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Old 09-27-2013, 04:50 PM
 
Location: Southern California
4,350 posts, read 4,952,033 times
Reputation: 2129

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Quote:
Originally Posted by Electrician4you View Post
He's already saving more because he is paying extra to principal. Refi'ing now is pointless. Long term He's not paying anywhere near what the 5.75% rate should be returning for the bank.


Now if you are gonna rent it you can go two way
Stop the extra payment and take advantage of the deductions from the rental.
Keep paying extra to pay off rental and enjoy bigger cash flow when paid off.
This is getting a little off topic , yes Rob is saving some money by paying extra per month.
BUT could still have more.
IF you make the same payments on a lower interest rate loan more of your payment will go to principal reduction.
IF you get a loan with No closing cost , No Point , it might cost you a higher interest rate than advertised rates, but probably still lower than the 5.75 you are paying today

Forget about the monthly minimum payment since you never make that payment. Ignore that fact that you can use 360 months to pay it off and target to pay it off at 60 month. You already showed that you are a disciplined person to pay it faster

Here is some simple math, 5% of $100,000 is $5000 , 3.5% is $3500. If you make the same payment amount on both of these loan $1500 more will go today brining down your principle

Yes the 3.3% rate days are gone my point was you didn't want to refinance back then for a reason, I know people that didn't want to refinance because it was "Too much work" I translated it to "It's too HARD" , the OPs question of "Will it be hard?" is all about perspective.

Sure if you could refinance at 4% versus keep the 5.75 loan today and save $5000 over the next 5 years is it worth it, is it worth your time, is it too hard to save $1000 year is something that you have to answer on your own. For some people this $1000 is a rounding error in their life for others it is more significant.

As far as the two options of not paying it off. I'd rather pay it off and use the $500 a month that is going towards deductible interest towards deductible repairs if you really want the deductions. Interest is just lost money, at least with repairs you get a better building out of it, but talk to a accountant otherwise you might have to capitalize those improvements.

Maybe I overlooked something . I'll go thought the thread again.
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Old 09-27-2013, 07:57 PM
 
Location: Hot Springs, Arkansas
389 posts, read 953,495 times
Reputation: 443
Quote:
Originally Posted by Electrician4you View Post
He's already saving more because he is paying extra to principal. Refi'ing now is pointless. Long term He's not paying anywhere near what the 5.75% rate should be returning for the bank.


Now if you are gonna rent it you can go two way
Stop the extra payment and take advantage of the deductions from the rental.
Keep paying extra to pay off rental and enjoy bigger cash flow when paid off.
I've done the same thing. But my point is that if one can invest the money elsewhere in excess of the mortgage rate one can come out ahead in the long run. I've owned 10 homes and have yet to pay off a single one. The 30 year mortgage is a fiction as the average person only lives in their home for between 5 and 7 years.

I don't know his total circumstances or the rental market where he lives. I would go to Zillow and find the approximate rental amount for his current home. If he is paying about $2,000 a month in interest and taxes and can rent it for $2,500 or $3,000 a month he will make money. I'd get a long term rental lease and have it handled by a property management company. Make sure the renter is rock solid throughout and won't trash the house or avoid his rent payments. If he isn't send him packing before he moves in. I speak from experience.

If not he may be better off to simply remortgage the property as it still has a sizable mortgage and take advantage of the lower rates. But as I said the train may already have left the station. I'm paying 3.25% on mine. I don't know what the rates are at the current time in his location.

Where I live the rent goes for almost twice what I am paying on my first home. So it depends on the market and the realized income. This may be a subject best served by an expert in such matters who can crunch all the relevant numbers.

There are other factors to consider as well such as moving costs, packing, and filling up the new house with additional furniture, etc. I think the next time we move we will call in an auctioneer and tell him to sell everything, the house, furniture, the dogs and cats and move to a furnished doublewide in the middle of nowhere. Houses can be a true nightmare. The "American Dream" of home ownership is a lot of hogwash to be perfectly blunt. I've visited in million dollar homes and wondered about the cost of maintaining it. Many of these are just money pits and with the economy so uncertain we could all be living under the bridges one these days.
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Old 10-01-2013, 10:44 AM
 
Location: Southern California
4,350 posts, read 4,952,033 times
Reputation: 2129
Seeing an ATT commercial made me think of this thread. "It's not complicated"

AT&T TV Commercial -- It's Not Complicated "Candy Island" - YouTube

Is saving money better than not saving money?
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Old 10-02-2013, 10:06 AM
 
Location: Hudson Valley region, NY
192 posts, read 327,316 times
Reputation: 235
FYI for those who recommended a refinance on the current home...we looked into doing the same thing as the OP and we were told that either we then had to stay in the current home for a one year minimum or we had to do the re-fi as an investment property which would have ended up as no rate drop and possibly an increase. Perhaps that was just our local Credit Union, but something to watch out for.
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Old 10-02-2013, 10:49 AM
 
Location: Mount Laurel
4,146 posts, read 8,423,199 times
Reputation: 3411
I highly recommend if OP is going to use the current house as rental, make sure

1. Understand the work and the mentality for being a landlord
2. Evaluate whether the current home is good for rental. Just because a house can be rented out doesn't always make it a good rental.
3. Get some sort of HELOC on the house. It's a good way to leverage and in case of emergency.
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Old 10-02-2013, 11:19 AM
 
Location: Southern California
4,350 posts, read 4,952,033 times
Reputation: 2129
Quote:
Originally Posted by HV_Mom View Post
FYI for those who recommended a refinance on the current home...we looked into doing the same thing as the OP and we were told that either we then had to stay in the current home for a one year minimum or we had to do the re-fi as an investment property which would have ended up as no rate drop and possibly an increase. Perhaps that was just our local Credit Union, but something to watch out for.
Yes the 1 year thing is common practice unless there is a reason to call it a second home.

1) I wondered if they had the ability to refinance in the past why they didn't do it
2) Even if they were able to do it at an investment property today, they'd just have to calculate the cost versus benefit of the new investment rate loan versus the 5.75 which they are paying today. If they did refinance today they would also have the option of a lower payment should something come up.

If the OP doesn't want to have the option to paying less per month they can consider an Investment non owner occupied loan at 10 years and still shop for a rate near 3%. The problems is the OP's loan is small amount , making it hard to cover their cost, resulting in a bump of the rate to over 4% plus more cost, points, etc, still it'd probably be under 5.75.

For clarification, I am not advising or recommending a specific action other than providing scenarios which the OP can think about and talk to qualified professional knowledgeable in their respected field. I'm just a random guy on the internet who has nothing to gain or lose from their actions.

The OP had a couple of questions, 1) What are their options? 2) Will it be hard?

I asked if the reason why they didn't refinance before was because they thought it was too hard, but the response back was they didn't feel they'd save enough.

So will buying a new place be "hard" , I'd say no based on the information provided.
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Old 10-02-2013, 11:29 AM
 
Location: Southern California
4,350 posts, read 4,952,033 times
Reputation: 2129
Quote:
Originally Posted by sj08054 View Post
I highly recommend if OP is going to use the current house as rental, make sure

1. Understand the work and the mentality for being a landlord
2. Evaluate whether the current home is good for rental. Just because a house can be rented out doesn't always make it a good rental.
3. Get some sort of HELOC on the house. It's a good way to leverage and in case of emergency.
The response to "My rent is going to be a little late this month" will dictate whether or not they should be a land lord. It is hard for many people to be "the bad guy" next thing you know you have someone living rent free for 3 month.

I agree just because you can't doesn't mean you should
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