Mortgage refinance

[tahiti]

Originally Posted by bradykp

some of the "conventional wisdom" out there suggests that, because it's a tax write-off, you shouldn't pay it off early. But that conventional wisdom ignores that as you get lower interest payments, you're not writing off that much. it's a fine line, and sometimes it just comes down to personal preference.

any finance person worth their salt will tell you it's a bad idea. i don't know if i'd put "conventional wisdom" in quotes. at this point in time, it's a fact.

[bradykp]

Originally Posted by tahiti

any finance person worth their salt will tell you it's a bad idea. i don't know if i'd put "conventional wisdom" in quotes. at this point in time, it's a fact.

bad idea to pay it off early? not true. there are situations that it could benefit you, like if you're only writing off a touch more than the standard deduction, but you're paying the interest, so it wipes off the write-off. it mostly applies to older people near retirement, but it's certainly not a fact that it always makes sense to keep a mortgage. if you have no other debt, and you're shelling out $500/month in interest, writing that off to get 30% back means you're still paying $350/month in interest.

[Obrero]

Originally Posted by bradykp

bad idea to pay it off early? not true. there are situations that it could benefit you, like if you're only writing off a touch more than the standard deduction, but you're paying the interest, so it wipes off the write-off. it mostly applies to older people near retirement, but it's certainly not a fact that it always makes sense to keep a mortgage. if you have no other debt, and you're shelling out $500/month in interest, writing that off to get 30% back means you're still paying $350/month in interest.

^^Lousy advice^^

[bradykp]

Originally Posted by Obrero

^^Lousy advice^^

it's not my advice, it's the advice published regularly in Money Magazing, Kiplinger's, etc. The point is - although most of the time the tax break is worth it, you're still paying interest which is a cost, whether it's partially reduced by a tax credit or not. So when that write-off becomes small enough that you might not be deducting much more than the standard deduction anyhow, it becomes less of an easy choice and gets more complicated.

[O-er in WO]

Originally Posted by Obrero

^^Lousy advice^^

Unless your property taxes are higher than a standard deduction, at some point you will get zero deduction for the interest you paid. And even if you are able to deduct that interest but say you are in a 15% bracket, you only get $15 back of every $100 you paid, so $75 just went out of your pocket.
One of the scenarios that I can think of when it doesn't make sense to pay off early, is in the period of hyperinflation.

Anyway, could someone who refinanced in NJ list the total cost they paid for refi ? Is there a difference between refinancing with you current lender or another one?

Thanks.

[tahiti]

Originally Posted by bradykp

bad idea to pay it off early? not true. there are situations that it could benefit you, like if you're only writing off a touch more than the standard deduction, but you're paying the interest, so it wipes off the write-off. it mostly applies to older people near retirement, but it's certainly not a fact that it always makes sense to keep a mortgage. if you have no other debt, and you're shelling out $500/month in interest, writing that off to get 30% back means you're still paying $350/month in interest.

i've said before I'm not the best person to explain this (Obrero has some excellent posts on this), but it's a matter of using someone else's money (the bank's) to make money for you.

[tahiti]

Originally Posted by O-er in WO

Unless your property taxes are higher than a standard deduction, at some point you will get zero deduction for the interest you paid. And even if you are able to deduct that interest but say you are in a 15% bracket, you only get $15 back of every $100 you paid, so $75 just went out of your pocket.
One of the scenarios that I can think of when it doesn't make sense to pay off early, is in the period of hyperinflation.

Anyway, could someone who refinanced in NJ list the total cost they paid for refi ? Is there a difference between refinancing with you current lender or another one?

Thanks.

I refi'ed about 1 year ago, rolled my costs into the loan, and it cost just under $2100...that included a commitment fee, title company doing the closing, title insurance, and recording fees. I used another company other than my previous mortgage holder.

[bradykp]

Originally Posted by tahiti

i've said before I'm not the best person to explain this (Obrero has some excellent posts on this), but it's a matter of using someone else's money (the bank's) to make money for you.

i understand, basically in most cases (probably above 90%) - you're right. but it's just not always true. you reach a point where you aren't saving more than you get on the return of avoiding the interest altogether.