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Old 08-17-2010, 10:03 PM   #21
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Originally Posted by REWahoo View Post
A Google search reveals dozens of calculators to determine the interest savings but I don't think I've ever seen one that attempts to also include the tax deduction and potential investment gain aspects. The variables probably make it too complex to easily quantify - which is also the reason there is no consensus on this forum as to the wisdom/folly of early mortgage payoff.
Yes, thanks, I agree, none of them quite had what I was looking for, was hoping someone had a silver bullet. So I unfortunately have to fall back on my own math. A horrid tool if there ever was one.
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Old 08-18-2010, 11:00 AM   #22
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Harley, do a forum search on "pay off the mortgage early?" and I'm betting you'll find TONS of help.
I've been reading them, and yes, there is TONS of something, but I'm not sure it's help. Mostly it's the eternal mortgage or no mortgage argument. I don't see much about fine tuning the mortgage.

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Yes, thanks, I agree, none of them quite had what I was looking for, was hoping someone had a silver bullet. So I unfortunately have to fall back on my own math. A horrid tool if there ever was one.
Same here. I guess re-doing my taxes using different mortgage deductions would help, as well as tracking the other items I mentioned. This may be more work than it's worth. Where's my dartboard...
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Old 08-18-2010, 11:26 AM   #23
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This may be more work than it's worth. Where's my dartboard...
I suspect that's one of the reasons so many of the mortgage do/don't payoff early debates boil down to "do whatever makes you feel good/sleep at night". There is more to the decision than just numbers - which I know is hard.
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Old 08-18-2010, 12:10 PM   #24
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PenFed 5/5 is up to 4% today. Man, did I time this right!
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Old 08-18-2010, 12:26 PM   #25
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Read This Before You Refinance Your House

I am not saying we should do as this guy says, but it is interesting to me that he wrote this artice 1.5 years ago...

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Realtors always warn you “You’d better act now before rates go up.”
You might think they’re right… After all, mortgage rates are the lowest they’ve been since the Fed started keeping records in 1971. But interest rates could go much lower.
America’s problems came to a head in 2007. Since then, the Fed has cut interest rates from over 5% to near zero. As I’ve written before, it looks a lot like Japan
In the 1980s, Japan had an overlending bubble similar to ours today… Its bubble peaked in 1990. Japan’s version of the Fed cut rates from above 5% to below 1% €“ and it’s held them there ever since!
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Old 08-18-2010, 12:37 PM   #26
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I haven't looked into this yet, and I'm not (yet) a PenFed member, but this conversation is making me think about refinancing again. I'm curious though. We are retired, with no pension, no real income other than dividends and interest. We have plenty of money as far being able to pay off the mortgage at any time. But I'm wondering if we're going to be able to qualify again, in these new days of actually doing means testing. If I can get a 4.375% loan that's .5% better than what I currently have. About $120/month. It's real money, but I'd hate to have to jump through too many hoops (sorry Sarah ).
My impression of the mortgage-approval process is that they're interested in cash flow: interest, dividends, pensions. Assets don't cut it. Debts can kill it. So $1M in the bank and other debt of $250K means only that you need a lot of income from that $1M to be able to show ample cash flow after servicing the $250K debt.

One reason not to have a mortgage would be if you have a substantial assets earning less than your mortgage cost. It doesn't make much sense to pay for the liquidity privilege of a 5% mortgage when you have an equivalent amount of money earning 2.5% in a CD. That type of liquidity can be more easily obtained with a HELOC.

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I'm trying to figure out at what point and level a mortgage is worth it to us. I'm carrying one because our house is pretty expensive even now, and having it 100% paid off is leaving a good chunk of money in non-liquid form.
I hate dead equity too. I don't have an answer, unless it's the peace of mind that helps you sleep at night. In my case it occasionally wakes me up wondering how I can turn it into a dividend stream. Again a HELOC helps soften the sting.

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Also, having the mortgage deduction has helped keep us down in the 15% tax bracket last year, and probably for the next few years too, which will help with the Roth conversions.
So what I want to do is figure out how much the mortgage is costing us vs. how much it is saving us, and how much mortage is the sweet spot. I know I need to compare how much we get as a deduction vs. how much we are paying in interest, and I think I also need to consider how much we would be paying into the 25% bracket if we didn't have the deduction. I guess I also have to subtract out how much we are making in interest on the amount of the mortgage (negligible). Has anyone ever worked all this out, or (please, God) know of a site or calculator that will walk me through it?
You can play around with these NFCU question-answer calculators:
Navy Federal: Online Financial Calculators

They can also display a payment-by-payment listing of how much you'll pay in principal & interest, so that you'd be able to see when the itemized interest deduction drops below the tax return's standard deduction. But before that happens, perhaps you'd just boost your charitable donations a bit more to get back into itemizing and to stay in the 15% bracket.

Our refi decision boils down to payback. How much would it cost to do the refi, including points & closing costs? How long would it take to pay it back through reduced payments? I ignore the opportunity cost of the refi money and the itemized-deduction tax aspects. If the refi has an eight-year payback then it's probably not a good deal (especially if you're moving before then). If the payback is only a year or two then it's worth the effort. If the payback is 3-4 years then you have to decide whether rates can't possibly get any lower (e.g., whether you'll be doing another refi in a couple years) or whether it's worth waiting a while.

We've already refi'd our home five times in the 10 years since we've bought it, most recently to 4.5%. The last refi's payback was ~32 months, and it has another 14 months to run. We've been stalking a local bank's 4% 30-year fixed mortgage. Since we're still in payback time on the last refi, and since this new rate has some fairly stiff points costs, it's not a screaming bargain right now. But I'm tempted.

A couple weeks ago it was at two points. Last week it was at 1.75 points. This week it's at 1.5 points. I have high hopes for the next couple of weeks.
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Old 08-18-2010, 11:01 PM   #27
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Any online calculators that anyone would recommend for the "To re-fi or not to re-fi" question?
There probably is no such thing, because much of the decision is a matter of personal preference, and therefor cannot be calculated. See the numerous threads about paying off or keeping the mortgage, and when to take SS.

My own personal calculation is simple: If I can save $100/mo in interest (note: only interest on the current balance, NOT payment), and the break-even period is less than 12 months
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Old 08-21-2010, 03:36 PM   #28
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I refi'd to PenFed's 5/5 ARM about 4 months back and they didn't charge a origination fee. They stopped charging the 1% about 6-8 months I think.

Also, if PenFed still owns your loan then they'll only charge you 0.5% to modify the loan to the new rate. I have approx the same size loan at 4% and I'm making extra payments to pay it off in about 5 years. It doesn't make sense in my case since I would only save about 400 in interest over the 5 years when I take into account the 0.5% fee.
Are they still charging 'closing costs' if I just refi'd through them 18 months ago?

With my current pay down I have about 8 years left so I don't think the 5/5 would make much of a difference with it jumping to over 5%.

Now if I could get the 10 or 15 year at 3.875 with only paying .5% I would, but I doubt that's how it works. That would save me about $2500.
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Old 08-21-2010, 10:04 PM   #29
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Originally Posted by REWahoo View Post
A Google search reveals dozens of calculators to determine the interest savings but I don't think I've ever seen one that attempts to also include the tax deduction and potential investment gain aspects. The variables probably make it too complex to easily quantify - which is also the reason there is no consensus on this forum as to the wisdom/folly of early mortgage payoff.

I believe the mortgage professor's site has all that and more: Mortgage Calculators
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Old 09-01-2010, 11:46 AM   #30
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FYI....just received an auto-alert from PenFed stating their 15 yr fixed is now down to 3.75%

Can't believe I'm still waiting to see if they'll continue to decline....ridiculous.
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Old 09-01-2010, 12:39 PM   #31
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I know I should just call in and ask, but does anyone know if this deal is just for the 5/5 ARM or if it also applies to fixed mortgages @ PenFed, too?
Answering my own question in case others are still using this thread....yes, PenFed will reset the rate on a fixed mortgage if they still own it. Unfortunately ours has already been packaged up and sent off to Ginnie May
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Old 09-01-2010, 02:42 PM   #32
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does anyone know if penfed 15 year refi is no cost, no fee, no points? thanks
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Old 09-01-2010, 04:33 PM   #33
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they market it as a "low cost" refi - meaning they will pick up a lot of the basic costs assuming the transaction goes thru.....however, they also have a 1% origination fee for all fixed rate mortgages. they added this as a standard fee (previously it was free) at the end of last year.
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PenFed 5/5 Closing Costs
Old 09-01-2010, 10:16 PM   #34
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PenFed 5/5 Closing Costs

I just got my TILA document after initially filing a Re-Fi with PenFed's 5/5 ARM @ 3.625% with no points. I'm looking at closing costs of around 3500 (already subtracted escrow and required services - which they said will be nulled) I am just trying to compare closing costs here, seems like some of you have gone through the process....is this normal? Is the TILA accurate in portraying the actual closing costs? Also, is this re-fi a good decision if I expect to move out within at around the 4-5th year and my current mortgage is a 7/1 ARM thats about to reset to an ARM this December?
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Old 09-02-2010, 12:00 AM   #35
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Is the TILA accurate in portraying the actual closing costs?
My experience with my Penfed refinance a few years ago was that they did not lowball me. In some cases they did not know the fee structure for some things, so the either guessed or misread -- I believe in all cases the actual fee ended up being close to but less than their estimates.

They seemed to contract out the actual closing / escrow / title services to a local company. The local company was quick and efficient but made numerous obvious mistakes. They were happy to correct it and adjust things after I pointed them out, so in the end I was very happy with what I paid in terms of costs and fees. The hassle factor was moderate but again I ascribe that to the locally contracted firm, not PenFed themselves.

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Old 09-02-2010, 06:59 AM   #36
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My actual costs were somewhat below the estimate when I refi'd last year. Closing costs vary by location and loan balance: how much is your loan and where are you?

As to whether the refi makes sense, it depends on the path of rates and your risk tolerance. When your loan resets, what will the new rate be? What is the index and margin and we can help you look it up. If I were to guess, I would expect the next couple years to have low short term rates, but after that it is anyone's guess. So locking a 5/5 reduces your risk at a (probably) slightly higher cost.
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Old 09-02-2010, 10:31 PM   #37
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The regulations have changed for the good faith estimate with regards to closing costs. The rules are somewhat confusing for consumers, but the bottom line is that the information is much more accurate nowadays, otherwise the lender ends up eating certain costs. So lenders are not low balling the estimates.
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Old 10-12-2010, 10:15 AM   #38
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Bump.

PenFed 15yr down to 3.625% today and I'm finally pulling the trigger. I can see rates going a little bit lower but not THAT much. I think they'll let it float down during the processing period anyway. Should save us $20k over the life of the loan.
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Old 10-13-2010, 11:52 PM   #39
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I just got pre-qualified early this morning for a 30 year mortgage from Pen Fed - and thank you to the posters of this forum for letting me know about it. After house hunting for 3 years we finally think we found a house in a location at a price we like.

I never thought I'd want to carry a mortgage into retirement, but now I'm liking the idea.

We plan to retire in 2.5 years at age 56. I won't receive a COLA until I am 62. If we borrow to the limit of our combined pensions which cover the cost of interest, principal, taxes and maintenance then I won't worry about inflation. If our pensions get inflated away, they will still cover our pensions.

Our other investments will easily cover our expenses. If time get tough we can cut back on our spending, but our housing will be covered.
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Old 10-14-2010, 11:14 PM   #40
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I got an email from PenFed today stating their 30 year fixed is at 3.958% APR. I would love to snag that rate.
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