Mortgage advice

[icemanrd19]

So the wife and I are upgrading our house. House is 335k and we are putting 20% down. I think the interest rate is 4.25 ( ill find out for sure later ). Does it make sense to buy points to lower the interest rate to 4% if we plan on staying here for 15 years? Instead of paying $5300 in points why not put that directly towards the mortgage? Our loan term will be for 30 years. The wife said our mortgage would be around $2000 a month. Any extra money that I get without strapping us will go towards the mortgage. I'm going to see if we can afford a 20 year instead.

[icemanrd19]

Any and all advice would we good.

Thank you
Randy

[Auto Rod Technologies]

When I checked into the different payment amount from 20-30 year it wasn't a whole lot different, I went 15, but I didn't finance nearly that much, I ended up going 15 year. I would at least ask the bank the difference in payments for 15, 20, and 30 year before you do anything.. I would have been sick to know I could have been out in half the time for a small difference in payments.

[icemanrd19]

Last house I owned was 182k. After a few years we refinanced to a 15 year loan on 125k. Within two years I had the mortgage to 90k as of two months ago. Payments and taxes then were $1250. Daycare is a extra $1126 that I didn't have to pay before.

If a 30 year loan payment is $2000 and a 15 year is $2500 I could swing that. My car would just take longer lol

[IMPALA MAN]

My brother was contemplating a 30, 25 or 15 year mortgage. The interest rate was around 4.5% On the 30 year. His investment advisor told him to get the lower interest 4.5 rate 30 year note. He also said to give him (the investment advisor) the difference in the 15 year vs 30 year payment each month. He then told him at the 15 year mark, call me and I will pay off your mortgage and have plenty of money left over to cut you a healthy check. That was 15 years ago this year. He did not pay the house off, however he did buy a rental house that is now making his house payment. The moral of the story. If you can borrow money for 4.5%, invest it and continually get say an 8% return, you may want to think about it. My best advice, be debt free as fast as you can. Buy used cars and drive them until they are junk. Then one day, around 40-45, you will be able to live it up. Instead of walking in the bank and asking for their money, you can go in and request your money!

[Auto Rod Technologies]

Yup.. my plan is to be debt free by 40.. I can't stand making these mortgage payments.. On both the house and the two buildings for my business.. I have no desire to have a bigger house.. Perhaps add on to the shop but I will do that after I can afford to pay for it up front.

[Auto Rod Technologies]

As far as the car statement, I usually try to buy totals that come through the shop, fix them, drive them a year or two and then sell for a profit.. Nothing like getting paid to drive a vehicle.. lately been to busy to do this but I was awefully tempted to try to buy a suv that came through recently.. The problem with that is it's less time for me to invest into my 37 if I got it.. lol.

[icemanrd19]

That's another thing. I'm thinking about getting rid of my new maxima but I love the safety aspect of a new car with a 7 month old child.

So 30 year mortgage and pay extra, 15 year mortgage, buy points or use the money I would buy points towards the down payment, or ............. ?

[Auto Rod Technologies]

I can't say much, the only reason I bought the piece of property I just recently purchased is because I wanted the Garage and it was right down the road from the shop.. lol..
It was a easy way to add on to the shop.. i wanted to rent the house but bank wouldn't allow it without calling it a second home.. So I moved into it, but i'm kinda glad i did. It beats living in my apartment.

[Ron.in.SoCal]

Simple Randy. Divide the extra points dollar difference by the difference in payment amount. This will give you the number of months it will take to break even. If you think you'll stay in the house longer than that number buy down the points.

Simplified example: $2000 to buy down the loan. Difference in loan payment is $250. Calc looks like this:

2000/250 = 8.

In eight months you'll have broken even and every monthly payment thereafter you are $250 ahead. If you plan on staying in the house for even four years, you're ahead:

48 months minus 8 = 40. 40 months x 250 (saved) = $10k.

There's more....but that's the general idea.

[icemanrd19]

Yea but how much money would I save if instead of buying points I just apply that amount towards the principle so I'm borrowing less?

[bs46488]

we are refinancing right now. I think we are getting the same 4.25 rate as you.

We decided to go with the 30 year and are going to make extra payments. My lender actually told me if we make 1 extra payment a year, it would shave off 9 years on the loan. $2000 / 12 = $166 we can easily swing that (probably 2 or 3 times). Personally, I would not purchase points.

[icemanrd19]

Ok soo 10 months later my loan by cenlar has been sold to AMS servicing. Nothing changes except where i send the payment. Thing is I hate the website. They make it a pain to pay extra on the loan. My questions is whats the chances of walking into chase bank and asking them to match my current loan since all my other accounts are with them?

[Mkelcy]

I didn't read through all of the responses (I'm sure they gave good advice), but you have to run the numbers. Use an Excel spreadsheet and know what the answer is.

[Decline]

I dont own a home but have contemplated it.
Housing prices in SoCal are insane, especially conisidering having grown up on the east coast.

I figure overall with a 30yr plan you pay double the price and with a 15yr you pay 1.5 the price because of interest, and like when buying a car you never look at the payment, only the total cost.

Obviously theyr'es other variables but that has been my general rule of thumb.

[icemanrd19]

I at least have the bank that i want to match my interest rate. Now i just need to get a lower rate for them to match that. Im waiting to hear back from two banks. One already said they would be lower. Once that happens I'm golden

[IMPALA MAN]

The best advice I can give anyone....reduce expenses, reduce expenses, reduce expenses. Inflation is designed for people that cannot do this. People get cost of living raises because their EXPENSES go up. What if your expenses go up 1% instead of 3% like everyone else?
Here is how:
Capitalize on any Quick Pay opportunities you can. Do you pay your car insurance every month, 3 months at a time or every 6 months? Look at your policy, the 6 months plan save you money. This equals reducing expenses
I had an example where our son needed braces. The bill was $3600. We could choose between 3 payment plans. They differed in what amount you put down and how long you wanted to pay payments. I called the dentist to see what the price would be if we paid up front. After the initial shock of the question (the receptionist had obviously never been asked this) she asked the dentist, then came back with $3100 as the bill. This equals reducing expenses or $500 extra for my family
We use propane for our heat. If you pay within 10 days of the bill, you get a 5% discount. We have always paid within 10 days for the last 15 years. The money we saved, yeah it was a little over $1500. So let's do some quick math.
Braces for everyone that cannot pay up front $3600

Braces for us $3600
Discount for paying up front $-500
Total $3100

$1500 that I we saved on propane $-1500
Total $ 1600

I have a 2005 GMC Sierra that gets about 18 mpg. I drive 120 miles round trip to work.
I purchased a 2002 Mini Cooper for $6800 to drive instead of my truck
In about 2.5 years the gas savings paid for the car (including insurance and plates) I am planning on keeping the car about 3-4 years if I can. Whatever I keep it past the 2.5 year mark, is money in my pocket. I just recently broke even and even of the car flops now and i can't even sell it to the salvage yard for $10.00, I still have my truck that has accumulated only 5,000 miles in the last 2.5 years. Whatever I do save moving forward.....could go towards something I can get cheaper by paying early.

Gasoline, we are going to buy it so why not buy it cheap. I have a gas card that gives me 5% cash back up to $100 per month. Well I spend a little more than that. So I have gas cards that I rotate so I get the full 5% back. I always pay my bill at the end of the month. At the end of last year, I bought an I pad for the family.....with my cash back that I earned. Notice I didn't use any more gas, just purchased it differently.

REDUCE EXPENSES at a rate better that inflation and you will start to see progress. Inflation is usually 3% per year. If your expenses go up less that 3%, you will start to gain. Eventually when times are tough and everyone is reducing their prices on TV's etc., You will have cash to jump on the sale.

I purchased a flatbed car trailer from my next door neighbor. I wasn't even ready to buy one. It was in pretty rough shape. I got it for $325. Pulled it into my yard and immediately ripped the fenders, tail lights and removed the decking. I had my buddy sand blast it for $75. Note, when I took it to him, all he had to do was walk up to it and start sandblasting. I made sure to do EVERYTHING I could so I didn't have to pay him to do it. It was also easy money for him.
Then I started searching for fenders. I found some at a local store that had a small kink in them. There were three. They were $65.00 each. In the end, because they were kinked the manager told me if I bought all three for $75 I could take them today. I did and instead of picking them up the next day with my truck (which costs $11 more per day to drive to work) I managed to get them in the Mini Cooper. As an added benefit, when the guys at work wanted to go to lunch and asked who can drive....well I couldn't because I had no room....Even more gas savings.
Two weeks later when I got the trailer done I had $625 total in it and it was road worthy to take across the country. The guy that mows my neighbors lawn offered me $1200 for the trailer. I had to refuse as my neighbor is elderly and I was very clear with here that I did not want to buy the trailer to flip it. I only wanted it for my use. Now when my car needs taken to paint jail, I will trailer it there. When my Mini Cooper finally decides to retire, I don,t plan on paying a tow bill. I have a cell phone and as long as someone can get me to my truck and trailer, I am good to go.
Best of luck and hope it helps. I also have a great budget worksheet that is VERY simple and easy to use. The sheet will help ANYONE manage their money much smarter.

[Mr Nick]

Great advice IMPALA MAN!

To the OP... an easy way to pay extra toward principal on your mortgage, is to make half a payment every 2 weeks, instead of a full payment once a month. This way you make 13 full payments per year, instead of only 12. I have mine set to make the payment the day after my payroll direct deposit. I actually pay half plus $100 extra every two weeks. I have Wells Fargo and their website is very user friendly and easy to set up payments like this.

I do the same with my car note, the monthly payment is low $300 something, I pay $175 every two weeks.

[AMSOILGUY]

This is a great topic. Even if its an old post brought back. What I have been told and feel it makes the most sence to me is: Always pay any extra money on whatever debt it is you have the highest interest rate on vs the highest balance. As you get your lower balances paid off apply that to the next one. With that said if you can afford to pay extra and have nothing else with a higher rate then by all means get rid of that mortgage. Also mortgage interest is tax deductible where other notes are not.