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Post by Deleted on Feb 28, 2021 22:09:45 GMT
I just refinanced my Jumbo loan, ~ 1.3 million at 2.75% 30 yr. fixed at no costs. I doubt interest % will ever go lower. It is probably as good as it gets on % interest.
Now challenges are
1. To be mortgage free at retirement. 2. With annual property tax of $30k, how would I pay it during retirement years?
Is it worth paying some extra principal every month?
with $500.00 extra principal every month I get my mortgage done in 26 years (age of 78) instead of 30 years and save 86000 in interest over those 26 years.
Is it even worth trying?
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Post by javajoe on Mar 1, 2021 1:02:32 GMT
Every situation is different, but at 2.75% I personally wouldn't automatically apply extra principal. You can always pay it off early later but once you contribute now you lose both liquidity flexibility or the ability to ever earn more than 2.75% on those dollars.
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Post by richardsok on Mar 1, 2021 2:47:26 GMT
Am I getting this straight?
You're 52 and taking on $1.3 million in debt, which you figure you can pay off when you're "only" 78.
And your fall-back plan is WHAT if you get a debilitating illness at, say, 65 ?
Saddled onto this is $30,000 in annual RE tax TODAY. And, over time, those taxes will likely -- decrease? You think?
Unless the property we're discussing generates regular income, or you confidently earn in the mid six-figures, I don't know where to start.
But you're right. It's a great rate.
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Post by uncleharley on Mar 1, 2021 15:32:15 GMT
I rolled an existing mortgage of a much smaller amount over into a 15 yr mtg @ 2.5% a couple of days before the election in Nov. The payment PITI is less than I would pay to rent this place, but more than I would pay for a more modest dwelling. According to my Dr I am a young 78 yrs old. No one knows what kind of challenges we will face in the future, however a mortgage at less than 3 % would seem to be a wise hedge against inflation and yes, every central bank on the planet wants inflation. I am convinced they will have their way. JMHO
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Post by Deleted on Mar 1, 2021 15:42:21 GMT
so inflation should generally help residential real estate prices go up. I understand it depends on location. but low rates and nice inflation should be good for home prices?
I will not put extra money towards principal. I will put that money into a SP500 index fund or a mid cap growth fund or world allocation fund and then do lump sum payment later. Hopefully the fund will make more than 2.75% + tax.
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Post by retiredat48 on Mar 1, 2021 17:30:01 GMT
so inflation should generally help residential real estate prices go up. I understand it depends on location. but low rates and nice inflation should be good for home prices? I will not put extra money towards principal. I will put that money into a SP500 index fund or a mid cap growth fund or world allocation fund and then do lump sum payment later. Hopefully the fund will make more than 2.75% + tax. Now you're talking... Do not ever pay off that great mortgage...rates rising already. BTW biggest benefit of inflation is you will be paying monthly mortgage with" cheaper dollars". What is wrong with dying with a mortgage?? The money you save not paying off the mortgage, you have as backup safety money. Remember, if you pay off half of mortgage, and for some reason you miss mortgage payments, banks don't care about the past--you may head for foreclosure. The cash prevents this. BTW curious people want to know: Is this house in California--like a million plus for a standard three bedroom?? Or are you wealthy enough to have a million plus home somewhere?? More importantly, richardsok--let's target lunch early this month. R48
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Post by Deleted on Mar 1, 2021 17:37:52 GMT
House is in CA. As per Zillow it is worth 2.4-2.5 million. I re-financed my mortgage. But if housing market crashes and I lose my job or debilitating illness at the same time then i am toast as I currently live month to month ie. my income just about covers my expenses. No debt other than this mortgage.
"The money you save not paying off the mortgage, you have as backup safety money. Remember, if you pay off half of mortgage, and for some reason you miss mortgage payments, banks don't care about the past--you may head for foreclosure. The cash prevents this." - Totally makes sense. This risk is very very real especially if we get another 2008.
What is wrong with dying with a mortgage?? - Nothing really, kids will sell the house and get back the principal. It is paying the monthly mortgage and property tax in retirement that worries me.
That means I will have to relocate to a cheaper location in retirement. My wife loves this home and it is awesome community. Very stable. Houses rarely come for sale. Lot of retired original owners and as old folks are leaving (usually dying or too old to live by themselves, their kids grew up here and left) some younger families are moving in. I noticed people tend to stay here as long as they could.
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Post by Mustang on Mar 2, 2021 0:09:13 GMT
If you are living month to month then making extra payments on the mortgage is out of the question. And, at an interest rate of 2.75% it isn't worth it anyway. If you invest any extra money in a somewhat safe fund like Wellesley Income then you could expect a 7% return. So even though I'm a big believer of being debt free during retirement, I don't think getting 4 years off the loan is worth it.
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Post by retiredat48 on Mar 2, 2021 4:00:08 GMT
House is in CA. As per Zillow it is worth 2.4-2.5 million. I re-financed my mortgage. But if housing market crashes and I lose my job or debilitating illness at the same time then i am toast as I currently live month to month ie. my income just about covers my expenses. No debt other than this mortgage. "The money you save not paying off the mortgage, you have as backup safety money. Remember, if you pay off half of mortgage, and for some reason you miss mortgage payments, banks don't care about the past--you may head for foreclosure. The cash prevents this." - Totally makes sense. This risk is very very real especially if we get another 2008.What is wrong with dying with a mortgage?? - Nothing really, kids will sell the house and get back the principal. It is paying the monthly mortgage and property tax in retirement that worries me. That means I will have to relocate to a cheaper location in retirement. My wife loves this home and it is awesome community. Very stable. Houses rarely come for sale. Lot of retired original owners and as old folks are leaving (usually dying or too old to live by themselves, their kids grew up here and left) some younger families are moving in. I noticed people tend to stay here as long as they could.waffle...you have not given us your other assets and portfolio size etc. This could mitigate things. But regardless, you do not have to sell the house and downsize. Here's a solution. Before retirement, while you have earned income NOW, apply for a large Home Equity Loan...fixed rate or variable. These are usually good for 10 years minimum, with another ten to twenty years with the line of credit draw period stopped. You then begin paying it back. Now, you can draw a large sum against the HELOC, and invest it safely. This is just like the cash you would have received by selling the large home. Use this cash as needed to make mortgage payments on the mortgage. You could get ten to twenty years of payments. Thus you can stay in your current home for that time period. An alternative is to not draw on the HELOCX until needed...periodically. If you eventually leave that home, selling it, you pay off both the mortgage and HELOC balance if any, the rest is cash to you. Note all you are doing is tapping into your home equity, decreasing the amount that goes to your heirs, but you get liquidity to live on till you die. This is the way it should be. Kids simply get remainder of assets. period. This permits your portfolio investments to grow and grow...so heirs get thisi ncrease. Disclosure: I have two large HELOCs on my three houses, at 3% fixed on one, 2.5% variable on another, about 17 years left to pay off. I'm not leaving my homes!! There is no need for you to downsize. But you will pay $30,000 a year in property taxes that some may consider wasteful. But so what. We could all lower taxes by downsizing...many don't. (And we could all move to Florida--NO, NO please do not join the thousand a day moving to my state to lower taxes) Good day waffle. R48
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Post by richardsok on Mar 2, 2021 13:44:54 GMT
retiredat48, Great, Bob. I look forward to it. You have my contact number.
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Post by retiredat48 on Mar 3, 2021 6:08:20 GMT
bump...for waffle review
R48
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Post by Deleted on Mar 4, 2021 17:18:33 GMT
Thanks R48. Taking out HELOC is a very good idea to help with cash flow during retirement. But I would have to do it before I retire because bank will need to see job to give loan I would guess. I will research more on HELOCs.
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Post by retiredat48 on Mar 5, 2021 4:55:40 GMT
Thanks R48. Taking out HELOC is a very good idea to help with cash flow during retirement. But I would have to do it before I retire because bank will need to see job to give loan I would guess. I will research more on HELOCs. Yes, that is what I posted. Take out HELOC now. You do not have to fund it until you retire...if ever needs funding ($$ withdrawals). R48
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Post by Deleted on Mar 7, 2021 2:36:19 GMT
Thanks R48. I reread your statement. It somehow did not register first time.
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Post by retiredat48 on Mar 7, 2021 21:09:43 GMT
Thanks R48. I reread your statement. It somehow did not register first time. In six months or more, favorable rates for HELOCs may be up by 1/2% or more. Mortgage rates tend to be based on ten year Treasury bond rates. R48
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