Refinance complete!!!

[Fishing Rhino]

Ok, hold on a minute....I'm confused. If the rate is a fixewd rate, isn't the whole point behind getting a lower interest rate on a refi to loosen up funds for higher yield investments? I can see the psychological side, and the safety net owning real estate affords, but you are living in it - its not an investment, its an necessity.

Saving/reducing the total cost of the loan by a hundred grand sounds like a pretty good investment to me. Paying it off quicker will yield more money in interest savings than investing it somewhere else, particularly in the beginning.

Here's how, and don't laugh at our mortgage payments, the largest of our three mortgages was 102.25 per month.

A rough breakdown of the amortization schedule showed that in the beginning, nearly ninety percent of the payment was interest, and only ten percent, give or take, was applied to the principal. (90 bucks for interest, 10 bucks to reduce the principle balance.) The next payment was a few cents less for interest, and a few cents more applied to the balance)

So, if we paid an extra ten bucks against the principle, it saved us ninety bucks in interest. Paying ten to save ninety is a pretty good return on that ten spot.

Granted, as time goes by, the savings per month shrinks, and at some point that money might be better invested elsewhere.

Refinancing was a great investment. I can think of no circumstance where renting is preferable to owning.

You'll never get a cent back that you paid in rent, nor will it provide any equity. The problem at the moment is that home values are in a state of flux, mostly downward.

Here are the numbers on our home owning experience.

1965 bought our first home in Holliston, MA for 18,900. Moved to Cape Cod in '69. Bought a home in Eastham, MA for 23,500 and sold our Holliston home for that amount. We put 3000 on our first home. Put over 7,000 down on our new home which is what we ended up with from the sale of our first.

In 1972 we moved to Westport from the Cape and sold our home for 33,000 and walked away with over 15,000 in hand.

Bought a new pickup for 3,000, put the remaining 12,000 with a 12,000 mortgage and we built our current home. We only finished the first floor and moved in.

Since then, as we could afford it, without having to borrow, we finished the upstairs in stages, remodeled the downstairs, added central heat, and air. For the first three or four years that we lived in the house we heated it with a wood stove.

Today, even with prices down, we pay taxes on an appraisal of nearly 500,000.

If something were to happen financially, we could sell it and buy a smaller home.

Had we rented, we'd have a few boxes full of paid rent receipts worth zero, and an equal amount of equity.

Getting off the soapbox.

[tyrius.]

I would think about paying extra on the mortgage and make sure that it makes sense for your situation.  You're paying just 4.5% interest which is tax deductible (if you itemize, which you should with a mortgage interest and property taxes).  So in essence you're paying under 4 in real terms.  Any investment that returns over 4% will mean that you'll end up with more in earnings than you would in savings.  If it were me I'd look first Tony 401k to make sure I was saving sufficient funds for retirement.  If that's true then look at your investment risk tolerance.  The only thing I'm saying is that there is more to it than just looking at the savings.

[J Francho]

Ok, hold on a minute....I'm confused. If the rate is a fixewd rate, isn't the whole point behind getting a lower interest rate on a refi to loosen up funds for higher yield investments? I can see the psychological side, and the safety net owning real estate affords, but you are living in it - its not an investment, its an necessity.

Saving/reducing the total cost of the loan by a hundred grand sounds like a pretty good investment to me. Paying it off quicker will yield more money in interest savings than investing it somewhere else, particularly in the beginning.

Here's how, and don't laugh at our mortgage payments, the largest of our three mortgages was 102.25 per month.

A rough breakdown of the amortization schedule showed that in the beginning, nearly ninety percent of the payment was interest, and only ten percent, give or take, was applied to the principal. (90 bucks for interest, 10 bucks to reduce the principle balance.) The next payment was a few cents less for interest, and a few cents more applied to the balance)

So, if we paid an extra ten bucks against the principle, it saved us ninety bucks in interest. Paying ten to save ninety is a pretty good return on that ten spot.

Granted, as time goes by, the savings per month shrinks, and at some point that money might be better invested elsewhere.

Refinancing was a great investment. I can think of no circumstance where renting is preferable to owning.

You'll never get a cent back that you paid in rent, nor will it provide any equity. The problem at the moment is that home values are in a state of flux, mostly downward.

Here are the numbers on our home owning experience.

1965 bought our first home in Holliston, MA for 18,900. Moved to Cape Cod in '69. Bought a home in Eastham, MA for 23,500 and sold our Holliston home for that amount. We put 3000 on our first home. Put over 7,000 down on our new home which is what we ended up with from the sale of our first.

In 1972 we moved to Westport from the Cape and sold our home for 33,000 and walked away with over 15,000 in hand.

Bought a new pickup for 3,000, put the remaining 12,000 with a 12,000 mortgage and we built our current home. We only finished the first floor and moved in.

Since then, as we could afford it, without having to borrow, we finished the upstairs in stages, remodeled the downstairs, added central heat, and air. For the first three or four years that we lived in the house we heated it with a wood stove.

Today, even with prices down, we pay taxes on an appraisal of nearly 500,000.

If something were to happen financially, we could sell it and buy a smaller home.

Had we rented, we'd have a few boxes full of paid rent receipts worth zero, and an equal amount of equity.

Getting off the soapbox.

I made my point....

[1inStripes]

Retirement???  I thought the world was ending in 2012?  I don't need no stinkin retirement.

Maybe I need to rethink this.

[tyrius.]

I made my point....

As long as you average more than a 4.15% return on your investment then it will cost you money to pay off your mortgage faster than required. The calculation isn't entirely straightforward as you have to consider net present value, future tax rates, liquidity concerns (if you pay off your mortgage you can not access that money), etc. But in it's simplest terms if you can invest the savings and earn more than your interest rate then paying off your mortgage early will actually COST you money and not save you money.

[SPEEDBEAD.]

I will remain blissfully ingnorant and happy to pay off a 30 year loan in close to 1/2 the time.

My retirement (pension) is good and additional safeguards are in place.

Hey, Debbie Downers, just say congrats.... ;D

[J Francho]

LOL, congrats Wayne.

tyrius, I know all of that.  Was looking to get a response from the other side of that argument.  Won't happen, I'm sure.

[tyrius.]

Hey, Debbie Downers, just say congrats.... ;D

It has nothing to do with being a downer and everything to do with trying to help out and provide information that may not have been considered.  You can ignore it if you want, no skin off my back.

One other thought that I have would be to make sure that you're time frame for the early payoff is correct.

Oh and congrats

[BadKarma42]

So, is it dumb for me to pay a little extra on my mortgage each month? 

[tyrius.]

tyrius, I know all of that. Was looking to get a response from the other side of that argument. Won't happen, I'm sure.

I was just trying to further explain the "investing" side of the argument.

[SPEEDBEAD.]

Hey, Debbie Downers, just say congrats.... ;D

It has nothing to do with being a downer and everything to do with trying to help out and provide information that may not have been considered. You can ignore it if you want, no skin off my back.

One other thought that I have would be to make sure that you're time frame for the early payoff is correct.

Oh and congrats

Jesus man...Lighten up.

See that dum arse laughing face at the end?  Funny.  HA HA

If your responses were any drier they would name a desert after you...

[J Francho]

So, is it dumb for me to pay a little extra on my mortgage each month?

No, I pay extra every year.  Its just not in my official budget to do so.  I also put money into updates and upkeep.  Updated bathrooms, roof, windows, etc.  I'm just not sure if I'm going to keep the house until its over, or high tail it out of town someday.  In the meantime, I beat the heck out of it, use it, and pay very little for it.  To me, its not a show piece, I'm not building something as a showpiece or expression of myself.  Its a nice place to live, and raise a fam, that's all.  Everybody's situation is different.

[tyrius.]

So, is it dumb for me to pay a little extra on my mortgage each month?

It's not dumb, it just isn't as simple as some people make it out to be. 

[tyrius.]

If your responses were any drier they would name a desert after you...

Right, because mortgage financing and investing are just enthralling topics of conversation. 

Oh, and just because I don't use the stupid emoticons doesn't mean that I'm serious all the time.

[SPEEDBEAD.]

If your responses were any drier they would name a desert after you...

Right, because mortgage financing and investing are just enthralling topics of conversation.

Oh, and just because I don't use the stupid emoticons doesn't mean that I'm serious all the time.

Stay in your hole then. :

Go poo on someone else's parade.

[BadKarma42]

I use the winky because I believe it adds to my wittiness.

[J Francho]

I use the winky because I believe it adds to my wittiness.

I thought that was a nervous tick.  :-?

[tyrius.]

Go poo on someone else's parade.

No reason to be a cry baby about it.

[SPEEDBEAD.]

No reason to be an arse in your posts either.

Not crying about anything, just pointing out that I never asked for your advice here.

Again, shoo!! Back to your hole...

[BadKarma42]

I use the winky because I believe it adds to my wittiness.

I thought that was a nervous tick. :-?

A common mistake.  The tick forces me to use the kiss smiley.

[BadKarma42]

No reason to be an arse in your posts either.

Not crying about anything, just pointing out that I never asked for your advice here.

Again, shoo!! Back to your hole...

Happy Festivus. 

[Siebert Outdoors]

Cool.  WTG,  Speedbead.

I'm looking at doing the same thing as you did. 

[SPEEDBEAD.]

Cool. WTG, Speedbead.

I'm looking at doing the same thing as you did.

PM me if you want any info on what I did.  Really simple actually.

[Root beer]

Refinancing was a great investment. I can think of no circumstance where renting is preferable to owning.

You'll never get a cent back that you paid in rent, nor will it provide any equity. The problem at the moment is that home values are in a state of flux, mostly downward.

I can. But I'm not going hijack this thread. 

[BadKarma42]

Would that be somethign you found in a finance textbook?