Author Topic: ATTN People with Mortgages  (Read 5484 times)

boarder42

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ATTN People with Mortgages
« on: March 27, 2017, 07:27:53 AM »
Something you all should be watching right now.  Even though the fed is raising rates, mortgage rates are based on the 10 year treasury yield.  When the market drops as it did in 2016 in Feb and again post brexit.  Money is typically moved to bonds.  When money is moved to bonds the yields fall.  I'd say we're sitting around 4% APR rates right now but if there is further fallout in the market i'd keep my eye on it and watch it as we could see the 10 Year yield fall farther.  A good rule of thumb is APR is ~ 10 year yield + 1.7%

There are many mortgage brokers that do no cost REFI's .... really 0 out of pocket costs. what you sacrafice is around 1/8th of a point.  So they basically sell points back from the lowest rate and thats where they make their profit.  so a no cost REFI is probably somewhere between 4.125 and 4.25 right now.

TheAnonOne

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Re: ATTN People with Mortgages
« Reply #1 on: March 27, 2017, 07:48:01 AM »
Something you all should be watching right now.  Even though the fed is raising rates, mortgage rates are based on the 10 year treasury yield.  When the market drops as it did in 2016 in Feb and again post brexit.  Money is typically moved to bonds.  When money is moved to bonds the yields fall.  I'd say we're sitting around 4% APR rates right now but if there is further fallout in the market i'd keep my eye on it and watch it as we could see the 10 Year yield fall farther.  A good rule of thumb is APR is ~ 10 year yield + 1.7%

There are many mortgage brokers that do no cost REFI's .... really 0 out of pocket costs. what you sacrafice is around 1/8th of a point.  So they basically sell points back from the lowest rate and thats where they make their profit.  so a no cost REFI is probably somewhere between 4.125 and 4.25 right now.
3.25% @15years right now.

I am guessing it will be a long time before I see these rates again!

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rantk81

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Re: ATTN People with Mortgages
« Reply #2 on: March 27, 2017, 07:49:09 AM »
Good info about the good mortgage brokers.

I did my refi about a year ago, and I got 3 5/8% for 30yr fixed, with zero out of pocket costs. They even reimbursed me for the cost of the appraisal.


aceyou

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Re: ATTN People with Mortgages
« Reply #3 on: March 27, 2017, 07:53:51 AM »
Interesting info Boarder, thanks for posting. 

Probably won't apply to me because I've got 13 years left on a 15 year note @ 3.125%, but it could help others currently at a higher rate down the road. 

Always good to be prepared to take advantage of an opportunity. 


Dicey

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Re: ATTN People with Mortgages
« Reply #4 on: March 27, 2017, 08:03:17 AM »
Interesting info Boarder, thanks for posting and punctuating!
(My bold.) See, I knew you were a gold mine of Information! Thank you.

boarder42

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Re: ATTN People with Mortgages
« Reply #5 on: March 27, 2017, 09:03:49 AM »
I'm at 3.25 on a 30 year so this doesnt benefit me... we'll likely never see that again but i'd love to see it.  the 3.25 on a 15 year i think you're in a prime location to possibly see a rate reduction.  Or better yet jump to the better 30 year when rates hit 3.75% or lower.

matchewed

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Re: ATTN People with Mortgages
« Reply #6 on: March 27, 2017, 09:20:08 AM »
I'm in process for picking up my first property. We've got a deal for 3.625% right now but the financing is still in the pre stage until some forms come in from the seller (HUD home).

This may be good news then as the deal is also based off the rate. So my deal can get sweeter. Thanks for the info.

GU

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Re: ATTN People with Mortgages
« Reply #7 on: March 27, 2017, 12:13:32 PM »
Mortgage refi's always seem to good to be true to me, but I don't know much about them.  Can anyone explain the downsides, if any? 

Does your mortgage "reset" if you refi?  I.e., if you have 20 years left on a 30-year, and you refi, does it start over at a 30-year payment schedule again?

RWD

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Re: ATTN People with Mortgages
« Reply #8 on: March 27, 2017, 12:22:05 PM »
Mortgage refi's always seem to good to be true to me, but I don't know much about them.  Can anyone explain the downsides, if any? 

Does your mortgage "reset" if you refi?  I.e., if you have 20 years left on a 30-year, and you refi, does it start over at a 30-year payment schedule again?

I have refinanced once from 6.5% to 5% in 2010. We paid closing costs again and the mortgage was reset from 28 years remaining to 30 years remaining (and a corresponding slightly lower payment). It also reset the clock on when we could remove PMI (FHA mortgage), at the time five years from mortgage origination. Despite these downsides it still saved us money over the next five years that we had the mortgage.

Another thing to consider is you may need to have your house value reappraised.

Lentils4Lunch

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Re: ATTN People with Mortgages
« Reply #9 on: March 27, 2017, 12:28:22 PM »
2.625 on a 15 year here. BAM

monte0930

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Re: ATTN People with Mortgages
« Reply #10 on: March 27, 2017, 01:04:49 PM »
I just did a no cost refi at the end of last year. Went from a 4.25% 30 year with 25 years remaining, to a 3% 15 year, same monthly payment.

monte0930

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Re: ATTN People with Mortgages
« Reply #11 on: March 27, 2017, 01:07:57 PM »
Mortgage refi's always seem to good to be true to me, but I don't know much about them.  Can anyone explain the downsides, if any? 

Does your mortgage "reset" if you refi?  I.e., if you have 20 years left on a 30-year, and you refi, does it start over at a 30-year payment schedule again?

Yes, the term would reset. Unless you went with a 20 year refi, or better yet a 15 year.

boarder42

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Re: ATTN People with Mortgages
« Reply #12 on: March 27, 2017, 01:51:07 PM »
Mortgage refi's always seem to good to be true to me, but I don't know much about them.  Can anyone explain the downsides, if any? 

Does your mortgage "reset" if you refi?  I.e., if you have 20 years left on a 30-year, and you refi, does it start over at a 30-year payment schedule again?

Yes, the term would reset. Unless you went with a 20 year refi, or better yet a 15 year.


you can and should likely always REFI to the longest term available.  if you plan on living in the same place longer than 7 years you come out ahead investing with a 30 vs taking a 15.  REFIing down isnt usually better in most cases. 

You should be STOKED to REFI to a lower rate and add more years to your mortgage

GU

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Re: ATTN People with Mortgages
« Reply #13 on: March 27, 2017, 02:07:07 PM »
Mortgage refi's always seem to good to be true to me, but I don't know much about them.  Can anyone explain the downsides, if any? 

Does your mortgage "reset" if you refi?  I.e., if you have 20 years left on a 30-year, and you refi, does it start over at a 30-year payment schedule again?

Yes, the term would reset. Unless you went with a 20 year refi, or better yet a 15 year.


you can and should likely always REFI to the longest term available.  if you plan on living in the same place longer than 7 years you come out ahead investing with a 30 vs taking a 15.  REFIing down isnt usually better in most cases. 

You should be STOKED to REFI to a lower rate and add more years to your mortgage

Thank you, that's helpful.  Is there a credit score impact to refinancing?

prognastat

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Re: ATTN People with Mortgages
« Reply #14 on: March 27, 2017, 02:14:44 PM »
Mortgage refi's always seem to good to be true to me, but I don't know much about them.  Can anyone explain the downsides, if any? 

Does your mortgage "reset" if you refi?  I.e., if you have 20 years left on a 30-year, and you refi, does it start over at a 30-year payment schedule again?

Yes, the term would reset. Unless you went with a 20 year refi, or better yet a 15 year.

It generally will include a hard pull of your credit history which may affect your credit score.


you can and should likely always REFI to the longest term available.  if you plan on living in the same place longer than 7 years you come out ahead investing with a 30 vs taking a 15.  REFIing down isnt usually better in most cases. 

You should be STOKED to REFI to a lower rate and add more years to your mortgage

Thank you, that's helpful.  Is there a credit score impact to refinancing?

boarder42

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Re: ATTN People with Mortgages
« Reply #15 on: March 27, 2017, 02:19:48 PM »
Mortgage refi's always seem to good to be true to me, but I don't know much about them.  Can anyone explain the downsides, if any? 

Does your mortgage "reset" if you refi?  I.e., if you have 20 years left on a 30-year, and you refi, does it start over at a 30-year payment schedule again?

Yes, the term would reset. Unless you went with a 20 year refi, or better yet a 15 year.


you can and should likely always REFI to the longest term available.  if you plan on living in the same place longer than 7 years you come out ahead investing with a 30 vs taking a 15.  REFIing down isnt usually better in most cases. 

You should be STOKED to REFI to a lower rate and add more years to your mortgage

Thank you, that's helpful.  Is there a credit score impact to refinancing?

its minimal,  but really the only major purchase in your life that 99% of people need good credit for is a home or a REFI on a home.  People are far too concerned about their credit score being possibly lowered to use it for what its good for. 

for reference i've refinanced and purchased a new house 7 times in the last 4 years.  i've also opened dozens and dozens of credit cards.  my score is still over 740.  The mulitple credit card applications are really what pulls it down the most b/c my average age of credit history is so low.  a hard pull on your credit will barely blip it for a couple months ... maybe you'll lose 5-10 points.  But again what are you going to use your credit for if not this.  what value are you getting out of it if not to use it for a REFI

iwasjustwondering

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Re: ATTN People with Mortgages
« Reply #16 on: March 27, 2017, 03:17:15 PM »
I refinanced from a 30-year at 4.5% to a 15-year at 2.99% last year.  I had 25 years left on the previous mortgage, so I saved myself 10 years and I think $250k over the life of the loan.  The great thing is that I also got rid of PMI by doing this, as I had only put 5% down when buying in late 2010.  I think my payment went up by $150 or so a month, in exchange for building equity much faster.

Refinancing is worth doing if you can get a significantly lower rate and/or shorten the term.  The broker should be able too show you how long it will take to break even/make money by refinancing.

Just Joe

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Re: ATTN People with Mortgages
« Reply #17 on: March 28, 2017, 08:33:37 AM »
Our mortgage bank allowed us do a no-cost refinance a few years ago. 3.125% and reset the clock to 15 years. We were originally on a 30 year mortgage but we're building equity faster as "iwasjustwondering" mentioned. Want this mortgage gone so come hell or high water we have a roof over our heads.  We're paying more down the principle faster though with higher than required payments.

boarder42

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Re: ATTN People with Mortgages
« Reply #18 on: March 28, 2017, 09:10:43 AM »
Our mortgage bank allowed us do a no-cost refinance a few years ago. 3.125% and reset the clock to 15 years. We were originally on a 30 year mortgage but we're building equity faster as "iwasjustwondering" mentioned. Want this mortgage gone so come hell or high water we have a roof over our heads.  We're paying more down the principle faster though with higher than required payments.

what is your FIRE plan... are you planning to use some version of the 4% rule?

TheAnonOne

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Re: ATTN People with Mortgages
« Reply #19 on: March 28, 2017, 09:13:45 AM »
I have mine on a 15 year, but the balance of 63k doesn't move the needle for me on a 30 vs 15 as far as "FIRE" or success rates are concerned. I could pay off the mortgage in under a year if I really cared.

Keeping it borrowed to invest instead, but like I said, 63k vs the $1,000,000+ I need to fire is pretty negligible..

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Scortius

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Re: ATTN People with Mortgages
« Reply #20 on: March 28, 2017, 09:43:09 AM »
Our mortgage bank allowed us do a no-cost refinance a few years ago. 3.125% and reset the clock to 15 years. We were originally on a 30 year mortgage but we're building equity faster as "iwasjustwondering" mentioned. Want this mortgage gone so come hell or high water we have a roof over our heads.  We're paying more down the principle faster though with higher than required payments.

That's great, but just make sure you're hitting your savings and investment goals before you put any extra into the mortgage.  Paying off a mortgage early is great for peace of mind, but it's a money loser in the long run.

Slee_stack

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Re: ATTN People with Mortgages
« Reply #21 on: March 28, 2017, 10:20:56 AM »

you can and should likely always REFI to the longest term available.  if you plan on living in the same place longer than 7 years you come out ahead investing with a 30 vs taking a 15.  REFIing down isnt usually better in most cases. 

You should be STOKED to REFI to a lower rate and add more years to your mortgage
All else equal, I agree.  Rates are rarely equal between a 15 and 30 year term though.  That will almost always mean I'd choose the 15yr at a 0.5% (or so) savings.

One could argue that if the rate difference is low enough, that the transaction costs on the next refi could negate the savings.  That's too much IF/THEN for me.

Scortius

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Re: ATTN People with Mortgages
« Reply #22 on: March 28, 2017, 10:27:25 AM »

you can and should likely always REFI to the longest term available.  if you plan on living in the same place longer than 7 years you come out ahead investing with a 30 vs taking a 15.  REFIing down isnt usually better in most cases. 

You should be STOKED to REFI to a lower rate and add more years to your mortgage
All else equal, I agree.  Rates are rarely equal between a 15 and 30 year term though.  That will almost always mean I'd choose the 15yr at a 0.5% (or so) savings.

One could argue that if the rate difference is low enough, that the transaction costs on the next refi could negate the savings.  That's too much IF/THEN for me.

The reason you go for the 30 over the 15 is because a low rate mortgage is a gift from the government, and the longer you can stretch out your payments the better.  Paying an extra 0.5% to stretch payments for another 15 years is a big win for you.  If you take the difference between what you'd pay for the 15 year and what you'd pay for the 30 year and invest it over those 30 years, you'll end up hundreds of thousands of dollars ahead, even accounting for the catch-up period after you've paid off the 15 year mortgage.

boarder42

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Re: ATTN People with Mortgages
« Reply #23 on: March 28, 2017, 10:48:48 AM »

you can and should likely always REFI to the longest term available.  if you plan on living in the same place longer than 7 years you come out ahead investing with a 30 vs taking a 15.  REFIing down isnt usually better in most cases. 

You should be STOKED to REFI to a lower rate and add more years to your mortgage
All else equal, I agree.  Rates are rarely equal between a 15 and 30 year term though.  That will almost always mean I'd choose the 15yr at a 0.5% (or so) savings.

One could argue that if the rate difference is low enough, that the transaction costs on the next refi could negate the savings.  That's too much IF/THEN for me.

The reason you go for the 30 over the 15 is because a low rate mortgage is a gift from the government, and the longer you can stretch out your payments the better.  Paying an extra 0.5% to stretch payments for another 15 years is a big win for you.  If you take the difference between what you'd pay for the 15 year and what you'd pay for the 30 year and invest it over those 30 years, you'll end up hundreds of thousands of dollars ahead, even accounting for the catch-up period after you've paid off the 15 year mortgage.

correct the breakeven is usually 7 years on 15vs 30 year mortgages ... if you stay longer than 7 years you will come out way ahead on the 30 year mortgage even with the rate difference

redbird

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Re: ATTN People with Mortgages
« Reply #24 on: March 28, 2017, 11:00:15 AM »
If you look around and you have good credit, you should be able to get sub-4% still. I have a locked in 2.875% rate on my under-contract house (closing hasn't happened yet). I didn't really shop around either - I just went to a credit union.

Ricksun

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Re: ATTN People with Mortgages
« Reply #25 on: March 28, 2017, 11:19:59 AM »
2.625 on a 15 year here. BAM

Same here!

RWD

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Re: ATTN People with Mortgages
« Reply #26 on: March 28, 2017, 11:29:03 AM »

you can and should likely always REFI to the longest term available.  if you plan on living in the same place longer than 7 years you come out ahead investing with a 30 vs taking a 15.  REFIing down isnt usually better in most cases. 

You should be STOKED to REFI to a lower rate and add more years to your mortgage
All else equal, I agree.  Rates are rarely equal between a 15 and 30 year term though.  That will almost always mean I'd choose the 15yr at a 0.5% (or so) savings.

One could argue that if the rate difference is low enough, that the transaction costs on the next refi could negate the savings.  That's too much IF/THEN for me.

The reason you go for the 30 over the 15 is because a low rate mortgage is a gift from the government, and the longer you can stretch out your payments the better.  Paying an extra 0.5% to stretch payments for another 15 years is a big win for you.  If you take the difference between what you'd pay for the 15 year and what you'd pay for the 30 year and invest it over those 30 years, you'll end up hundreds of thousands of dollars ahead, even accounting for the catch-up period after you've paid off the 15 year mortgage.

correct the breakeven is usually 7 years on 15vs 30 year mortgages ... if you stay longer than 7 years you will come out way ahead on the 30 year mortgage even with the rate difference

I just did some spreadsheeting with our terms (15 year at 3.125% versus 30 year at 3.875%) and came up with an ~11 year break-even point, assuming 7% returns. Am I missing something?

At 7 years we'll probably still be in this house, but 11 years is pretty unclear.

Scortius

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Re: ATTN People with Mortgages
« Reply #27 on: March 28, 2017, 12:16:23 PM »

you can and should likely always REFI to the longest term available.  if you plan on living in the same place longer than 7 years you come out ahead investing with a 30 vs taking a 15.  REFIing down isnt usually better in most cases. 

You should be STOKED to REFI to a lower rate and add more years to your mortgage
All else equal, I agree.  Rates are rarely equal between a 15 and 30 year term though.  That will almost always mean I'd choose the 15yr at a 0.5% (or so) savings.

One could argue that if the rate difference is low enough, that the transaction costs on the next refi could negate the savings.  That's too much IF/THEN for me.

The reason you go for the 30 over the 15 is because a low rate mortgage is a gift from the government, and the longer you can stretch out your payments the better.  Paying an extra 0.5% to stretch payments for another 15 years is a big win for you.  If you take the difference between what you'd pay for the 15 year and what you'd pay for the 30 year and invest it over those 30 years, you'll end up hundreds of thousands of dollars ahead, even accounting for the catch-up period after you've paid off the 15 year mortgage.

correct the breakeven is usually 7 years on 15vs 30 year mortgages ... if you stay longer than 7 years you will come out way ahead on the 30 year mortgage even with the rate difference

I just did some spreadsheeting with our terms (15 year at 3.125% versus 30 year at 3.875%) and came up with an ~11 year break-even point, assuming 7% returns. Am I missing something?

At 7 years we'll probably still be in this house, but 11 years is pretty unclear.

Make sure you're accounting for inflation.  Is that 7% before or after?  Usually we say 9-10% before inflation.

JG in Hangzhou

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Re: ATTN People with Mortgages
« Reply #28 on: March 28, 2017, 12:17:21 PM »
So if I'm FIRED, with no employment income, how can I qualify for a re-fi?

What I have experienced so far is:  "No income, no qualify." 

boarder42

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Re: ATTN People with Mortgages
« Reply #29 on: March 28, 2017, 12:18:02 PM »

you can and should likely always REFI to the longest term available.  if you plan on living in the same place longer than 7 years you come out ahead investing with a 30 vs taking a 15.  REFIing down isnt usually better in most cases. 

You should be STOKED to REFI to a lower rate and add more years to your mortgage
All else equal, I agree.  Rates are rarely equal between a 15 and 30 year term though.  That will almost always mean I'd choose the 15yr at a 0.5% (or so) savings.

One could argue that if the rate difference is low enough, that the transaction costs on the next refi could negate the savings.  That's too much IF/THEN for me.

The reason you go for the 30 over the 15 is because a low rate mortgage is a gift from the government, and the longer you can stretch out your payments the better.  Paying an extra 0.5% to stretch payments for another 15 years is a big win for you.  If you take the difference between what you'd pay for the 15 year and what you'd pay for the 30 year and invest it over those 30 years, you'll end up hundreds of thousands of dollars ahead, even accounting for the catch-up period after you've paid off the 15 year mortgage.

correct the breakeven is usually 7 years on 15vs 30 year mortgages ... if you stay longer than 7 years you will come out way ahead on the 30 year mortgage even with the rate difference

I just did some spreadsheeting with our terms (15 year at 3.125% versus 30 year at 3.875%) and came up with an ~11 year break-even point, assuming 7% returns. Am I missing something?

At 7 years we'll probably still be in this house, but 11 years is pretty unclear.

yes those numbers are much farther apart than what can be obtained when evaluated at the same time. 

Plus assuming you move to another home and get another low interest 30 year mortgage again it will perpetuate the gains you're seeing b/c its not 100% in a vacuum. just house A. 

dude

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Re: ATTN People with Mortgages
« Reply #30 on: March 28, 2017, 12:28:52 PM »
I'm already at 3.25%. Practically free money . . .  ;-)

GU

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Re: ATTN People with Mortgages
« Reply #31 on: March 28, 2017, 12:31:49 PM »
So if I'm FIRED, with no employment income, how can I qualify for a re-fi?

What I have experienced so far is:  "No income, no qualify."

Can't you just show them your fat portfolio balances?  I find it hard to believe someone with ~$1M in assets can't get a refi, but maybe I'm wrong.

boarder42

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Re: ATTN People with Mortgages
« Reply #32 on: March 28, 2017, 12:34:44 PM »
So if I'm FIRED, with no employment income, how can I qualify for a re-fi?

What I have experienced so far is:  "No income, no qualify."

Can't you just show them your fat portfolio balances?  I find it hard to believe someone with ~$1M in assets can't get a refi, but maybe I'm wrong.

this isnt something normally looked at to borrow you need income.  to show a fat portfolio balance means why do you need my money?

RWD

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Re: ATTN People with Mortgages
« Reply #33 on: March 28, 2017, 12:35:52 PM »
I just did some spreadsheeting with our terms (15 year at 3.125% versus 30 year at 3.875%) and came up with an ~11 year break-even point, assuming 7% returns. Am I missing something?

At 7 years we'll probably still be in this house, but 11 years is pretty unclear.

Make sure you're accounting for inflation.  Is that 7% before or after?  Usually we say 9-10% before inflation.

Before inflation. Break-even points with different assumed rates of return:
10% - 79 months
9% - 91 months
8% - 107 months
7% - 130 months


I just did some spreadsheeting with our terms (15 year at 3.125% versus 30 year at 3.875%) and came up with an ~11 year break-even point, assuming 7% returns. Am I missing something?

At 7 years we'll probably still be in this house, but 11 years is pretty unclear.

yes those numbers are much farther apart than what can be obtained when evaluated at the same time. 

Plus assuming you move to another home and get another low interest 30 year mortgage again it will perpetuate the gains you're seeing b/c its not 100% in a vacuum. just house A. 

I honestly have no idea what you're saying here...?

rantk81

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Re: ATTN People with Mortgages
« Reply #34 on: March 28, 2017, 01:36:20 PM »
So if I'm FIRED, with no employment income, how can I qualify for a re-fi?

What I have experienced so far is:  "No income, no qualify."

Can't you just show them your fat portfolio balances?  I find it hard to believe someone with ~$1M in assets can't get a refi, but maybe I'm wrong.

With the "new" mortgage regulations (e.g. since the last financial crisis), and having been through the mortgage/refi process a few times... I can whole-heartedly say "NO" you can't just show fat portfolio balances.

I had portfolio balances as multiples of the amount of loan I was trying to take out... But I was still literally taken through the wringer about every single detail of my income, every detail about my rental income, even the property tax amounts, questioned about every deposit into my checking account to "make sure someone else wasn't helping me with the down payment", etc etc etc.


talltexan

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Re: ATTN People with Mortgages
« Reply #35 on: March 28, 2017, 01:41:54 PM »
the mortgage rate premium for 15yr versus 30yr can change. Today it seems like 15-year rates are about 0.6% lower. When I was buying in 2013, I was quoted a 30-year at 4.25 and a 15-year at 3.125.

Opening the spread that wide makes it kind of a no-brainer to go for the shorter term.

Of course, I did the even more badass 5/1 ARM for 3.0%. With toddlers in the house, it's not like I'd sleep anyway :-)