Yep, banks don't lend money because they feel charitable.
The RE-FI Myth
- Thread starter Retired W4
- Start date
Jon651
Member
One of the best pieces of financial advice I ever got from my father was:
"Never add short-term debt to a long-term loan!" I've tried to pass that advice along over the years but unfortunately there is a lot of financial illiteracy out there. In order to make the point to my niece, for example, I've had to rephrase dad's advice:
"A home loan is for a house, not for a TV!"
As usual, dad was right.
"Never add short-term debt to a long-term loan!" I've tried to pass that advice along over the years but unfortunately there is a lot of financial illiteracy out there. In order to make the point to my niece, for example, I've had to rephrase dad's advice:
"A home loan is for a house, not for a TV!"
As usual, dad was right.
We live in the county. City folk have brought of land and as a result farm land prices have skyrocketed. In addition I have never seen a big advantage paying off the mortgage when I retire but I have tried to plan for retirement.
We have outgrown our house and, as I said, land prices doesn't make moving practical and affordable plus a high mortgage rate so we are going the Re-Fi route. We cut our interest in half, lowered our monthly payment by $300 and are using the cash out to expand and give house a update.
Besides you never really own your home. Try not paying your property taxes and watch what happens.
We have outgrown our house and, as I said, land prices doesn't make moving practical and affordable plus a high mortgage rate so we are going the Re-Fi route. We cut our interest in half, lowered our monthly payment by $300 and are using the cash out to expand and give house a update.
Besides you never really own your home. Try not paying your property taxes and watch what happens.
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Used wisely, a refi can provide tremendous financial benefits. For example, depending on rates, you can obtain a shorter note at a similar monthly payment, reducing your total interest payments while paying off the mortgage sooner. Alternatively, if finances are a bit tight, you can refi for the same term at a lower monthly payment and, as finances permit, apply the difference between you old and new payment toward the principle, again, though potentially to a lesser degree, also reducing the overall interest paid, and time to pay off the note. One also needs to consider what the mortgage interest rate is that you are paying vs what you can get in the refi, as well as what you might earn on the difference in monthly payments if saved and invested rather than paid against the mortgage.
In fact, over the years and several moves, depending on the circumstances and considerations, we've travelled each of these different paths. Lots to consider, especially your own specific situation. Investing the time and effort, though, can pay off both in the short and long term. Refi is a tool, not a scam if wisely chosen and used when it make financial sense in your specific circumstances. Yes, the bank will make money(they are a business, after all), but so can you.
Thanks for listening to me sound like my parents
In fact, over the years and several moves, depending on the circumstances and considerations, we've travelled each of these different paths. Lots to consider, especially your own specific situation. Investing the time and effort, though, can pay off both in the short and long term. Refi is a tool, not a scam if wisely chosen and used when it make financial sense in your specific circumstances. Yes, the bank will make money(they are a business, after all), but so can you.
Thanks for listening to me sound like my parents
S&P 500 Index funds have done me well. Just plan on
being in it for "the long haul", and leave it alone.
Jeff423
US Veteran
When I was laid off in the early 2000 a refi allowed me to keep my house.
We did two refinances. knocked a 7.5% loan down to a 5% and made it a 15 year in the process, pulling out 10K. Second was another house 5% down to 3.5% 12 years balance turned to a 10 year, payment stayed the same. Why would a lender do that? To keep us from going somewhere else.
My Grandfather used to quote an unnamed source "Two kinds of people in the world, Those who pay interest and those who collect it".
My Grandfather used to quote an unnamed source "Two kinds of people in the world, Those who pay interest and those who collect it".
OP
I want to know where you can get 2-4% from a bank!!
skwchock
US Veteran
I went with a 15 year mortgage. I paid the monthly premium and added $100 (or more if you can afford it) to be applied to the principle.. this brings the loan down faster.
Yes, but the way our appraisal districts keep jacking our values we can never get out from under our property tax. My yearly property
tax if paid over 12 months now exceeds my payment to the bank. Even when my mortgage is paid in a couple more years I am still paying the government….I prefer to keep giving my money to the bank….at least I own stock in them…..what do I get from the local governments. I am on electric coop, water coop and septic….I am still waiting on that sewer line they promised if we allowed them to annex us.
About 2 years before I married my ex, her parents moved to FL. and gave their house to her brother, as a take over the payment deal. He owed about $45K on it. It's a really nice house on a double lot his dad had custom built.
That was around 1980. He still lives in the house, but last I heard owes around $250K on the house. Every time he'd have any equity in the house he takes out a home equity loan.
He's my age and still works 2 jobs.
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Credit is a financial tool that allows us to purchase items that would take us years to save for. Think of a world with no credit - not good, however as a 30 veteran of the Financial Services industry, I think we have made credit entirely too available. This access allows folks to mortgage their future for short term wants.
Credit is not a bridge to a lifestyle one cannot afford, but it is often used in that manner.
There are 3 things I have learned over my 30 years and they are really simple concepts:
1. LIVE BELOW YOUR MEANS - this one is huge and many people can't bring themselves to do it. You have to have cash flow to save and invest for your future. Lack of cash flow leads to a costly cycle of having to borrow for emergency needs so no savings and no investments and no build in net worth.
2. Put your money into appreciating assets NOT DEPRECIATING assets. This means, don't spend a lot of money on expensive cars clothes etc. (guns are ok)
3. Know the difference between needs and wants and let yourself have some of the wants, but not all of them.
Do these three things over a lifetime and the results will be astonishing.
Good luck to all.
Credit is not a bridge to a lifestyle one cannot afford, but it is often used in that manner.
There are 3 things I have learned over my 30 years and they are really simple concepts:
1. LIVE BELOW YOUR MEANS - this one is huge and many people can't bring themselves to do it. You have to have cash flow to save and invest for your future. Lack of cash flow leads to a costly cycle of having to borrow for emergency needs so no savings and no investments and no build in net worth.
2. Put your money into appreciating assets NOT DEPRECIATING assets. This means, don't spend a lot of money on expensive cars clothes etc. (guns are ok)
3. Know the difference between needs and wants and let yourself have some of the wants, but not all of them.
Do these three things over a lifetime and the results will be astonishing.
Good luck to all.
This is great discussion. Should be taught in high school along with insurance and how to decide how much and what kind you need. I was raised by depression era parents. Even though they did well debt was to be used wisely and to a persons advantage and for only as long as necessary. At the kitchen table a pencil and paper and make it fun for the kids. This is information kids need to learn.
Some people don't mind at all being mortaged to the hilt for homes cars and toys. Some of us look at it as a heavy burden we want to get out from under.
Morgan88
Some people don't mind at all being mortaged to the hilt for homes cars and toys. Some of us look at it as a heavy burden we want to get out from under.
Morgan88
Jon651
Member
These are basically the financial rules I've lived by my entire life. I think they should be printed on our money (and every credit and debit card ever issued)!!!
crstrode
Member
Re-Financing is a fabulous option . . . however there are tips that should be considered to make it a boon and not a bane.
Do these three things and you will save tons of money and be debt free in a jiffy.
Do not follow them and you will be a slave to loan payments for ever.
1. Re-finance for less than, or equal to, the existing loan.
2. Refinance at a lower interest rate.
3. Re-finance for a shorter term.
For what it is worth, I have no rent or mortgage payments, no loan payments of any kind, and have been this way for decades. I worked a regular job all of my life, am not a lotto winner, my family was not rich, nor did I ever have a load of $$$ drop into my lap.
Do these three things and you will save tons of money and be debt free in a jiffy.
Do not follow them and you will be a slave to loan payments for ever.
1. Re-finance for less than, or equal to, the existing loan.
2. Refinance at a lower interest rate.
3. Re-finance for a shorter term.
For what it is worth, I have no rent or mortgage payments, no loan payments of any kind, and have been this way for decades. I worked a regular job all of my life, am not a lotto winner, my family was not rich, nor did I ever have a load of $$$ drop into my lap.
We refinanced our 30year(11 years in) mortgage last year. Was able to go to a 15 year at a lower rate, and the payment dropped by almost $250 a month, which we then immediately started applying to the new loan. The normal principle payment on the new loan was nearly $150 more than the principle payment on the old loan, after paying on it for 11 years. So in effect we had a net principle payment increase of nearly $400 more each month, with the same payment. My balance is melting
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