Author Topic: Index to Mortgage  (Read 13630 times)

rpr

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Re: Index to Mortgage
« Reply #50 on: February 25, 2015, 04:11:48 PM »
A question to those arguing against early mortgage payoff, do you refinance periodically to take advantage of additional home equity and use the cash to invest?  It's basically the same idea.

The incredibly-low interest rates available on mortgage loans today is what's driving the arguments for investing in lieu of early mortgage payoff.  If there were no costs associated with refinancing, I would be constantly refinancing for as long as rates remain this low.  Since there are costs associated with refinancing, I would probably refinance every 5 or 10 years or so if rates remain this low (would just need to do the math to figure out how often it's worth doing in light of the refinancing costs, which I haven't done), but assuming that rates will remain this low for so long is a huge "if".

Between 2011 and 2012, the rates were dropping rapidly and I refinanced three times and brought my 30 year FRM rates down to 4.875 to 3.5. Every single time, it was essentially a no-closing cost. I usually wait for a drop of at least 0.25%, to make it worthwhile.  My last refi was in Aug 2012, with rates being near 3.5% for 30 year FRM. Unfortunately, the rates have not gotten much lower since then.

bacchi

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Re: Index to Mortgage
« Reply #51 on: February 25, 2015, 04:31:06 PM »
A question to those arguing against early mortgage payoff, do you refinance periodically to take advantage of additional home equity and use the cash to invest?  It's basically the same idea.

Yep.

Like James, I'm ramping up a remodel (garage apt in my case) for ~$50k. If the closing costs look good, I'm going to take equity out at <4% to pay for it. Otherwise, I'll use cash-flow and savings.

RyanAtTanagra

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Re: Index to Mortgage
« Reply #52 on: February 25, 2015, 04:44:20 PM »
A question to those arguing against early mortgage payoff, do you refinance periodically to take advantage of additional home equity and use the cash to invest?  It's basically the same idea.

Yep.

Like James, I'm ramping up a remodel (garage apt in my case) for ~$50k. If the closing costs look good, I'm going to take equity out at <4% to pay for it. Otherwise, I'll use cash-flow and savings.

But if you had no plans for the money, would you do it for the sole purpose of investing it?

brooklynguy

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Re: Index to Mortgage
« Reply #53 on: February 25, 2015, 04:44:35 PM »
Between 2011 and 2012, the rates were dropping rapidly and I refinanced three times and brought my 30 year FRM rates down to 4.875 to 3.5. Every single time, it was essentially a no-closing cost. I usually wait for a drop of at least 0.25%, to make it worthwhile.  My last refi was in Aug 2012, with rates being near 3.5% for 30 year FRM. Unfortunately, the rates have not gotten much lower since then.

That's answering a different question -- refinancing to get a lower rate can make sense irrespective of whether you plan to pay off the mortgage early or keep it outstanding until final maturity in order to keep the proceeds invested for as long as possible.

rpr

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Re: Index to Mortgage
« Reply #54 on: February 25, 2015, 05:21:43 PM »
Between 2011 and 2012, the rates were dropping rapidly and I refinanced three times and brought my 30 year FRM rates down to 4.875 to 3.5. Every single time, it was essentially a no-closing cost. I usually wait for a drop of at least 0.25%, to make it worthwhile.  My last refi was in Aug 2012, with rates being near 3.5% for 30 year FRM. Unfortunately, the rates have not gotten much lower since then.

That's answering a different question -- refinancing to get a lower rate can make sense irrespective of whether you plan to pay off the mortgage early or keep it outstanding until final maturity in order to keep the proceeds invested for as long as possible.

My plan is to keep extending it. Every single time, I have refi'd it back to the original loan balance. So far, the cash out amounts have been zero or small since I refi'd within a few months. But it is almost going to be 3 years since the last refi. If the rates for a no-closing cost refi for a 30 year FRM get below 3.25%, I will be doing so.   

bacchi

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Re: Index to Mortgage
« Reply #55 on: February 25, 2015, 06:31:39 PM »
Like James, I'm ramping up a remodel (garage apt in my case) for ~$50k. If the closing costs look good, I'm going to take equity out at <4% to pay for it. Otherwise, I'll use cash-flow and savings.

But if you had no plans for the money, would you do it for the sole purpose of investing it?

I have and I'd do it again but there's a $100k HE deductible limit (my mortgage is technically a home equity loan). At that crossover, I'd have to split the mortgage interest into "deductible" and "non-deductible" portions and that's too much trouble. I'm manufacturing credit card spending for a new card and even that's tiresome.