12:53:36 PM »
Just completed my re-fi

188k
30yr
3.00%
0 points
Condo
No Escrow
$31 cash to close
Appraisal waiver
$1099 lender credit
California state
Used LenderFI

Dropped P&I payments from $1070/mth to $793/mth. Get to toss that extra $277/mth into the stock market which will hopefully turn into an extra $340,000 in 30 years :)

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2356 on: September 10, 2020, 02:28:15 PM »
I've been mulling this over.  We are not a high-income household.  In fact, relative to where we live, we would be considered a low-income household.  Dh is in non-profit and I am retired, gross income is $80k per year and we live in a very HCOL area.  We are okay on retirement savings.  The fear on our end is that we would not be able to qualify for a decent mortgage if dh leaves his job and we have to qualify with a similar salary but with a brand new job, I understand that length of employment is a big issue on new loans.
I think lenders also will look at new employment as continuous if it's within the same field. They understand people change jobs frequently for career progression etc. It may not be as big an issue just because he's at company B for < 1 year, but has been in the same career field for 20+ years.

That's interesting.  If that's the case, it would solve a lot of our concerns.

Having been through this recently (see above), what the banks seem to care about is whether you've been employed, not the number of times you have changed jobs.  If you have 5+ years where you can show on your taxes that you have earned above whatever threshold they want for a loan of a particular size, that's what matters.  It can be one job for 5 solid years or 10 different jobs over 5 years that collectively earned you a decent annual income.

Our problem was that, of the previous 5 years, we only had US taxable income in the most recent two.  We had foreign income and even tried to show that on our US taxes (Foreign Taxble Income Exemption) but that didn't fit their boxes.

This is excellent news!  Thank you, guys.  I've confirmed with a realtor that it's the case.  Huge relief.  So since we don't need to have cash on hand for that, it might not be wise to take out the loan.  Since no one said it's a good idea, I'm guessing people are just to polite to say it's a stupid idea.  I never knew mustachians to be so polite!  :)

You must have caught us on low-stress days.

Seriously, I think the difference between the two tracks will be minor as far as where you sit five years from now, and that's why we're not pushing you strongly. I think that because I think rates are going to stay low for a while.

You know when else I thought they'd stay low? October 2016. You've been warned.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2357 on: September 11, 2020, 10:28:57 AM »
I've been mulling this over.  We are not a high-income household.  In fact, relative to where we live, we would be considered a low-income household.  Dh is in non-profit and I am retired, gross income is $80k per year and we live in a very HCOL area.  We are okay on retirement savings.  The fear on our end is that we would not be able to qualify for a decent mortgage if dh leaves his job and we have to qualify with a similar salary but with a brand new job, I understand that length of employment is a big issue on new loans.
I think lenders also will look at new employment as continuous if it's within the same field. They understand people change jobs frequently for career progression etc. It may not be as big an issue just because he's at company B for < 1 year, but has been in the same career field for 20+ years.
DSD and her family are in escrow on a new home. They are using the same lender they currently have. The person who is buying their old place is also using the same lender. DSD got a better job offer the same field in the middle of escrow! She checked with the lender and they're not concerned, so job change has been completed.

couponvan

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Re: DONT Payoff your Mortgage Club
« Reply #2358 on: September 14, 2020, 12:23:21 PM »
2.5% 30 year fixed with Loan Depot today was quoted - no cost and no escrow.  Good, or should I try for lower?  It is way lower than my current 3.625% rate. Excellent credit, and lower LTV (under 70%).

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2359 on: September 14, 2020, 01:31:25 PM »
2.5% 30 year fixed with Loan Depot today was quoted - no cost and no escrow.  Good, or should I try for lower?  It is way lower than my current 3.625% rate. Excellent credit, and lower LTV (under 70%).
Holy shit, I'd grab that sucker with both hands!

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Re: DONT Payoff your Mortgage Club
« Reply #2360 on: September 14, 2020, 01:59:11 PM »
2.5% 30 year fixed with Loan Depot today was quoted - no cost and no escrow.  Good, or should I try for lower?  It is way lower than my current 3.625% rate. Excellent credit, and lower LTV (under 70%).
Holy shit, I'd grab that sucker with both hands!
Yep, that’s fantastic. Make sure they are not adding any points or costs into the loan.

couponvan

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Re: DONT Payoff your Mortgage Club
« Reply #2361 on: September 14, 2020, 02:03:49 PM »
2.5% 30 year fixed with Loan Depot today was quoted - no cost and no escrow.  Good, or should I try for lower?  It is way lower than my current 3.625% rate. Excellent credit, and lower LTV (under 70%).
Holy shit, I'd grab that sucker with both hands!

Grabbed.  It actually ended up being a $470 refund from the lender because of no appraisal required (old appraisal less than one year old in an appreciating area - house is now valued at $710K minimum).  We'll see how long it takes to close, but I am one happy cookie.

Well, there are origination fees et al, but the discount points make the fee total -$470.  When we close, our payments will go down $387/month, and no more escrow!  Win.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2362 on: September 14, 2020, 02:13:35 PM »
2.5% 30 year fixed with Loan Depot today was quoted - no cost and no escrow.  Good, or should I try for lower?  It is way lower than my current 3.625% rate. Excellent credit, and lower LTV (under 70%).
Holy shit, I'd grab that sucker with both hands!

Grabbed.  It actually ended up being a $470 refund from the lender because of no appraisal required (old appraisal less than one year old in an appreciating area - house is now valued at $710K minimum).  We'll see how long it takes to close, but I am one happy cookie.

Well, there are origination fees et al, but the discount points make the fee total -$470.  When we close, our payments will go down $387/month, and no more escrow!  Win.
WooO-HoOO!!! I recommending spending the refund on yourself. You earned it, you badass!

robartsd

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Re: DONT Payoff your Mortgage Club
« Reply #2363 on: September 14, 2020, 03:08:02 PM »
Grabbed.  It actually ended up being a $470 refund from the lender because of no appraisal required (old appraisal less than one year old in an appreciating area - house is now valued at $710K minimum).  We'll see how long it takes to close, but I am one happy cookie.

Well, there are origination fees et al, but the discount points make the fee total -$470.  When we close, our payments will go down $387/month, and no more escrow!  Win.
WooO-HoOO!!! I recommending spending the refund on yourself. You earned it, you badass!
I didn't think lenders could offer a refund paid by negative points (they could refund an application fee intended to pay for an appraisal though).

couponvan

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Re: DONT Payoff your Mortgage Club
« Reply #2364 on: September 14, 2020, 03:26:00 PM »
Grabbed.  It actually ended up being a $470 refund from the lender because of no appraisal required (old appraisal less than one year old in an appreciating area - house is now valued at $710K minimum).  We'll see how long it takes to close, but I am one happy cookie.

Well, there are origination fees et al, but the discount points make the fee total -$470.  When we close, our payments will go down $387/month, and no more escrow!  Win.
WooO-HoOO!!! I recommending spending the refund on yourself. You earned it, you badass!
I didn't think lenders could offer a refund paid by negative points (they could refund an application fee intended to pay for an appraisal though).
They refunded the appraisal fee because I provided our prior within one year old appraisal.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2365 on: September 15, 2020, 06:58:22 AM »
I don't know if this counts as an appraisal, but the house next door to us--identical floor plan--sold last month.

Unfortunately, I was disappointed at how low our old neighbors sold it. Thanks a lot, guys!

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Re: DONT Payoff your Mortgage Club
« Reply #2366 on: September 15, 2020, 07:52:02 AM »
All these crazy low refits make me jealous.  I’m likely to sell and move in the next 12 months so it doesn’t make sense foe me to look.  I console myself that at 3.75% my rate is still low, just not crazy low.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #2367 on: September 15, 2020, 08:00:26 AM »
All these crazy low refits make me jealous.  I’m likely to sell and move in the next 12 months so it doesn’t make sense foe me to look.  I console myself that at 3.75% my rate is still low, just not crazy low.

Yeah... similar for us.  We're suddenly uncertain whether we will remain here more than another year or two, and covid furlough (me) complicates any refinancing options for us.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2368 on: September 15, 2020, 01:04:15 PM »
Eight years ago rates got really low, and--contemplating what the immediate future looked like--what started as a project to refinance resulted in me realizing that I would need to move. And a smart, strategic move is one of the few projects that rocket you forward faster than a refi-.

The two years after that move saw the TallTexan HH gain $300,000 in net worth.

Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2369 on: September 15, 2020, 01:45:34 PM »
Eight years ago rates got really low, and--contemplating what the immediate future looked like--what started as a project to refinance resulted in me realizing that I would need to move. And a smart, strategic move is one of the few projects that rocket you forward faster than a refi-.

The two years after that move saw the TallTexan HH gain $300,000 in net worth.
Did you actually gain net worth or move your asset from real estate to cash?

NotBadForADad

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Re: DONT Payoff your Mortgage Club
« Reply #2370 on: September 15, 2020, 01:56:05 PM »
Someone explain to me the payoff or don't pay off the mortgage.

Dave Ramsey talks all about get out of debt and pay off the mortgage. That would strap my cash flow significantly if I doubled up on my payments.

SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #2371 on: September 15, 2020, 01:57:40 PM »
Someone explain to me the payoff or don't pay off the mortgage.

Go to page one of this VERY THREAD and start reading.   It will become clear. :)


nereo

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Re: DONT Payoff your Mortgage Club
« Reply #2372 on: September 15, 2020, 02:35:05 PM »
Someone explain to me the payoff or don't pay off the mortgage.

Dave Ramsey talks all about get out of debt and pay off the mortgage. That would strap my cash flow significantly if I doubled up on my payments.

Agree with SwordGuy - you can learn a lot about the various (and substantial!) reasons by skimming over this thread from page 1.

As for Dave Ramsey (DR) - his approach is centered on emotional and behavioral attitudes towards money, with a hefty dose of a very specific variety of Christian morality.  That can be helpful to people who are otherwise very poor with their money, and for people who believe in his version of Jesus.  But from a strictly financial view, his advice is often sub-optimal, and at times downright contrary to a person's best financial interests (again, provided they already have some financial self control).

If you wrack up debt and spend every penny, his approach is not a bad one to follow.  For those of us that want to optimize every dollar we earn, his is not the path to follow.

talltexan

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Re: DONT Payoff your Mortgage Club
« Reply #2373 on: September 16, 2020, 05:55:53 AM »
Someone explain to me the payoff or don't pay off the mortgage.

Dave Ramsey talks all about get out of debt and pay off the mortgage. That would strap my cash flow significantly if I doubled up on my payments.

Agree with SwordGuy - you can learn a lot about the various (and substantial!) reasons by skimming over this thread from page 1.

As for Dave Ramsey (DR) - his approach is centered on emotional and behavioral attitudes towards money, with a hefty dose of a very specific variety of Christian morality.  That can be helpful to people who are otherwise very poor with their money, and for people who believe in his version of Jesus.  But from a strictly financial view, his advice is often sub-optimal, and at times downright contrary to a person's best financial interests (again, provided they already have some financial self control).

If you wrack up debt and spend every penny, his approach is not a bad one to follow.  For those of us that want to optimize every dollar we earn, his is not the path to follow.

Given enough time, investing each dollar in the place in which it has the highest return will cause you to build wealth the fastest.

Dave Ramsey urges people to pay down debt first, but there are many cases--particularly with mortgage debt in today's market--where those dollars will earn a higher return if put into risky investments than if they're used to accelerate debt paydown. This thread has ample debate about whether this path is riskier than the Dave Ramsey plan.

robartsd

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Re: DONT Payoff your Mortgage Club
« Reply #2374 on: September 16, 2020, 10:28:19 AM »
Someone explain to me the payoff or don't pay off the mortgage.

Dave Ramsey talks all about get out of debt and pay off the mortgage. That would strap my cash flow significantly if I doubled up on my payments.
The key benefits are 1) investing has a significantly higher expected return than the interest rate (even after adjusting for risk) and 2) a lower (but not paid in full) mortgage balance does not provide any help should your income be reduced (mortgage payment still required; if you had invested instead of making extra payments, you could sell the investments to make required payments). In some cases there are additional tax related benefits to keeping the mortgage. Some here choose to carry a mortgage into FIRE due to reason 1 alone. Others choose to forgo unneeded returns and pay off the mortgage in full after reaching FI to reduce cash flow demands in retirement.

NotBadForADad

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Re: DONT Payoff your Mortgage Club
« Reply #2375 on: September 16, 2020, 10:56:07 AM »
Someone explain to me the payoff or don't pay off the mortgage.

Dave Ramsey talks all about get out of debt and pay off the mortgage. That would strap my cash flow significantly if I doubled up on my payments.
The key benefits are 1) investing has a significantly higher expected return than the interest rate (even after adjusting for risk) and 2) a lower (but not paid in full) mortgage balance does not provide any help should your income be reduced (mortgage payment still required; if you had invested instead of making extra payments, you could sell the investments to make required payments). In some cases there are additional tax related benefits to keeping the mortgage. Some here choose to carry a mortgage into FIRE due to reason 1 alone. Others choose to forgo unneeded returns and pay off the mortgage in full after reaching FI to reduce cash flow demands in retirement.

Thanks. I'm not that smart nor make enough to figure any of this out. We do want to move however, so, I'll probably just pay this thing until the day I die.

SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #2376 on: September 16, 2020, 11:17:12 AM »
Someone explain to me the payoff or don't pay off the mortgage.

Dave Ramsey talks all about get out of debt and pay off the mortgage. That would strap my cash flow significantly if I doubled up on my payments.
The key benefits are 1) investing has a significantly higher expected return than the interest rate (even after adjusting for risk) and 2) a lower (but not paid in full) mortgage balance does not provide any help should your income be reduced (mortgage payment still required; if you had invested instead of making extra payments, you could sell the investments to make required payments). In some cases there are additional tax related benefits to keeping the mortgage. Some here choose to carry a mortgage into FIRE due to reason 1 alone. Others choose to forgo unneeded returns and pay off the mortgage in full after reaching FI to reduce cash flow demands in retirement.

Thanks. I'm not that smart nor make enough to figure any of this out. We do want to move however, so, I'll probably just pay this thing until the day I die.

If you actually take the time to read this thread, you might be surprised to learn how much you can learn.   Why be shackled by the prison bars you put on your own brain?

robartsd

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Re: DONT Payoff your Mortgage Club
« Reply #2377 on: September 16, 2020, 12:23:16 PM »
Someone explain to me the payoff or don't pay off the mortgage.

Dave Ramsey talks all about get out of debt and pay off the mortgage. That would strap my cash flow significantly if I doubled up on my payments.
The key benefits are 1) investing has a significantly higher expected return than the interest rate (even after adjusting for risk) and 2) a lower (but not paid in full) mortgage balance does not provide any help should your income be reduced (mortgage payment still required; if you had invested instead of making extra payments, you could sell the investments to make required payments). In some cases there are additional tax related benefits to keeping the mortgage. Some here choose to carry a mortgage into FIRE due to reason 1 alone. Others choose to forgo unneeded returns and pay off the mortgage in full after reaching FI to reduce cash flow demands in retirement.

Thanks. I'm not that smart nor make enough to figure any of this out. We do want to move however, so, I'll probably just pay this thing until the day I die.
If you need more convincing that the best place to put whatever surplus you have is not extra mortgage payments, read this thread.

Otherwise, it's more important to learn what do do with your money instead. MDM's investment order thread is a great place to start learning what types of accounts to use. If you're a long way from FI, then you can just purchase a low cost total stock market index fund (or large cap index fund or target date fund) once you convince yourself that you are best off holding this investment even when it is going down (because you can't afford to not be holding it when it is going up). Later you can learn more about asset allocation strategies to preserve the wealth that you've accumulated (potentially adding bond funds, international funds, etc. to your investment mix).

Nothing wrong with keeping a low fixed rate mortgage until you die, plenty of people here plan to do that even though they know they don't have to.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #2378 on: September 16, 2020, 12:46:44 PM »

Nothing wrong with keeping a low fixed rate mortgage until you die, plenty of people here plan to do that even though they know they don't have to.

That's my plan... and my parents too.  They've got enough in investments to pay off their home several times over, but they get far more from having invested than they would having slightly lower monthly payments each month with no mortgage.

Assuming rates remain favorable, we'll refinance to stretch our term out another 30 years right before we retire, and pull out a good deal of the equity.

NotBadForADad

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Re: DONT Payoff your Mortgage Club
« Reply #2379 on: September 16, 2020, 01:02:56 PM »
Someone explain to me the payoff or don't pay off the mortgage.

Dave Ramsey talks all about get out of debt and pay off the mortgage. That would strap my cash flow significantly if I doubled up on my payments.
The key benefits are 1) investing has a significantly higher expected return than the interest rate (even after adjusting for risk) and 2) a lower (but not paid in full) mortgage balance does not provide any help should your income be reduced (mortgage payment still required; if you had invested instead of making extra payments, you could sell the investments to make required payments). In some cases there are additional tax related benefits to keeping the mortgage. Some here choose to carry a mortgage into FIRE due to reason 1 alone. Others choose to forgo unneeded returns and pay off the mortgage in full after reaching FI to reduce cash flow demands in retirement.

Thanks. I'm not that smart nor make enough to figure any of this out. We do want to move however, so, I'll probably just pay this thing until the day I die.
If you need more convincing that the best place to put whatever surplus you have is not extra mortgage payments, read this thread.

Otherwise, it's more important to learn what do do with your money instead. MDM's investment order thread is a great place to start learning what types of accounts to use. If you're a long way from FI, then you can just purchase a low cost total stock market index fund (or large cap index fund or target date fund) once you convince yourself that you are best off holding this investment even when it is going down (because you can't afford to not be holding it when it is going up). Later you can learn more about asset allocation strategies to preserve the wealth that you've accumulated (potentially adding bond funds, international funds, etc. to your investment mix).

Nothing wrong with keeping a low fixed rate mortgage until you die, plenty of people here plan to do that even though they know they don't have to.

For sure. Right now, I'm just focusing on hammering out all of my debt and then getting 3-6months living expenses covered. We plan to move in a few years to get out of the city.

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #2380 on: September 16, 2020, 01:10:38 PM »

For sure. Right now, I'm just focusing on hammering out all of my debt and then getting 3-6months living expenses covered. We plan to move in a few years to get out of the city.

Hard to know without more detailed information, but 'hammering out all debt' before you have 3-6 months living expenses (i.e. an "Emergency Fund") is likely backwards from what is advised here.  In fact, eliminating low-interest debt is pretty low on the Investment Order, for very good reasons.

CarnivoreforLife

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Re: DONT Payoff your Mortgage Club
« Reply #2381 on: September 16, 2020, 01:37:45 PM »
Hello! long time lurker have an important question. Please help!

I would like to refinance my mortgage- 5 years into the loan, 25 years left- currently is $122,000 balance 4% . total pmt $1023.00.
Bank offer 2.75% 15 yrs at $862 a month
                3.00% 20 yrs at $704 a month

Closing cost is $3,000 and they said it can be rollover into the mortgage, making it $125,000.  is this a good deal?

thank you in advance for your help!

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #2382 on: September 16, 2020, 01:52:40 PM »
Hello! long time lurker have an important question. Please help!

I would like to refinance my mortgage- 5 years into the loan, 25 years left- currently is $122,000 balance 4% . total pmt $1023.00.
Bank offer 2.75% 15 yrs at $862 a month
                3.00% 20 yrs at $704 a month

Closing cost is $3,000 and they said it can be rollover into the mortgage, making it $125,000.  is this a good deal?

thank you in advance for your help!

A couple questions for you:
1) why are you not considering 30 year fixed rate mortgages?
2) will you plan on staying in your home for at least 18 months to recoup the $3k in closing costs?
3) Have you gotten multiple offers from different lenders?

Both of those scenarios have you paying LESS each month for a shorter term.  So it's a no brainer that either are much better than your current mortgage provided that you will be in your home through 2021.

But is it the BEST deal out there? Probably not.  I've seen 15 year fixed rates with no points and less closing costs for around 2.5%.  30 year terms are currently available for ~3.0% (the PI portion of your loan would be $527).  Given that you calculated $704/mo at 20 years it seems you aren't putting taxes and insurance into your monthjly figures.

CarnivoreforLife

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Re: DONT Payoff your Mortgage Club
« Reply #2383 on: September 16, 2020, 01:58:24 PM »
Thank you for your reply!

I did consider 30 years also- its 3.125 % at $544 P&I
We plan on renting this home out next year and buy our forever home.

Which option is the best you think?

this is my second quote and I don't think I want anymore hard inquiries on my credit score...

CarnivoreforLife

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Re: DONT Payoff your Mortgage Club
« Reply #2384 on: September 16, 2020, 02:03:35 PM »
Hello! long time lurker have an important question. Please help!

I would like to refinance my mortgage- 5 years into the loan, 25 years left- currently is $122,000 balance 4% . total pmt $1023.00.
Bank offer 2.75% 15 yrs at $862 a month
                3.00% 20 yrs at $704 a month

Closing cost is $3,000 and they said it can be rollover into the mortgage, making it $125,000.  is this a good deal?

thank you in advance for your help!

A couple questions for you:
1) why are you not considering 30 year fixed rate mortgages?
2) will you plan on staying in your home for at least 18 months to recoup the $3k in closing costs?
3) Have you gotten multiple offers from different lenders?

Both of those scenarios have you paying LESS each month for a shorter term.  So it's a no brainer that either are much better than your current mortgage provided that you will be in your home through 2021.

But is it the BEST deal out there? Probably not.  I've seen 15 year fixed rates with no points and less closing costs for around 2.5%.  30 year terms are currently available for ~3.0% (the PI portion of your loan would be $527).  Given that you calculated $704/mo at 20 years it seems you aren't putting taxes and insurance into your monthjly figures.



Thank you for your reply!

I did consider 30 years also- its 3.125 % at $544 P&I
We plan on renting this home out next year and buy our forever home.

Which option is the best you think?

this is my second quote and I don't think I want anymore hard inquiries on my credit score...

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #2385 on: September 16, 2020, 02:10:59 PM »
Hard inquires should not reduce your credit score if they are all grouped together within a limited time frame (+/- 1 month, I think).  The credit agencies simply view this as "shopping around".  Most hard inquires (or groups of hard inquires) will drop your score just ~5 points or so... even better, this dip typically lasts just a few months.

bottom line - getting the best quote will mean far more to you than worrying about a slight and temporary dip.


So... to get to your question.... I'd really see if 3.125% 30/yr is really the best deal out there.  Start by showing a perspective loan officer that number and asking how much lower s/he can go.  Should save you a lot of time and probably will get you a better rate.

If that's the best offer you can get, to me it's a no-brainer.  Take the 30year at 3.125%.  To me it's not worth it to lock yourself into a 15year term just to shave 0.625% off an already stupidly-low interest rate.  If you suddenly find yourself with a firehose of extra cash each month you can easily put that extra $288 you save by having a longer term directly to your mortgage and you will wind up with a fairly similar payoff schedule. 
Buuuutt.... the whole idea is that you can earn a much better return on your money elsewhere than you could paying down a fixed 3.125% mortgage (remember, inflation is your friend with fixed rate debt).

achv_fcku-mny

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Re: DONT Payoff your Mortgage Club
« Reply #2386 on: September 16, 2020, 02:13:22 PM »
Thank you for your reply!

I did consider 30 years also- its 3.125 % at $544 P&I
We plan on renting this home out next year and buy our forever home.

Which option is the best you think?

this is my second quote and I don't think I want anymore hard inquiries on my credit score...


I would recommend taking 30 year option for flexibility it gives you with cashflow, if you have discipline to put savings on monthly cashflow to better use, like investments that may provide better returns.

Get as many quotes as you like, any number of quotes for mortgage finance within 15 days will be considered as just one inquiry.
« Last Edit: September 16, 2020, 02:14:57 PM by achvfi »

CarnivoreforLife

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Re: DONT Payoff your Mortgage Club
« Reply #2387 on: September 16, 2020, 02:16:06 PM »
Thank you for your reply!

I did consider 30 years also- its 3.125 % at $544 P&I
We plan on renting this home out next year and buy our forever home.

Which option is the best you think?

this is my second quote and I don't think I want anymore hard inquiries on my credit score...


I would recommend taking 30 year option for flexibility it gives you with cashflow, if you have discipline to put savings on monthly cashflow to better use, like investments that may provide better returns.

Get as many quotes as you like, any number of quotes for mortgage finance within 15 days will be considered as just one inquiry.

OK- THANK YOU SO MUCH!!

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #2388 on: September 16, 2020, 02:25:08 PM »
Quote
We plan on renting this home out next year and buy our forever home.

Just saw this.  BE CAREFUL.
Many primary residence mortgages come with clauses that you will (duh) reside in the home and not use it as a rental for a fixed period of time (often at least 2 years, or 2/5 years).  Real estate mortgages tend to be as much as 0.5% higher because they carry more risk to the bank.

Now... you might be thinking "how will the bank know"... and they probably won't.  UNTIL you apply for another mortage for your 'forever home' - in which case they won't like seeing two SFH as primary residences.

Now one way to approach this is to just take out a normal mortgage since you intend to use it for a while as your primary residence, and then in a year or two ask the bank to adjust the contract to make it a rental property.  There's a reasonable chance they might not make a change to your interest rate if you have enough equity stored up... or it will just be a slight bump. 

Either way... read the fine print.


Dicey

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Re: DONT Payoff your Mortgage Club
« Reply #2389 on: September 16, 2020, 02:54:18 PM »
Quote
We plan on renting this home out next year and buy our forever home.

Just saw this.  BE CAREFUL.
Many primary residence mortgages come with clauses that you will (duh) reside in the home and not use it as a rental for a fixed period of time (often at least 2 years, or 2/5 years).  Real estate mortgages tend to be as much as 0.5% higher because they carry more risk to the bank.

Now... you might be thinking "how will the bank know"... and they probably won't.  UNTIL you apply for another mortage for your 'forever home' - in which case they won't like seeing two SFH as primary residences.

Now one way to approach this is to just take out a normal mortgage since you intend to use it for a while as your primary residence, and then in a year or two ask the bank to adjust the contract to make it a rental property.  There's a reasonable chance they might not make a change to your interest rate if you have enough equity stored up... or it will just be a slight bump. 

Either way... read the fine print.
Agree with nereo.

They will find out via your insurance company if you have an impound account, yet another reason not to have one.

If you're going to rent it out long term, I agree a 30 year loan makes sense.

For latest loan news, paging @couponvan.

CarnivoreforLife

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Re: DONT Payoff your Mortgage Club
« Reply #2390 on: September 16, 2020, 03:05:24 PM »
Quote
We plan on renting this home out next year and buy our forever home.

Just saw this.  BE CAREFUL.
Many primary residence mortgages come with clauses that you will (duh) reside in the home and not use it as a rental for a fixed period of time (often at least 2 years, or 2/5 years).  Real estate mortgages tend to be as much as 0.5% higher because they carry more risk to the bank.

Now... you might be thinking "how will the bank know"... and they probably won't.  UNTIL you apply for another mortage for your 'forever home' - in which case they won't like seeing two SFH as primary residences.

Now one way to approach this is to just take out a normal mortgage since you intend to use it for a while as your primary residence, and then in a year or two ask the bank to adjust the contract to make it a rental property.  There's a reasonable chance they might not make a change to your interest rate if you have enough equity stored up... or it will just be a slight bump. 

Either way... read the fine print.
Agree with nereo.

They will find out via your insurance company if you have an impound account, yet another reason not to have one.

If you're going to rent it out long term, I agree a 30 year loan makes sense.

For latest loan news, paging @couponvan.


OK, I see...

I would like to clarify some things.
Our forever home would be under hubs name only.  Current one is under mines only and we're going to rent it out next year.  If that makes any difference in the future when I rent the house out...
So, you're saying make sure the REFINANCE clause doesn't prohibit us to rent the house out in a year or two?
And, our agent friend stated that we could rent the house for $1,800- that's why I would to refinance to get the lowest and best rate for optimal cash flow...



Also

NotBadForADad

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Re: DONT Payoff your Mortgage Club
« Reply #2391 on: September 16, 2020, 03:35:10 PM »

For sure. Right now, I'm just focusing on hammering out all of my debt and then getting 3-6months living expenses covered. We plan to move in a few years to get out of the city.

Hard to know without more detailed information, but 'hammering out all debt' before you have 3-6 months living expenses (i.e. an "Emergency Fund") is likely backwards from what is advised here.  In fact, eliminating low-interest debt is pretty low on the Investment Order, for very good reasons.

Well excuse me. I was following the Dave Ramsey Baby steps.

SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #2392 on: September 16, 2020, 04:00:43 PM »

For sure. Right now, I'm just focusing on hammering out all of my debt and then getting 3-6months living expenses covered. We plan to move in a few years to get out of the city.

Hard to know without more detailed information, but 'hammering out all debt' before you have 3-6 months living expenses (i.e. an "Emergency Fund") is likely backwards from what is advised here.  In fact, eliminating low-interest debt is pretty low on the Investment Order, for very good reasons.

Well excuse me. I was following the Dave Ramsey Baby steps.

No, you weren't.  :)

You got the order wrong for Dave Ramsey's baby steps method.
This stuff isn't hard, but it's "particular".   Details matter.   

https://www.daveramsey.com/dave-ramsey-7-baby-steps




NotBadForADad

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Re: DONT Payoff your Mortgage Club
« Reply #2393 on: September 16, 2020, 04:03:18 PM »

For sure. Right now, I'm just focusing on hammering out all of my debt and then getting 3-6months living expenses covered. We plan to move in a few years to get out of the city.

Hard to know without more detailed information, but 'hammering out all debt' before you have 3-6 months living expenses (i.e. an "Emergency Fund") is likely backwards from what is advised here.  In fact, eliminating low-interest debt is pretty low on the Investment Order, for very good reasons.

Well excuse me. I was following the Dave Ramsey Baby steps.

No, you weren't.  :)

You got the order wrong for Dave Ramsey's baby steps method.
This stuff isn't hard, but it's "particular".   Details matter.   

https://www.daveramsey.com/dave-ramsey-7-baby-steps


I know what the steps are. I have $1k+ in the bank. And have been diligent with paying debt down, $14k since March.

What did I miss?

SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #2394 on: September 16, 2020, 04:06:51 PM »

For sure. Right now, I'm just focusing on hammering out all of my debt and then getting 3-6months living expenses covered. We plan to move in a few years to get out of the city.

Hard to know without more detailed information, but 'hammering out all debt' before you have 3-6 months living expenses (i.e. an "Emergency Fund") is likely backwards from what is advised here.  In fact, eliminating low-interest debt is pretty low on the Investment Order, for very good reasons.

Well excuse me. I was following the Dave Ramsey Baby steps.

No, you weren't.  :)

You got the order wrong for Dave Ramsey's baby steps method.
This stuff isn't hard, but it's "particular".   Details matter.   

https://www.daveramsey.com/dave-ramsey-7-baby-steps


I know what the steps are. I have $1k+ in the bank. And have been diligent with paying debt down, $14k since March.

What did I miss?

"All debt" includes a mortgage, which we've assumed you have since you're on this thread.   The Baby Steps put paying off the mortgage as step #6 of 7.    3-6 months emergency fund is #3 of 7.    Details matter.




NotBadForADad

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Re: DONT Payoff your Mortgage Club
« Reply #2395 on: September 16, 2020, 04:11:19 PM »

For sure. Right now, I'm just focusing on hammering out all of my debt and then getting 3-6months living expenses covered. We plan to move in a few years to get out of the city.

Hard to know without more detailed information, but 'hammering out all debt' before you have 3-6 months living expenses (i.e. an "Emergency Fund") is likely backwards from what is advised here.  In fact, eliminating low-interest debt is pretty low on the Investment Order, for very good reasons.

Well excuse me. I was following the Dave Ramsey Baby steps.

No, you weren't.  :)

You got the order wrong for Dave Ramsey's baby steps method.
This stuff isn't hard, but it's "particular".   Details matter.   

https://www.daveramsey.com/dave-ramsey-7-baby-steps


I know what the steps are. I have $1k+ in the bank. And have been diligent with paying debt down, $14k since March.

What did I miss?

"All debt" includes a mortgage, which we've assumed you have since you're on this thread.   The Baby Steps put paying off the mortgage as step #6 of 7.    3-6 months emergency fund is #3 of 7.    Details matter.

So I can't inquire on a thread and get my feelers out? Ok let me rephrase,  all debt except the mortgage, as typically spoken in the DR realm.

Better??

nereo

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Re: DONT Payoff your Mortgage Club
« Reply #2396 on: September 16, 2020, 05:25:12 PM »
No one is trying to be hostile here, and sometimes it’s hard to judge tone over posts. Everyone involved is just trying to help and learn.

How people discuss debt is one of the big differences between this forum and the DR boards. Here “all debt” includes the mortgage, and the focus is a bit different (compare the “investment order” linked above to “DR’s Baby Steps”)

What matters with mortgages is whether you are using it as agreed on the note. It doesn’t matter if you split who holds each loan. If you aren’t living there r have rented it out, that could be a problem. Check first, or risk penalties.

SwordGuy

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Re: DONT Payoff your Mortgage Club
« Reply #2397 on: September 16, 2020, 05:43:16 PM »
@NotBadForADad ,  Sorry, I'm not trying to be hostile.   I'm trying to make a point.

Details matter and you can learn the details.

This thread contains a host of information about why one would (or would not) want to focus on investing before paying down the mortgage or vice-versa.   

For most people with a low fixed rate 30 year mortgage, the DR baby steps #6 and #7 should be reversed for optimum wealth building and financial freedom.   And yes, there are exceptions.    The reasons why are buried in this thread as various folks have put forward their situations and folks have walked them thru their decision.

It's my belief that the time it takes to read thru this thread is time well spent.     We're talking the potential for serious money.




CarnivoreforLife

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Re: DONT Payoff your Mortgage Club
« Reply #2398 on: September 16, 2020, 05:52:08 PM »

What matters with mortgages is whether you are using it as agreed on the note. It doesn’t matter if you split who holds each loan. If you aren’t living there r have rented it out, that could be a problem. Check first, or risk penalties.
[/quote]

Thank you for your feedback and opinions...this was more complicated than I thought, unfortunately :(
What would YOU do if this was your situation?  Now, I think I just got confused.  Refinance but maybe unable to rent it out in the future or keep original mortgage and can rent it out since notes allow after 3 years...
You're right, we're all in this together and trying to help and learn from one another and I really appreciated your time and comment.

thank you.

dragoncar

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Re: DONT Payoff your Mortgage Club
« Reply #2399 on: September 16, 2020, 07:44:57 PM »
Hey I was wondering.... can anyone tell me?  Do details matter or not?