[Hawkeye]

Originally Posted by David70

I generally agree and would think the odds are you can make money by investing but one requirement is you invest all of the reduced payment, spending none of it. Another is I find a lot of value in not owing others money.

With the "increased liquidity", not sure what you doing with the money but I have investments I can sell, assuming you are also investing the saved money and have similar issues.

With the math, interested in someone checking me. To make math easier using $200k loan, remove insurance, HOA, and tax

30 year loan @ 2.75%, payment is $816 and after 5 years (set purchase date to 1/1/20 and end of 2025 to make simpler) have $27,542 in equity - https://www.bankrate.com/calculators...alculator.aspx

15 year loan @ 2.5%, payment is $1333 and after 5 years have $70,039 in equity.

Difference in balance is $70,039-$27,542 = $42497. To get the same balance with my investment of $517 a month ($1333-$816) I invest $517 a month per month over 5 years and with it if I get 12% average return I will have $42,223. Slightly less and I still have to pay taxes on my investment? https://www.bankrate.com/calculators...alculator.aspx

Seems like the calculators or my inputs are wrong but I don't see where.

I am not sure where your math went off but the difference in balances after 5 years would be $176k - $140k = $36k. I am not sure how you got a balance of only $27k after only 5 years. Your $42k for the 12% interest seems right - with a more conservative 6% it would still be about break even at $36k.

Edit: I did all the same things you mentioned ( the issue you had was doing 6 years on the loan but only 5 on the investments)
$43,144 more equity in 15y loan but investments at only 6% average interest is worth $44,460.

And this is ignoring inflation as Corn explained - which only helps over time with a fixed payment.

I refinanced down to a 2.75% 15 yr ~4 years ago...always look at throwing more $$$ at the principal each month to pay it off early, but at that rate it's pointless to do so when exponential growth will be realized through passive investments instead. That's mostly because interest is already a fraction of what it was when compared to a 30 year...if the term were any longer though, I'd likely reconsider.

[UncleWede]

Once 2/21 rolls around, I won't care what home loan interest rates are any more Last refi we did was 12 years @3.25. Since I don't owe enough any longer to matter on taxes, NOT paying a huge amount of interest isn't worth my while.

Around 3/21 I'm giving my '02 Sonoma probably to my wife's uncle, then possibly replacing with something large enough to haul a boat. And/or joining one of those boat clubs.

Around 4/2021 I'm NOT giving the e90 to my 20yo son, and probably getting the wife an X3/5. We bought nice v6 cars for the 2 older boys, both with leather interiors, and they didn't last more than about a year before each smashed them up going way too fast. I've ridden (slightly drunk) with the 20yo in the e90, don't particularly want to know what would happen when I'm not in the car with him. . .

[David70]

Originally Posted by Hawkeye

I am not sure where your math went off but the difference in balances after 5 years would be $176k - $140k = $36k. I am not sure how you got a balance of only $27k after only 5 years. Your $42k for the 12% interest seems right - with a more conservative 6% it would still be about break even at $36k.

Edit: I did all the same things you mentioned ( the issue you had was doing 6 years on the loan but only 5 on the investments)
$43,144 more equity in 15y loan but investments at only 6% average interest is worth $44,460.

And this is ignoring inflation as Corn explained - which only helps over time with a fixed payment.

You are right, 6 years on the loan, 5 years on the investment, there's the mistake

So using your corrected numbers, I either pay the 15 year loan (higher payment amount) or the 30 year loan + invest the remainder (same total payment) and I have to make 6% on the investment to break even. But really some number a little higher than 6% to cover the income taxes I will pay on the investment but not on the house equity.

In my example I don't see how inflation plays into it. Both examples I am paying out the same amount each month and have the same results to show from it at the end of 5 years.

Still a guaranteed 6% is I believe impossible to find.

[corn18]

Originally Posted by David70

Still a guaranteed 6% is I believe impossible to find.

Ding, ding, ding, we have a winner! You MIGHT make more than 6% on your investments. You WILL pay X% interest on your mortgage. Hard to quantify risk, and that's why there are at least 771,347,965 threads on the financial fora asking the same question: Pay off my mortgage or invest? It's really more about emotions than math in the grand scheme of things. It does FEEL really, really good to own your house and have absolutely zero debt. But the numbers say a 2.75% fixed rate 30 year loan along with three 0% 7 year car loans comes out ahead. But that doesn't make me feel as good as being debt free.

[David70]

Originally Posted by corn18

Ding, ding, ding, we have a winner! You MIGHT make more than 6% on your investments. You WILL pay X% interest on your mortgage. Hard to quantify risk, and that's why there are at least 771,347,965 threads on the financial fora asking the same question: Pay off my mortgage or invest? It's really more about emotions than math in the grand scheme of things. It does FEEL really, really good to own your house and have absolutely zero debt. But the numbers say a 2.75% fixed rate 30 year loan along with three 0% 7 year car loans comes out ahead. But that doesn't make me feel as good as being debt free.

Agree and also wonder how many of the "I will invest the difference" really happens and I believe many end up with a 7 year loan and the money is gone to unknown places.

I won't have another car payment and also with this, the idea of having to write a $35k-$45k check (I only buy used) makes it far easier to keep what I have. Car payments made it easier to decide to go get another car. Choice there is $400 payment for the 5 year old car to $450 for a new car. Additional cost didn't make nearly the difference the big check makes.

Also add that the emergency fund recommended to keep in cash (or similar) also gets reduced as the required payments drop.

[corn18]

Originally Posted by David70

Agree and also wonder how many of the "I will invest the difference" really happens and I believe many end up with a 7 year loan and the money is gone to unknown places.

I won't have another car payment and also with this, the idea of having to write a $35k-$45k check (I only buy used) makes it far easier to keep what I have. Car payments made it easier to decide to go get another car. Choice there is $400 payment for the 5 year old car to $450 for a new car. Additional cost didn't make nearly the difference the big check makes.

Also add that the emergency fund recommended to keep in cash (or similar) also gets reduced as the required payments drop.

You are singin' my tune! It was easy to buy new cars every 3-5 years when we financed them (never was a lease guy for whatever reason). Now that we pay cash, we keep them 8-10 years. And buy used in most cases (Z4 and truck). It pinches a bit when you are writing a $50k check out of savings.

And the impact on the EF was something I didn't realize until running the math after everything was paid off. Actually, my expenses were low enough and my taxable retirement account large enough that I just got rid of the EF altogether.

And now I am going to have a mortgage again. It kills me. But paying $475k for a $510k loan is really cool, too. If I were a betting man, I won't have a mortgage next year, even if it's 0%. I am a very emotional investor.

[qba335i]

Originally Posted by corn18

Ding, ding, ding, we have a winner! You MIGHT make more than 6% on your investments. You WILL pay X% interest on your mortgage. Hard to quantify risk, and that's why there are at least 771,347,965 threads on the financial fora asking the same question: Pay off my mortgage or invest? It's really more about emotions than math in the grand scheme of things. It does FEEL really, really good to own your house and have absolutely zero debt. But the numbers say a 2.75% fixed rate 30 year loan along with three 0% 7 year car loans comes out ahead. But that doesn't make me feel as good as being debt free.

+1

There is something about not having to make any payments and actually owning an asset. Being debt-free provides a lot of financial flexibility.

[hooligan_G01]

Originally Posted by Alfisti

Wait, wait. So it's locked in at 2.75 for 30 years?

You guys down there really do have overly confusing taxation and finance rules, it's a fucking dog's breakfast.

No, some people are misusing the term "rate lock". A non-variable mortgage is referred to as a "fixed" mortgage vs. an "ARM" (Adjustable Rate Mortgage) or other variable rate loan vehicles.

A "rate lock" is an agreement, between you and a lender, on a rate that is "locked" for a certain period of time before finalizing the loan. Some of them have "float down" clauses which allow the "locked" rate to go down if primary rates drop, but prevent it from going up if rates happen to rise.

Then there are "points" that can be purchased and have already been well described earlier in the thread.

https://www.consumerfinance.gov/ask-...times%20longer.


https://www.consumerfinance.gov/ask-...m-loan-en-100/

https://www.consumerfinance.gov/ask-...y-work-en-136/

[Hawkeye]

Originally Posted by hooligan_COLD

No, some people are misusing the term "rate lock". A non-variable mortgage is referred to as a "fixed" mortgage vs. an "ARM" (Adjustable Rate Mortgage) or other variable rate loan vehicles.

A "rate lock" is an agreement, between you and a lender, on a rate that is "locked" for a certain period of time before finalizing the loan. Some of them have "float down" clauses which allow the "locked" rate to go down if primary rates drop, but prevent it from going up if rates happen to rise.

Then there are "points" that can be purchased and have already been well described earlier in the thread.

https://www.consumerfinance.gov/ask-...times%20longer.


https://www.consumerfinance.gov/ask-...m-loan-en-100/

https://www.consumerfinance.gov/ask-...y-work-en-136/

technically my fixed rate mortgage is locked in at the same rate for the next 30 years

[hooligan_G01]

Originally Posted by Hawkeye

technically my fixed rate mortgage is locked in at the same rate for the next 30 years

Yes, your fixed rate mortgage is locked, invariable, stationary, immovable, anchored, permanent, moored, determined.

[TboneS54]

I'm in a similar situation. Rental property is at 4.25 which was very very good for an investment property a few years ago. Primary is at 4.125. Not exactly sure which I want to refinance, if not both, but I don't feel any rush in doing so. I do think about moving in the not so distant future, so refinancing the primary may not really be worth it (starting the clock over only to pick up and leave soon thereafter). I certainly would do a "free" refi, especially since rates are so low.

If there was more harmony and stability in the world, I'd be more inclined to refi quickly and sit on it, but unfortunately, I think low rates will be around for a while.

[izzyM2]

We have a great CS (810) and I had a chance to refi for 2.75% back to 30yrs. They will add on about $18k to my current balance with all fees in. I thought it was too high, after calculations and with our goal of paying it off our home in 5 yrs. I was better off with our current loan at 3.25%. Cancelled it!

[TXSTYLE]

To OP.... That is a foking superb rate and job well done. Don't let nobody tell you otherwise. This is my expertise. And I keep my finger on the pulse of rates and real estate as it's one of my businesses.
If anyone id even considering to finance a new home loan, refinance an existing or acquire some rental property, do so immediately!

[David70]

Originally Posted by TboneS54

I'm in a similar situation. Rental property is at 4.25 which was very very good for an investment property a few years ago. Primary is at 4.125. Not exactly sure which I want to refinance, if not both, but I don't feel any rush in doing so. I do think about moving in the not so distant future, so refinancing the primary may not really be worth it (starting the clock over only to pick up and leave soon thereafter). I certainly would do a "free" refi, especially since rates are so low.

If there was more harmony and stability in the world, I'd be more inclined to refi quickly and sit on it, but unfortunately, I think low rates will be around for a while.

If you thinking about moving from your primary then it is unlikely to make sense to refinance. Rental property already looks pretty good but if there is close to no chance you will sell it I would look into refinancing it. All comes down to numbers and how long you have to keep the property to break even on the refinance.

For the "low rates will be around for a while" - I agree but each month you wait you lose some amount of money.

Originally Posted by izzyM2

We have a great CS (810) and I had a chance to refi for 2.75% back to 30yrs. They will add on about $18k to my current balance with all fees in. I thought it was too high, after calculations and with our goal of paying it off our home in 5 yrs. I was better off with our current loan at 3.25%. Cancelled it!

I don't understand the $18k increased balance but unlikely to ever make sense to refinance to lose half percent if you are planning on paying it off relatively soon.

[thez99]

Originally Posted by corn18

Holy crap! We just moved and are building. I just locked in our mortgage at 30 year, fixed, no points @ 2.75% ($700k house, $510k loan to keep it conforming). I want to just pay cash, but that is seriously cheap money. If anyone is looking at buying or refinancing, now is a good time.

Phew. I’d love to be able to buy out a $700k house with cash...

You guys hiring??

[corn18]

Originally Posted by thez99

Phew. I’d love to be able to buy out a $700k house with cash...

You guys hiring??

We are. If you are an engineer with a security clearance, we will hire you today.

[VisualEcho]

We are changing from the 13 years we have left at 3.39% to the 2.75% on a 10 year and saving $22K. Paperwork hassle, especially in this digital age, but for $22K? You bet.

[David70]

Originally Posted by thez99

Phew. I’d love to be able to buy out a $700k house with cash...

You guys hiring??

He said he is close to retirement and I think it is a good goal be able to own your house at retirement (whether you do it or not). Also need to figure when and where you will retire and what you will need to do it.

[corn18]

Originally Posted by David70

He said he is close to retirement and I think it is a good goal be able to own your house at retirement (whether you do it or not). Also need to figure when and where you will retire and what you will need to do it.

Exactly correct. The plan has always been to retire without a mortgage. But 2.75% 30 year money has changed that, for now.

When and how much are intrinsically linked for us. Once we are Financially Independent (FI) we will Retire Early (RE) and that is FIRE. Some folks hit FI and keep working, which is fine. I am ready to move on to what's next, which I hope is grandkids. Which, coincidentally, determines our where. We seriously looked at moving to South Africa because we fell in love with it last year. But we have found that living 24 hours away from family won't work for us. So we moved back to OH and will stage out of here as we chase the kids/grandkids around the country/world. Great fun.

[thez99]

Well sure if the option was either sink a considerable amount of cash and have no mortgage versus keep the majority of that cash to invest and have a lower % mortgage, this keeps your credit going, allows for more investment opportunity, I'd def go with the mortgage under these circumstances.

And no I'm def no engineer. I'm a chef
I love cooking but it certainly doesn't roll in the 6 figures by any means

[aus]

Any of you guys pay extra on your mortgage?
It's helped me a LOT. I can't believe how my principle has dropped in the last 5-6 years.
Rental property rates aren't great. Not sure how they classify a second home.

Originally Posted by TboneS54

I'm in a similar situation. Rental property is at 4.25 which was very very good for an investment property a few years ago. Primary is at 4.125. Not exactly sure which I want to refinance, if not both, but I don't feel any rush in doing so. I do think about moving in the not so distant future, so refinancing the primary may not really be worth it (starting the clock over only to pick up and leave soon thereafter). I certainly would do a "free" refi, especially since rates are so low.

If there was more harmony and stability in the world, I'd be more inclined to refi quickly and sit on it, but unfortunately, I think low rates will be around for a while.

I just closed on a ZERO cost refi on a $600,000 loan at 2.99%. It's a tiny bit lower now with the market crash last week. PM me if you want his info. It's through Quicken loan. Lots of paperwork but pretty painless.

You're in California, the value of your house will mostly likely go up considerably in the long run. Consider renting it later. Houses out of state are CHEAP in comparison.

.