Debt consolidation

[growing_older]

You can use that "ticking time bomb" as motivation. I paid off my mortgage with a HELOC and got a great - but variable rate. OMG, I was very motivated to pay that thing off before rates shot up and hurt me.

[rayvt]

Quote:

Originally Posted by W2R This has been my approach as well. I'd prefer to buckle down and get out from under ANY debt, to worrying and stressing over which kind of debt I'd prefer.

Worry & stress? If you are on top of things, there's little of that. And I would guess that most people who are serious about FIRE are on top of things.

Mortgage at 4.25%
Car loan at 3.99%
Portfolio of dividend-paying & preferred stocks yielding 8.9%.

Monthly SS checks go to on-line checking account, from which:
automatic bill-pay sends payments to mortgage & car lenders.

For other living expenses:
Monthly pension check goes to a credit union checking account.
Monthly dividend income automatically gets sent to same account.

All done automatically without any manual intervention.
No buckling down necessary.

[golfnut]

I did some legwork on refinancing. Presently have a 3.0% equity line and balance is now around $19,000 and a fixed 15 yr mortgage with a rate of 4.75%, $62,700 balance. On the equity line we pay $500 per month and on the the fixed loan we pay $972 per month.

Bank is offering a 10 yr fixed at 3.75%. I'm tempted to roll all the above into this loan. cost of this loan is $1,700 which could be rolled into loan bringing the total to $83,400.

Good idea or bad? Comments would be welcome.

Thanks,

Golfnut

[brewer12345]

The only thing I don't like about it is the 1700 of costs. The other possible sticking point is the higher minimum payment. If this payment might cause you cashflow stress, it might not be worth doing.

Alternatively, Pen Fed offers a HELOC that is fixed for 5 years and adjusts once every 5 years thereafter. They quote the rate at 4.12% and AFAIK the eat all of the origination costs.

I wold plug some alternatives into the Mortgage Professor calculators and see what look best.

[golfnut]

Quote:

Originally Posted by brewer12345 The only thing I don't like about it is the 1700 of costs. The other possible sticking point is the higher minimum payment. If this payment might cause you cashflow stress, it might not be worth doing. Alternatively, Pen Fed offers a HELOC that is fixed for 5 years and adjusts once every 5 years thereafter. They quote the rate at 4.12% and AFAIK the eat all of the origination costs. I wold plug some alternatives into the Mortgage Professor calculators and see what look best.

Brewer, thanks for the response. Note with the 10 yr fixed at 3.75%, the monthly payment would be $845 with the $1,700 rolled into the loan amount. Presently we are paying $972 + 500 or $1,472 monthly.

[brewer12345]

Quote:

Originally Posted by golfnut Brewer, thanks for the response. Note with the 10 yr fixed at 3.75%, the monthly payment would be $845 with the $1,700 rolled into the loan amount. Presently we are paying $972 + 500 or $1,472 monthly.

Whether you finance the 1700 or pay out of pocket, it is still a cost to you. Your effective interest rate will be higher because you are paying off 81700 and paying back 83400 (with interest). Not a deal-killer, but go into it with your eyes open.

Edit: I fixed the principal balance. I also ran the numbers on my handy dandy HP12C and calculate that if you roll the costs into the new loan and pay all the scheduled payments until the end of the 10 years, your effective interest rate is 4.02%. If you prepay, the effective rate starts climbing from there.