It’s Been Two Years Since Our Refinance

Two years ago we completed the re-finance of our house.  I thought I would go through some of the numbers and things that have happened.

Original Loan: 30 year mortgage, 5.875%, closed July 2007
New Loan: 15 year mortgage, 3.375%, closed November 2011

Increase in monthly payment: $157.69

Reduction in total term: 10 years, 8 months

Principal paid on new loan in the first 24 payments: 10.67%
Principal paid on old loan in prior 24 payments: 4.97%

Amount ‘extra’ paid on new loan over last 24 months: $0Amount ‘extra’ paid on old loan over the prior 24 payments: $4,144

Number of months before euphoria of making double the impact wore off: 2

Number of times I’ve regretted not taking a longer term re-finance so that I could have extra cash each month: ~5Average amount of time (in seconds) for me to completely dismiss that idea as ‘the crazy talking’: 4

Happiness on a scale of 1 to 10 when my tax preparer followed up to make sure that the reduced interest amount for 2012 was correct: 10

My calculated age at end of original 30 year term: 62My calculated age at end of new 15 year term: 52

My kids ages at end of original 30 year term: 28 and 26My kids ages at end of new 15 year term: 17 and 15

So, some things to take away from the above numbers:

  • mb-201311contractIf we stay in our home and don’t make any adjustments to the mortgage, we will have it completely paid off prior to the kids starting college, which has always been a goal of mine.
  • We would also have at least 10 years of being mortgage free while still being in the workforce.  This would definitely help set the table for a more successful retirement.
  • When I was still paying on the old mortgage but working through the details of the re-fi, the numbers were incredible to me.  By paying essentially what I was paying anyways every month, I’d be making almost double the impact.  That was awesome for the first couple of months.  Luckily, I anticipated this.
  • Paying the mortgage off early is not a priority right now.  Any extra money goes toward savings goals such as saving for a new car, home improvements, travel, or retirement.
  • If I were to pay the mortgage early, I would likely do so when I could pay off the entire balance at once.  So, if I made a boatload in the stock market and my trading account balance (after taxes) exceeded my mortgage balance, it would be then that I might consider a payoff.
  • We are nowhere near that possibility in our current state.
  • But I’m OK with that.
  • I think we chose the perfect term length.  It doesn’t crimp our lifestyle and keeps us honest to our savings goals.  The truth is that extra cash flow would be nice, but wouldn’t be worth it at all.

 I know many of you must have taken advantage of the low rates back around the time they hit thier low point.  I’d love to hear from those who have had their re-fi’s and how you’ve fared, emotionally and financially, in the subsequent months.

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Why I’m Glad I Have Someone Do Our Taxes

I’ve been lucky enough to have someone do my taxes for as long as I’ve ever had to file them.  How did I get so lucky? Because my dad has been lifelong friends with the guy that does them, and he’s always treated our family very well.

I’ve never questioned his ability, but whenever I see something I don’t understand on a tax return, I ask about it, for the simple sake that I want to understand things.

We re-financed our mortgage last year, so when I was estimating our tax return, I entered the closing costs, but when our tax return came back, this wasn’t on here.  Only a small portion was.

I knew he was correct.  He always is.  So, I didn’t sweat it and in fact I waited until after tax season was done before I dropped him an e-mail asking why the closing costs were nowhere to be found.

He wrote back explaining that for a re-finance, the deduction is spread out over the original term of the loan. Our deductible closing costs were roughly $1,200 for the 15-year mortgage, meaning that we’ll see roughly $80 written off each year for the next 15 years.  In fact, there was $20 written off in 201, which makes sense given that we re-financed with three months left in the year.

(FYI: For an original mortgage on the property, you can write off the entire closing amount for the year in which the closing took place.)

Good to know!

When it comes to doing taxes, I know that I could likely enter the big stuff.  But, honestly, it’s the little stuff like this which makes me really, really glad that we have someone do our taxes.

And not just any someone, but someone we completely trust.

Do you  have someone do your taxes?  Did you know about the re-finance amortization requirement when it comes to writing off the closing costs?

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Closing Day!

This afternoon is our scheduled closing.  It amazes me how many details are rushed until the last minute.  At T-minus 24 hours, I didn’t even know the final mortgage amount.

I had gotten confirmation that the closing was taking place via an e-mail.  I requested a change from the info (they were still using my wife’s maiden name which is how it was on the original mortgage since we had not yet gotten married) and had inquired about final numbers.  A lady called and still said ‘everything was in process’.

They also told me that I would likely be getting a check at closing, because they’d overestimated the closing costs in the Good Faith estimate, but had kept the same mortgage amount.  I said that I wished that she could just change the mortgage amount so it would be a net-zero transaction, and she told me ‘Oh, no problem, we can still do that’.

With less than 24 hours to go.  But she assured me that this happened all the time and that everything is going, in her words, ‘Great!’

Makes me nervous but so far everything has been smooth sailing, so let’s keep our fingers crossed.

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The Funniest Part Of The Mortgage Re-Finance Conversation

As I mentioned earlier in the week, we’re looking to re-finance our home loan to a much more manageable 3.375% rate on a 15-year mortgage compared to the current 5.875% 30-year loan we have today.

The conversation with the loan agent went remarkably well, but the part that had me laughing was when she was giving me our credit scores (over 800!) and said “Oh, I notice you don’t have one of our ??? credit cards.”  I don’t even remember the name of the card, but I politely declined.

I couldn’t help but laugh and it does show that there is humor to be found when talking to a bank.  You have to keep your eyes out everywhere for people trying to get you into the latest and greatest credit card.

I can only begin to imagine what they’ll bring at closing, assuming we get that far!

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