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    Mrraymonds01's Avatar
    Mrraymonds01 Posts: 6, Reputation: 1
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    #1

    May 23, 2013, 03:15 PM
    Refi help
    Hi, I'm 55, retired with a $98,000 a year government pension, my wife is 52 and is a stay at home mom.
    We have a home worth $550,000 with a mortgage of $188,000 with a payment of $1,207 a month for 20 yrs left. A second of $80,000 with a payment of $944 a month with 9 years left. A third of $40,000 with a payment of $659 a month with 6 years left. Total payments of $2,810. Taxes and insurance are not included.
    I want to refi $308,000 to a 30 year with a rate of 3.625% for a payment of $1,408 a month. This will free up appox. $1,402 a month for $100,944 savings the first six years. And $26,316 for the next 3 years.
    We have approx $45,000 in pension loan with 42 months left and $44,000 of various credit card debt and college loans for our kids.
    My wife seems to think that since we only have 6 years left on our $40,000 loan and 9 years left on our $80,000 we're "paying ourselves" because the interest is lower than the principal.
    We would have about $17,000 a year extra and that would have us debt free except the mortgage in 6 or much less years with the debt we have already except for the new mortgage and then another extra $9,000 a year for the next three years.
    We have 4 children, a 24, 22, 20 and a 14 year old. They should be out of the house by then and I don't see us in this home a lot longer after the 9 years. Too big for two people.
    I say it will take us 18 years using her plan to get to the point where we will be in 9 years using mine. We have no college saving plan for the 14 year old Thank you
    ScottGem's Avatar
    ScottGem Posts: 64,970, Reputation: 6056
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    #2

    May 23, 2013, 04:21 PM
    If you were going to stay in the home longer than 9 years, I would agree with your plan. But since you plan to move, I would be more inclined to suggest a 15 yr instead of 30. Also, not knowing the interest rates on the loans makes it harder to judge. You should still realize a significant monthly savings and have a lot more equity in 9 years.
    Mrraymonds01's Avatar
    Mrraymonds01 Posts: 6, Reputation: 1
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    #3

    May 23, 2013, 05:09 PM
    Sorry Scott the 188,000 is 5.01%, the 80,000 is 6.25%, the 40,000 is 5.75%
    Mrraymonds01's Avatar
    Mrraymonds01 Posts: 6, Reputation: 1
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    #4

    May 23, 2013, 05:12 PM
    Also I don't think I care about the equity and the end of the nine years since we get most of it throughout the nine years. Unless I'm wrong. Thanks
    ScottGem's Avatar
    ScottGem Posts: 64,970, Reputation: 6056
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    #5

    May 23, 2013, 05:34 PM
    With those interest rates, you should be able to significantly reduce your monthly outlay with a 15 yr mortgage. And yes you are wrong. Your wife has a point that you are currently paying more towards principle than interest. If you refi for 30 years, you are going to be paying much more in interest at the beginning of the loan. So you should be concerned with building equity at your ages and position.
    Mrraymonds01's Avatar
    Mrraymonds01 Posts: 6, Reputation: 1
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    #6

    May 23, 2013, 05:36 PM
    $2810 X 72 payments = 202,320 old payments
    $2151 X 36 payments =+ 77,436 old payments
    279,756 total old payments
    $1405 X 108 payments = 152,064 new payments
    127,692 savings


    Owe at end of 108 payments = 90,494 old payments

    Owe at end of 108 payments = 247,549 new payments

    And we can always pre-pay to lower the over all interest since we will have a lot of extra money in the nine years.
    Mrraymonds01's Avatar
    Mrraymonds01 Posts: 6, Reputation: 1
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    #7

    May 23, 2013, 05:46 PM
    Scott, we have $100,000 cash in bank, $175,000 in IRA's 2 family rental free and clear worth $200,000 with rent of $2,250 coming in from it. Not really worried about the future as I think we should have the money liquid as opposed to illiquid assets. I feel the 100,000 cash will be going down until we hit the 6 year mark and then start to go back up. So get the cash early so we don't lose the opportunity to invest it, am I wrong. Thanks
    ScottGem's Avatar
    ScottGem Posts: 64,970, Reputation: 6056
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    #8

    May 23, 2013, 06:18 PM
    In my opinion yes. In my opinion I don't think it's a good idea to go for a 30 year you plan on selling in 9-10 years. You are front loading the interest. I think you are better off building equity. I'm not disagreeing with the idea of combining your mortgages and reducing your monthly outlay. I'm just disagreeing with committing to a 30 yr mortgage.
    Mrraymonds01's Avatar
    Mrraymonds01 Posts: 6, Reputation: 1
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    #9

    May 24, 2013, 05:21 AM
    I like the idea of the money up front to get debt free except for the mortgage. She is forgeting the non- deductible interest on the CC's and pension loan and the opportunity cost of spending our cash reserves. And we can always pre pay once we're debt free.
    joypulv's Avatar
    joypulv Posts: 21,593, Reputation: 2941
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    #10

    May 24, 2013, 05:58 AM
    I can see arguments for a 30 year. Nice low rate that may not be seen again for decades. Difficulty selling the house, or children who leave and come running home because they can't afford what's out there. Suggestions that there will be a glut of houses for sale as baby boomers (now 66, with more added daily) put their big houses on the market. You could be right in the middle of a glut 9 years from now!
    The current resurgence doesn't matter that much to you, but it's based on investors, not home buyers, according to the first stats.
    Decisions like this have many variables and of course in hindsight you may find that you won or lost, but this one isn't huge either way.

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