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post #10261 of 11161
Quote:
Originally Posted by jbarwick View Post

We originally went from a 30 year mortgage to a 15 year mortgage, thus saving long-term interest.  If we refinance now, as I mentioned in my post, is that we would continue to pay our current mortgage payment, just with a lower rate so we would save on interest from here on out which we are at like 14 years.  Rates are down that much YoY.  I would look at refinancing costs but I know at least $400-$500 for an appraisal then whatever fees are.  There are a lot of low fee options but at a higher rate than I want or more fees and a lower rate.  I am looking for a 15 year, 2.5%, no-fees or at least <$500 which seems possible.  

The savings are minimal at less than $1,000 per year as we would still continue our path to pay off in the 14 years we have left but it would ultimately be less than that with a lower interest rate and larger principal payments each month.

15 years or less is where to be, good work there. To save $1000 per year is minimal, paying into the mortgage a few extra bucks would net you that without the hassle and without adding another year of payments to the mix.

Quote:
Originally Posted by Concordia View Post

If you're making the same monthly payment, the real issue is how many months you're avoiding by shortening the term. Present value of those payments is your win.

Don't think that's the case, from what I read he's at 14 years and would reset to 15 again. Not a fan of that, anything can happen in your life and getting out from under a bank should be the priority.
post #10262 of 11161
Quote:
Originally Posted by idfnl View Post


Don't think that's the case, from what I read he's at 14 years and would reset to 15 again. Not a fan of that, anything can happen in your life and getting out from under a bank should be the priority.

If that's true then his "win" is not a positive number. Same calculation.
post #10263 of 11161
Quote:
Originally Posted by Concordia View Post

If that's true then his "win" is not a positive number. Same calculation.

Indeed, but the same net effect can be had in a shorter time span by just paying a little extra into the mortgage.
post #10264 of 11161
Which can also be done on the 15-year that has a lower interest rate. You keep adding variables to change, almost anything is possible.
post #10265 of 11161
From that perspective then the terms of the refi are also variables. IMO, it's just not worth the bother over a measly $1k a year so I made a suggestion that would have the same net effect.
post #10266 of 11161

If I continue paying the same amount as I currently am, I would still pay the house off in 14 years not 15 even though the mortgage term is reset.  Lowering the interest rate would be the same effect as adding more to my current payment so I will pay the house off quicker than I currently am but I would assume only by a year at most but a year is a year.

post #10267 of 11161
Quote:
Originally Posted by jbarwick View Post

If I continue paying the same amount as I currently am, I would still pay the house off in 14 years not 15 even though the mortgage term is reset.  Lowering the interest rate would be the same effect as adding more to my current payment so I will pay the house off quicker than I currently am but I would assume only by a year at most but a year is a year.

It's clear you can spend slightly less month to month + extra principle and get the same result of a 14 yr payoff. My opinion is based on my 'why bother' threshold, and I just don't think it's worth the trouble, but that's related to what I pay monthly. To contextualize it better, to me it represents a savings of about 2.5%, just not enough. If that 1k meant 8%, that would be different.
post #10268 of 11161
Does it not make more sense just to get a good 30 yr rate and invest the difference in monthly payments at a higher rate? Seems like the difference would have a larger impact than investing the full monthly payment for the remaining 15 years, but I am not certain.
post #10269 of 11161
Risk vs. return-- and some of the risks are conflicting. E.g., there is the risk involving the lack of liquidity created by paying down the mortgage in cash vs. keeping it in your brokerage account.
post #10270 of 11161
It's not as easy as just get a good a good 30 year rate. Most banks will only allow you to rate lock within 60 days of closing and you never know what the rate will do. I got screwed on this when I bought my house from when I put my initial purchase deposit to rate lock. It went from about 3.5% at the time I put down my deposit to just over 4% when I rate locked. Also, different banks have different fee schedules depending on the rates they give so it may not always be worth it to jut get the lowest rate possible if the closing costs are high and you don't plan on living in the house for an extended period of time.
post #10271 of 11161
This is totally coloured by my experiences of being poor but I always figure the safest bet is the longest amortization term. It keeps the payment lower in case of financial hardship but of course one always has the option of paying extra when flush. I always prepare for financial setbacks by keeping the monthly nut low.
post #10272 of 11161
Ya service 2/3/4 if you got a credible expectation of 6/7/8 elsewhere and leave dat principal be. H/e simplifying your CF as soon as possible gotsts a utility of its ownself, no two ways boud it. smile.gif
post #10273 of 11161
Quote:
Originally Posted by Concordia View Post

Risk vs. return-- and some of the risks are conflicting. E.g., there is the risk involving the lack of liquidity created by paying down the mortgage in cash vs. keeping it in your brokerage account.

If liquidity is a concern then you're probably extending yourself unnecessarily. Too many people buy more house than they can really afford. There's a risk to owing money on a home, anything can happen to you so it's better to have the property in your name outright asp -way before trying to make it work better for you in an investment account.
post #10274 of 11161
Up here SR still rents; waitin for dat mean reversion.

The optionality value of renting sometimes gets ignored wit dat "build equity" mantra. The latter of course always has merit (a long-term home being a consumption good first and foremost anyway) h/e as shown above the entry pricing is horrendous. Basically millenials financing boomers' retirements being even nicer.

Plus w all the speculators timing their flips you can find a "distressed" owner (landlord) here and there in need'a'dat CF for the mttg. Ya *cannot* find a bargain sale (in Toronto/Vancouver at least).
post #10275 of 11161
Quote:
Originally Posted by SirReveller View Post

Up here SR still rents; waitin for dat mean reversion.

The optionality value of renting sometimes gets ignored wit dat "build equity" mantra. The latter of course always has merit (a long-term home being a consumption good first and foremost anyway) h/e as shown above the entry pricing is horrendous. Basically millenials financing boomers' retirements being even nicer.

Plus w all the speculators timing their flips you can find a "distressed" owner (landlord) here and there in need'a'dat CF for the mttg. Ya *cannot* find a bargain sale (in Toronto/Vancouver at least).

 

I think the Canadian number must get skewed more by big cities in Canada with the lower number of people, no?  I can't believe rural Canada continues such a run.  Isn't it Toronto and others major cities with all the foreign buyers?

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