PSA - look to refinance mortgage now

[Jhhnn]

Certainly everyone's individual scenario may be a little different which is why it's >1% is a rule of thumb and not hard fact.

Time remaining in house/in mortgage, current rate (fixed vs variable), closing costs/origination fees, etc. etc. all matter in the calculation. Not to mention what eski said, do you want money tied up in a house or free for investments (I purposefully did not say "other investments" as a primary home is absolutely not an investment).

Not exactly. Paying off the house was an investment that lets us live rent free. Low overhead is key to middle class retirement.

 

[TheVrolok]

Not exactly. Paying off the house was an investment that lets us live rent free. Low overhead is key to middle class retirement.

Well, I would argue you're using the term "investment" colloquially in that sense to imply that it improves your cost of living or lifestyle.

30 second Google search turns up these two links which cover my basic premise

The Truth? Your House Is Not An Investment - Money Under 30

Buying a house is a major financial decision that can give you peace of mind and a wonderful place to live. But it's not an investment.

www.moneyunder30.com

.

Renting Vs. Buying A Home: Which Is Right For You? | Bankrate

Should you buy a home? Or keep renting? We help you weigh the pros and cons of each.

www.thesimpledollar.com

 

[RearAdmiral]

I'm thinking about doing it for 0.4% and on top of that, probably selling my house within 5-6 years. No closing costs, I'll bank an extra ~$7k when I sell, and also pay $200 less per month in the meantime. Why not ...

How do you get no closing costs? Unless it is built into the new mortgage, or you don't have to pay for new title insurance?

 

[hal2kilo]

My abject procrastination sometimes pays off. Now I just got to do it.

 

[repoman0]

How do you get no closing costs? Unless it is built into the new mortgage, or you don't have to pay for new title insurance?

It's paid for via 0.125% higher rate than I can otherwise get. Since I'm likely moving in 4-6 years and break even point on paying the new closing costs is longer than that I'd rather just keep my $3500 right now.

 

[s0me0nesmind1]

I'm at 3.125% on a 15 year - less than 1 year in.

I'm honestly doubting that any lender would be willing to cover all the closing costs to give me a rate reduction...

 

[RearAdmiral]

It's paid for via 0.125% higher rate than I can otherwise get. Since I'm likely moving in 4-6 years and break even point on paying the new closing costs is longer than that I'd rather just keep my $3500 right now.

Gotcha, thanks.

 

[Dulanic]

I was thinking about this before I saw this and actually locked in 3.125 yesterday /w closing credit... well worth it.

 

[s0me0nesmind1]

Generally speaking an index fund will give you a much higher rate of return than the ~4% that you're talking about with your mortgage here. In addition, money invested in stocks/bonds/whatever is vastly more liquid than money put into your mortgage as you can only recoup your prepaid principal when you sell your home while you can sell stocks any time if you really need to.

So basically my advice would be if you're trying to maximize your returns paying down the principal of your mortgage is probably not a good idea so long as you're comfortable with some risk.

It's a fine balance between things.

Paying extra on your mortgage is a guaranteed rate of return - the stock market is not.
Additionally, you can generally tell if something is going to be a good investment year or not.
Personally I hedge bets and put money into both every year.

Also homes are an investment (IMHO) - I say that only because it's something that generally appreciates with time. You should always go into a home purchase with that in mind. When you need to make a home purchase, one of the first questions you should ask yourself is "Will this home go up in value or down in value based on what is happening in the area surrounding it?"

It is entirely unlike a vehicle which depreciates with time. Also unlike investments, homes have a tax advantage in that you generally won't pay taxes on profits from your home sale... that's definitely something to take into account as well.

 

[s0me0nesmind1]

Anyone have recommendations on where to look to find best rates? Also for places that will cover closing costs?

 

[Dulanic]

Anyone have recommendations on where to look to find best rates? Also for places that will cover closing costs?

Usually local lenders will be the best best for refi's. National banks tend to suck for refi's. I always find a good google search for "best mortgage companies near me" is a good start.

I just got rate quotes from like 5 different lenders and found the lowest cost one. I found rates lower than anything on nerdwallet and others that way.

 

[vi edit]

Local credit unions are some of the best rates you can find and many will cut some kind of dividend back each year based on interest paid.

 

[UNCjigga]

Anyone have recommendations on where to look to find best rates? Also for places that will cover closing costs?

If you don’t mind loan telemarketers calling you every 5 minutes for the next 2 weeks, you can always hit up quickenloans.com or lendingtree.com and have them bring the offers to you. But for godsakes never, ever do both. I learned the hard way. The calls...the endless calls!!!

Otherwise hit up your local credit union, government/military credit union or PenFed if you don’t have a credit union.

 

[s0me0nesmind1]

If you don’t mind loan telemarketers calling you every 5 minutes for the next 2 weeks, you can always hit up quickenloans.com or lendingtree.com and have them bring the offers to you. But for godsakes never, ever do both. I learned the hard way. The calls...the endless calls!!!

Otherwise hit up your local credit union, government/military credit union or PenFed if you don’t have a credit union.

Haha, I'm great at not answering my phone, so that doesn't bother me. But thanks, I'll take a look at both.




Ultimate question though... is this the low point as far as mortgages or is there more to go?

 

[TheVrolok]

Haha, I'm great at not answering my phone, so that doesn't bother me. But thanks, I'll take a look at both.




Ultimate question though... is this the low point as far as mortgages or is there more to go?

I think we're about the 52 week low, if not a little under. I just quickly looked at 30 year fixeds for a comparison.

Who knows if there's more to go, probably?

I just saw our local credit union doing 2.65 15 year fixed. Boy that's tempting for a second property, but timing just isn't right for me.

 

[Bitek]

For my situation, we bought in 2012 and have a 3.5%/30yr.

We did some extra payments to stuff some extra money away, and more importantly, create a bit more headroom of equity in case we needed to take out a loan (eg home repair, remodel, who knows, more of a back pocket thing.)

We only did that to a point. Running a calc on the interest savings vs investment and returns, it wasn't the best use of money once we had a comfortable amt of equity. The other down side is money is illiquid.

Since then we put away the money into investments. Either 401s or 529s, in addition to reasonable expectations of higher returns, both of which are tax advantaged where extra payments are not.

If you needed more accessibility to the money, I'd still consider investments in brokerage accounts in order to buy index funds or CDs if your are looking shorter term, less risky assets.

401k limits are $19.5k per spouse (company matching doesn't count towards limit.)
I'd look very hard at looking at maximizing this as much as you can afford to do so unless there is a certain case where extra payments make more sense at these very low rates.

 

[s0me0nesmind1]

Another tip for folks here -

If you have a bank with a decent CD account - highly recommend you dump some money in there today vs. keeping in the savings account where the interest rate can be changed tomorrow.

Personally with my bank I opened a new CD @ 2.00% and transferred a good amount of my savings into it. The rate was still thankfully 2.00%.

 

[s0me0nesmind1]

For my situation, we bought in 2012 and have a 3.5%/30yr.

We did some extra payments to stuff some extra money away, and more importantly, create a bit more headroom of equity in case we needed to take out a loan (eg home repair, remodel, who knows, more of a back pocket thing.)

We only did that to a point. Running a calc on the interest savings vs investment and returns, it wasn't the best use of money once we had a comfortable amt of equity. The other down side is money is illiquid.

Since then we put away the money into investments. Either 401s or 529s, in addition to reasonable expectations of higher returns, both of which are tax advantaged where extra payments are not.

If you needed more accessibility to the money, I'd still consider investments in brokerage accounts in order to buy index funds or CDs if your are looking shorter term, less risky assets.

401k limits are $19.5k per spouse (company matching doesn't count towards limit.)
I'd look very hard at looking at maximizing this as much as you can afford to do so unless there is a certain case where extra payments make more sense at these very low rates.

I hinted at this earlier - but homes have a tax advantage as well. I forget what it is - but I think the cutoff is even if you make $100k+ in profit on your home sale, you don't have to pay taxes on that profit.

You don't get that out of any other investment, so that's worth noting.

 

[TheVrolok]

I hinted at this earlier - but homes have a tax advantage as well. I forget what it is - but I think the cutoff is even if you make $100k+ in profit on your home sale, you don't have to pay taxes on that profit.

You don't get that out of any other investment, so that's worth noting.

One of the major problems with considering your primary residency an investment and using this as a purported benefit is that it's an extremely illiquid asset. You, generally, can't just decide to sell your home and accomplish it at a moments notice. Sure, it CAN happen. I have friends who put their house on the market and closed within a month or something silly like that, but it's not common. You'll also need somewhere else to live. If you're relatively inflexible with your ability to close your position it's just not a great investment.

For myself, I think what I'll probably end up doing is cutting back on my extra mortgage payment (about 40% extra per payment) and move this money into my brokerage account and buy.

 

[cytg111]

In 4 months when the planet is on covid fire ill refinance my mortage to a minus 10 pct 30 year loan... right now its minus 0.5pct... I dont know how much of this crazy shit the global economy can handle before it all comes down...

 

[s0me0nesmind1]

One of the major problems with considering your primary residency an investment and using this as a purported benefit is that it's an extremely illiquid asset. You, generally, can't just decide to sell your home and accomplish it at a moments notice. Sure, it CAN happen. I have friends who put their house on the market and closed within a month or something silly like that, but it's not common. You'll also need somewhere else to live. If you're relatively inflexible with your ability to close your position it's just not a great investment.

For myself, I think what I'll probably end up doing is cutting back on my extra mortgage payment (about 40% extra per payment) and move this money into my brokerage account and buy.

How illiquid it is still doesn't take away that it is an investment.

Also not sure where you live (CA?) but homes here (In TX) are typically gone in a week. My home sold the next day in less than 24 hours (this was <1 year ago).

 

[Bitek]

I hinted at this earlier - but homes have a tax advantage as well. I forget what it is - but I think the cutoff is even if you make $100k+ in profit on your home sale, you don't have to pay taxes on that profit.

You don't get that out of any other investment, so that's worth noting.

I thought the home sale profit was tax free for three years or untaxed if you roll it into a new home. Then it's taxed at capital gains iirc (been awhile since we looked into it.)

Maybe I'm thinking of another rule tho.

We made a good amount of money on our first place in the housing bubble and just used that as equity to buy the next one.

The trouble with all this being is that you have to go through the trouble of selling your house, and you still need a next one. In addition, most home improvements lose money on net, and depending on your locality, may trigger reassessments so the tax man can get his extra pound of flesh.

I only see primary housing as a tax advantaged illiquid asset that you can use as collateral in case of emergency for liquid funds at some measure of risk.

Either way, we prolly ain't moving anytime soon voluntarily. I'm done packing boxes for as long as I can.

 

[Dulanic]

I hinted at this earlier - but homes have a tax advantage as well. I forget what it is - but I think the cutoff is even if you make $100k+ in profit on your home sale, you don't have to pay taxes on that profit.

You don't get that out of any other investment, so that's worth noting.

A lot higher than that. $250K for individual or $500K for married.

 

[Juiblex]

Doesn't refinancing reset the ammoritization table? To save a percent would be idiotic with a 30 year loan if that's the case. Which is why banks like to encourage idiots to refinance.

 

[s0me0nesmind1]

Doesn't refinancing reset the ammoritization table? To save a percent would be idiotic with a 30 year loan if that's the case. Which is why banks like to encourage idiots to refinance.

How is it idiotic just because ammortization table is reset? What just because your loan starts over at 30 years? That doesn't mean you can't make higher payments.

If it saves you a percent (hell, even .5%) of interest, and you don't have to pay big closing costs, how is it not a win?