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The 2008 recession hurt us bad. Not in job but in house value, we had closed just the yr prior. 4yrs ago I was able to take advantage of refi to a lower better 15yr mortgage even though I was in negative equity. I was able to really hammer my principle with this, and I might be close to even again. The problem is 2 yrs ago children entered the picture pulling my wife from working. We are struggling now to keep going, we’ve cut out all we could but other expenses just bury us when they happen (car, medical, etc). Not to mention we are unable to give the kids some experiences ie, go to beach, vacation with other family. The payment went from 30% of pay to 48% per month.
With cashing out investments I can put down 20% (assuming appraisal comes back favorable) and substantially cut the monthly payment down(22% of pay per month), but the trade off is restarting a mortgage. Perhaps as the children get older we can go after the principle again and get the years down but is the flexibility worth it? I really had my hopes up to not be paying a mortgage till I die. Anyone have experience with something like this?
I can tell you this: On our last house, I was still working (DH had already retired). We paid off that house and were mortgage free.
Then I retired and, a few years later, we relocated. Sold that paid off house (at a loss - it was purchased in the Phoenix area in 2007) and bought another house. We could have paid cash for that house, but chose to put down about 33% and mortgage the rest.
Why? (In no particular order - each was pretty much as important as the other)
1. Because we could get 3.5% at 30 years - we've done better than that with our investments.
2. Because I have massive health insurance premiums and our property taxes doubled. At least the interest deduction allows us to itemize.
3. Because I wanted money to enjoy our lives.
There is no right answer in this and no two circumstances are the same. Yes, yes, yes, if going back to 30 fixed affords you a lifestyle instead of struggling to stay afloat, you need to do this. There's plenty of time to accelerate principal. And, congratulations and thank you for not taking the easy way out. Not everyone could do it, and it takes persistence and discipline to fight your way through this.
If you have the cash to put down 20% for the refi, why aren't you just using that money to live on? Why throw more money into the house just to have less monthly? You should be investing the cash money to make more so you have the money for the beach and trips. Use the gains on the investments to treat yourselves and pay other bills. I don't see how it makes sense to spend approximately $5k to refi AND put 20% down. A refi is not free and you have closing costs all over again. Even if you put the fees into your rate, it's still there monthly for 30 more years.
If you have the cash to put down 20% for the refi, why aren't you just using that money to live on? Why throw more money into the house just to have less monthly?
That 20% is not enough to last another decade. Using the investment $$ is what I have been doing for the last 2 yrs but I fear its going too fast.
Quote:
Originally Posted by SmartMoney
And, congratulations and thank you for not taking the easy way out. Not everyone could do it, and it takes persistence and discipline to fight your way through this.
Thank you btw, there is almost no place on the web where you read that eating crow for buying a house that tanked and staying the course was/is the right decision. I even found services for strategic default, and how it makes more financial sense to walk away cause the years of bankruptcy will be less than the recovery of the house value.
The 2008 recession hurt us bad. Not in job but in house value, we had closed just the yr prior. 4yrs ago I was able to take advantage of refi to a lower better 15yr mortgage even though I was in negative equity. I was able to really hammer my principle with this, and I might be close to even again. The problem is 2 yrs ago children entered the picture pulling my wife from working. We are struggling now to keep going, we’ve cut out all we could but other expenses just bury us when they happen (car, medical, etc). Not to mention we are unable to give the kids some experiences ie, go to beach, vacation with other family. The payment went from 30% of pay to 48% per month.
With cashing out investments I can put down 20% (assuming appraisal comes back favorable) and substantially cut the monthly payment down(22% of pay per month), but the trade off is restarting a mortgage. Perhaps as the children get older we can go after the principle again and get the years down but is the flexibility worth it? I really had my hopes up to not be paying a mortgage till I die. Anyone have experience with something like this?
Similar experience.......2nd home purchase in 2005 absolutely crushed us, sold for about a 240K loss.
Refi'd in 2003, so I have less than 2 years left on the 15 yr fixed mtg. but the $3300 a month is killing us (not incl taxes, insurance or hoa fee). No job loss but wages are down 25% from the boom.
We are just frozen for the next 2 years.....have great equity (500K+) but don't want to move. No new cars, no major projects until the house is paid for. I look at the 2 yrs as the light at the end of the tunnel.
I realize you have 11 yrs left and "frozen" might not be an option. If you have to switch to a 30, you can always bump up the payments towards principle if you need it.
We built our first house in 2001 with little money down. After the housing crash, we lost a ton in property value. When we sold it in 2014, it was for $12k less than what we paid to build it!
But our neighborhood went downhill and I couldn't stand it anymore. We didn't make much money off the sale, but we bought a condo we loved and got a 30 year mortgage. But we are paying extra each year to pay it off in 22 years. The key is making extra payments early in the loan, while most of your payment is interest.
Things in life never go smoothly, unfortunately. I wish I could have our mortgage paid off by age 55, but that won't happen.
If the loan is Fannie owned, if a significant prepayment of principal is made (typically minimum of 10K, you can request the payments be recast.
Get to a CPA. The accountant needs to calculate the Capital Gains vs any offset of deductible expenses from a refi (and you can get a no cost or close to no cost refi) and see if the payment (recast or refi) relief meets your expectations and needs. (My opinion is the recast is not going to provide anything close to the punch of a 30 year amortization). There's no yardstick of what you "should" do. Your needs are not the same as anyone else's.
recasting is very interesting. I didn't know that was an option or even a thing until now. Do I need an appraisal for that? Maybe that can eliminate my PMI,
I wish i knew sooner.
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