Re-Fi House Question - Rate

I would use Nola Lending. They are great. Have bought and refinanced with them. I used Stacey Chehardy. 985 710 0050. She is great.

15 year rate was right at 3.0% on Monday. I haven't really looked at fees lately but lender fees should be around 1k most likely on a refi. I would stay away from big banks like chase and cap one. I work for a title company so if you have any general questions, I could help you. Just shoot me an email at my username at yahoo

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15 year rate was right at 3.0% on Monday

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got this from Campus Federal Credit Union

the going 15ry rate is 3.0% I have locked a couple of 2.875% but the LTV will need to be under 60% to make that happen.

So wait...your scenario to cover the potential issues I discussed is to take out a HELOC and in an emergency negatively amortize your home to the tune of $25,000 while at the same time adding a monthly note at an interest rate that will approach-if not be well into-double digits in terms of its interest rate?

Owe more on your house, have less time to pay it off, and add bills to your monthly obligations which are already evidently a problem if you're pulling out a large sum?

This is a scenario that any financial planner-and anyone with the customer's best interest in mind-would suggest that the customer avoid.

Instead, you can easily either look at it one of two ways in my scenario:

A.) You've increased the power of whatever income you have left by switching off the 15 year term and paying your normal 30 year payment amount while still leaving yourself a fair amount of equity untouched in case the worst happens.

Or

B.) You've lowered your most important bill on the single most important asset of 99% of American Homeowner's monthly obligations by 50%.

Either way you want to look at it, by going with my route, you do NOT reduce the homeowner's equity in emergencies and simultaneously ADD to their monthly expenses, which baldona's route would do.

There's no offense because for some folks-those who have great medical insurance and fantastic life insurance and quality, easily liquid assets in the bank-this is a good idea. But for the vast majority of others, its simply a short-term sugar rush that will leave them in much greater financial straits than before their emergency.

Even when we discuss the alleged interest-rate-related disadvantages, most folks who itemize will realize the interest paid on the front end back as a tax savings as all interest paid on mortgages of owner-occupied properties is 100% tax deductible.

Again, there's no offense intended here, but we're talking about financial discipline with my scneario. We're talking quite likely financial ruin in baldonas.

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baldona

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I never said to do the HELOC, I said that is an option in an emergency and not one that I would recommend even.

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You indicated my suggestion was half right and only offered this as a possible solution to the scenario I presented. I have to be honest with you, that's not a solution. It's a problem. I'm glad we agree but why suggest it in response if you don't recommend it?

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GFunk, do you sell Whole Life Insurance? Your advice sounds like someone that does.

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Never. Not for a day in my life. I'm insured to the gills on a term policy for just less than 10x my annual income (Forget if its a 15 or 20 year term; I think its 20 though).

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The best long term financial plan, is to be debt free including your house.

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I agree.

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Wealthy folks don't have mortgages so they can invest more. The best way to pay off your house is to take the least term with the lowest interest so you are putting as much as you can possibly afford today into your payments.

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There's no such thing as the "best," way to pay off your house. That's like saying, "This is the best workout you can do in the gym to lose weight and get the body of your dreams."

You ask 15 people who lost weight and shaped up and they'll give you 15 different answers about the method they used to achieve their goals.

In the same sense, the best way to pay off your house-from my perspective-is to do it in the most aggressive manner while still providing yourself a hedge-or insurance-against the unexpected. Which smart people-regardless of their relative level of wealth-recognize is anything but unexpected.

The method I outlined may not be the best for you. Or for others. You may not like it. But the objections you raised are completely rebutted via the mortgage interest tax deduction, the lack of negative amortization in times of personal financial crisis, the lack of adding to the household expenditures by way of an additional bill during that same time, and the flexibility of radically reducing monthly expenditures regarding the single biggest, most important cost in any homeowner's budget.

It is the most risk averse yet aggressive method to achieve the customer's long-term financial goal.

You can pay the house off in 15 years just as you suggest and the interest rate costs will be negligible based on annual tax deductions and still keep the family budget as flexible as possible.

If the person adhering to this plan isn't disciplined enough to make the payments monthly then perhaps that is indicative of a lack of the type of discipline necessary to attain the wealth you speak of.

That's conjecture but let's close this by asking you some questions:

- Will paying the 15 year am pay off the 30 year instrument in 15 years?
- Will the mortgage interest tax deduction eliminate any issues regarding interest payments over the life of the instrument?
- Will the 30 year am cost the OP less money in times of emergency and providing more flexibility throughout the life of the mortgage?

These are rhetorical, but the answers drive home the soundness of the theory.

I agree 100%. If you want to pay it off in 15 years, get a 15 year (assuming you have emergency fund already). The monthly interest rate difference made it a pretty easy decision for me. If the payment difference affects your ability to handle an emergency, you have bigger problems...

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The best long term financial plan, is to be debt free including your house. Wealthy folks don't have mortgages so they can invest more.

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Not necessarily. If one is trying to build wealth over time, one way to do it is by prudently using leverage. While eliminating a mortgage eventually means not having a debt payment, it also means an opportunity cost in money that could have been invested for a higher return than the cost of the mortgage. Plus, once it's paid off, you're sitting on essentially dead money. I could sell some cashflow positive rental property or some equities and pay off my 3% 30 year fixed at any time. But with my real return on those investments being greater than the cost of the mortgage, it would make no sense to do so.

It's all in your situation and how comfortable one is in managing debt. Consumer debt tends to be bad debt. But targeted investment debt is part of why I'm right now looking at an early retirement. But, to each his own...

I understand your point. However, your example uses a spread of less than 1% between 15/30yr rates. 1%(ish) spread seems more common.

Secondly, for all the math you're showing the idea of "emergency" is quite abstract. Someone with a special needs child or large family may need a larger emergency fund. A single guy with good health insurance needs much less.

The OP is proposing a smaller mortgage than most. In your example, you compare P&I payments. I believe the more telling number is the interest amount only, because that money is forever gone. A higher principal payment merely means an increase in equity.

In the larger sense though, I still believe anyone who is in a position to pay extra on a 30yr is better served by having an adequate emergency fund and a 15yr mortgage. The interest agrees.