The "Let's Talk Money" Thread

[Vilandil Tasardur]

What branch?  I worked as an FA at PNC while i was in law school, I may know the person.

Van Dusen Road in Laurel.

 

That is why you should check the experience and history of the person that you are considering working with....if the person is "registered" they should carry a Series 7 and 66 (or older Advisors Series 63 and Series 65).  It is public information and can be found on BrokerCheck.finra.org .  If the person is legit all of the licences will be posted there along with the dates they received those licenses and if there has been any complaints filed by past clients against the person it will be listed there.  Also, on the report is a listing of everywhere the person has worked.  You can see licenses held, how long in the industry, complaints and how long they have been with their current employer and who they worked for previously.  If you look at the person's webpage you should be able to see if they carry any professional designations (CFP, CRPC, FPS, etc.).  

 

That is a good way for you to weed out the type of people mentioned above.

 

Noted. Heading there now. Thanks a lot!

[zoony]

Save money now before the kids come LOL

I'm no expert but I think do what worlds for you. There are a few simple rules of finance all of which start with time value of money. So great job saving at a young age.

Regarding interest, money is so unbelievably cheap right now and cash is so hard to save, I find myself financing vehicles and paying them over time. I'm sure it's not the best method but I'd much rather have access to $50k in cash and a car payment with 2% interest than no car payment and no cash.

That said, unsecured debt is pretty awful and interest rates are always high. Best to avoid that type, not that you had any just clarifying my position

[PleaseBlitz]

Van Dusen Road in Laurel.

 

 

 

Sorry, I was in NoVa, I didn't have any contact with MD folks.  

[Vilandil Tasardur]

Okay, so after some more in depth reading, it looks like what they are offering is as such:

 

 

If I take a HELOC out with a certain value, some lenders allow you to set aside a portion of the HELOC and assign that a fixed rate. So if you take our a HELOC for 100K but only want to use 40K, you can fix the rate on that 40K. Anything of the remaining 60K that you spend at a later date are calculated at whatever the new interest rate would be, but that original 40K purchase has its fixed, original rate. 

 

http://www.bankrate.com/finance/home-equity/heloc-with-fixed-rate-option.aspx

 

Something like this, I think.

 

Edit: Although it still doesn't seem viable for them to let me fix the rate as low as 2.65...

Save money now before the kids come LOL

I'm no expert but I think do what worlds for you. There are a few simple rules of finance all of which start with time value of money. So great job saving at a young age.

Regarding interest, money is so unbelievably cheap right now and cash is so hard to save, I find myself financing vehicles and paying them over time. I'm sure it's not the best method but I'd much rather have access to $50k in cash and a car payment with 2% interest than no car payment and no cash.

That said, unsecured debt is pretty awful and interest rates are always high. Best to avoid that type, not that you had any just clarifying my position

The good Lord can always change things of course, but kids are not something we anticipate. They'd just ruin best laid plans   .

 

[PleaseBlitz]

Okay, so after some more in depth reading, it looks like what they are offering is as such:

 

 

If I take a HELOC out with a certain value, some lenders allow you to set aside a portion of the HELOC and assign that a fixed rate. So if you take our a HELOC for 100K but only want to use 40K, you can fix the rate on that 40K. Anything of the remaining 60K that you spend at a later date are calculated at whatever the new interest rate would be, but that original 40K purchase has its fixed, original rate. 

 

http://www.bankrate.com/finance/home-equity/heloc-with-fixed-rate-option.aspx

 

Something like this, I think.

 

Edit: Although it still doesn't seem viable for them to let me fix the rate as low as 2.65...

 

 

So, this is a pretty common program.  The devil is in the details, specifically, 1) how many tranches you can "fix" (meaning, if  you take out a $100k line in January, then you fix $40k of that in February, can you THEN fix an additional $40k in March?); and 2) what the variable rate translates to when you decide to fix a portion (i doubt they will give you the same fixed rate as the 2.65%, but if they WILL, then you should just use this program to refinance your whole ****ing loan at that rate if you meet the LTV requirements).

[CBass1724]

You need one of these in your backyard. 

 

[Vilandil Tasardur]

So, this is a pretty common program.  The devil is in the details, specifically, 1) how many tranches you can "fix" (meaning, if  you take out a $100k line in January, then you fix $40k of that in February, can you THEN fix an additional $40k in March?); and 2) what the variable rate translates to when you decide to fix a portion (i doubt they will give you the same fixed rate as the 2.65%, but if they WILL, then you should just use this program to refinance your whole ****ing loan at that rate if you meet the LTV requirements).

 

So I just spoke to them at the bank again. They assured me that, if I wanted to, I could fix the entire thing at 2.65% or that I could leave the rate variable. They said I could choose to fix as much (or as little) as I want anytime in the first ten years that I had the account. 

 

I am starting to strongly consider using this to "refinance" my mortgage. If I can transfer the remaining 75k of my mortgage to this line of credit and lock that rate in at 2.65% (as opposed to my current 4.75%), I would save some decent coin over the long haul.

[chipwhich]

I agree with Zoony on cars.  A friend of mine buys cars with cash and likes to brag about it.  To me, you can get cars for almost 0 interest rate, why give up your cash.

With regards to a HELOC, I think it's good to have in case of emergency.  I wouldn't look at it for any other option other than an emergency source of funds.

[PleaseBlitz]

So I just spoke to them at the bank again. They assured me that, if I wanted to, I could fix the entire thing at 2.65% or that I could leave the rate variable. They said I could choose to fix as much (or as little) as I want anytime in the first ten years that I had the account. 

 

I am starting to strongly consider using this to "refinance" my mortgage. If I can transfer the remaining 75k of my mortgage to this line of credit and lock that rate in at 2.65% (as opposed to my current 4.75%), I would save some decent coin over the long haul.

 

How many years are left on your mortgage?  And then, does the line have a "draw period" and a subsequent "repayment period"?  If so, is it 10 year draw period, 20 year repayment period?

 

Sorry to get down into the weeds, I literally analyze programs like these for a living.  I think the main thing you have to worry about is qualifying.  Meaning, your house is worth X and you already owe Y, and the difference is your equity.  HELOC are usually based on the equity, which may be an issue for qualifying. 

[Vilandil Tasardur]

How many years are left on your mortgage?  And then, does the line have a "draw period" and a subsequent "repayment period"?  If so, is it 10 year draw period, 20 year repayment period?

 

Sorry to get down into the weeds, I literally analyze programs like these for a living.  I think the main thing you have to worry about is qualifying.  Meaning, your house is worth X and you already owe Y, and the difference is your equity.  HELOC are usually based on the equity, which may be an issue for qualifying. 

 

No worries on getting in to the weeds. The weeds are where **** gets figured out.

 

By years, I would have like 27 years left on my mortgage, as in, I took a 30 year mortgage 3 years ago. By amortization schedule, I have about 15 years left on my mortgage, as in, I have reached the balance I was expected have hit at what would have been my "mid point" payment if I had only ever paid the minimum. 

 

I think you're right, I'm not sure I qualify for all I need. I think I would miss it by a small amount. I'll have to ask them and, if not, possibly check if the rates are still uber low in a couple of years. 

 

The line would have a draw and repayment period. She mentioned it would be a 10 year draw period. But I was careful to ask if there were any penalties for paying off early or such and she said no. She said I could pay off the balance at any time. The bank would pay all of the closing fees as long as I kept the line open for 3 years.

[Hersh]

Save money now before the kids come LOL

I'm no expert but I think do what worlds for you. There are a few simple rules of finance all of which start with time value of money. So great job saving at a young age.

Regarding interest, money is so unbelievably cheap right now and cash is so hard to save, I find myself financing vehicles and paying them over time. I'm sure it's not the best method but I'd much rather have access to $50k in cash and a car payment with 2% interest than no car payment and no cash.

That said, unsecured debt is pretty awful and interest rates are always high. Best to avoid that type, not that you had any just clarifying my position

 

 

This is personal preference from someone who is not "allergic to interest" and views debt as basically the same as any other financial tool:  I would never pay my mortgage down ahead of funding my retirement accounts.  Mortgage interest (for a first or second home, but not a vacation home) is tax deductible so, depending on your bracket, you are hurting yourself from a tax-management perspective.  

 

 

TL/DR:  Cash management is step one, tax management is next-level. 

 

What a timely topic with Trump talking about how he loves debt. Personally, while I'm not allergic to interest, I pretty much do everything I can to avoid it. I tend to think of it as what are the odds I can invest money in todays market to make more after taxes than the interest I would pay on a loan. If I'm not likely to make more investing, I am paying off debt as quickly as possible.

 

I want as many assets free and clear of debt as quickly as possible.

[PleaseBlitz]

With a HELOC, you could conceivable pay of the vast majority, but not all, of your current loan, lock it in at the lower rate, and just keep the very small portion of your current mortgage that you couldn't refinance due to LTV restraints.  

 

First thing i would do is run a payment calculator and see if this is even worth it to you for a $75k balance.  http://www.bankrate.com/calculators/mortgages/mortgage-calculator-v2

What a timely topic with Trump talking about how he loves debt. Personally, while I'm not allergic to interest, I pretty much do everything I can to avoid it. I tend to think of it as what are the odds I can invest money in todays market to make more after taxes than the interest I would pay on a loan. If I'm not likely to make more investing, I am paying off debt as quickly as possible.

 

I want as many assets free and clear of debt as quickly as possible.

 

Trump loves debt b/c he can declare bankruptcy and get rid of it without paying it.  This makes him both a savvy businessman and a scumbag.

 

I like (or, more accurately, don't mind) debt because every loan that i currently have is under 3.25% and all of my investments are making better than 5% and compounding.  Much of the loan interest is tax-advantaged.

[Hersh]

With a HELOC, you could conceivable pay of the vast majority, but not all, of your current loan, lock it in at the lower rate, and just keep the very small portion of your current mortgage that you couldn't refinance due to LTV restraints.  

 

First thing i would do is run a payment calculator and see if this is even worth it to you for a $75k balance.  http://www.bankrate.com/calculators/mortgages/mortgage-calculator-v2

 

Trump loves debt b/c he can declare bankruptcy and get rid of it without paying it.  This makes him both a savvy businessman and a scumbag.

 

I like (or, more accurately, don't mind) debt because every loan that i currently have is under 3.25% and all of my investments are making better than 5% and compounding.  Much of the loan interest is tax-advantaged.

 

and now you are going to share what your investments are...

[PleaseBlitz]

and now you are going to share what your investments are...

 

Ha, like I said above, I have a brother in the business that knows his ****.  I just give him money and  tell him to do his thing.

[techboy]

TL/DR: Where do rich people keep their money when they want it to be safe/grow some but not lock it away until retirement?

The truth is that rich people are often busy becoming/being rich and have more money than time (literally). They then get suckered by overpriced financial products that are meant to be sold, not bought. Fortunately, they can afford it, but the rich are probably the last people you should emulate.

The best answer depends on the term, amount, liquidity, and level of work you're interested in doing.

Under no circumstances should you pay someone 1.2% to manage it for you. That's highway robbery, especially in an era with lower expected returns going forward. The fact that's it's also possibly average just tells you how many people get fleeced by the financial industry.

If you want a higher return than you could get anywhere else, with really great liquidity and FDIC insurance, but some work, the best idea is to open two Netspend type accounts, which each pay 5% up to $5,000. https://www.fatwallet.com/forums/finance/1432026/

If you want easier, but still FDIC insured, go with longer term CDs. Often the rates on the 5 year products are better than shorter even if you break them, because the penalty is on the interest, generally.

If you want higher return with a little risk, a short term tax exempt bond fund could work, like VTEB. That might fluctuate a little, but it'll give you federal tax free dividends and the risk is minimal.

[Bonez3]

Does anyone think refinancing with a cashback for a slightly better rate a good idea. I'm bout 3.5 years into a 30 year mortgage and can get better rates, slightly, at ~3.85%. I would probably receive some cash as well to do some home projects. Could probably pay extra for next few years to help shorten new 30 year.

 

Any thoughts? Downsides? Upsides?

[chipwhich]

Does anyone think refinancing with a cashback for a slightly better rate a good idea. I'm bout 3.5 years into a 30 year mortgage and can get better rates, slightly, at ~3.85%. I would probably receive some cash as well to do some home projects. Could probably pay extra for next few years to help shorten new 30 year.

 

Any thoughts? Downsides? Upsides?

 

The downside is you never payoff your mortgage.  This has been the American way for the last 20-25 years?  Buy house, refinance house, take cash out.  Refinance again, cash out, refinance again, cash out.  Then housing prices fluctuate and you owe more than the house.  You are cashing out for a project and paying it back with interest for 30 years?  What's the downside? 

 

[skinfan2k]

can you refinance and reduce the number of years??? 

[PleaseBlitz]

Does anyone think refinancing with a cashback for a slightly better rate a good idea. I'm bout 3.5 years into a 30 year mortgage and can get better rates, slightly, at ~3.85%. I would probably receive some cash as well to do some home projects. Could probably pay extra for next few years to help shorten new 30 year.

 

Any thoughts? Downsides? Upsides?

 

Depends on the closing costs.  The math essentially is to divide the closing costs [for example, $10,000] by the amount you save per month [for example, $250].  The answer [in this example 40] is the number of months it will take you break even.  After that, the $250 is your monthly gain.  So if you think you are going to be in the house for another 4 years or more, it makes sense [in this example, and purely in a financial sense].  Money is not getting any cheaper for a long time.  Also, and way too many people do this, is they just look at the dollars and cents of the financial transaction.  When I was an evil LO, I always advised people to remember that they have to live there too.  So if you NEED or REALLY WANT to do a project, and you need money to do that project, a home-secured loan is probably the cheapest way to get that money.  

 

 

can you refinance and reduce the number of years??? 

 

 

Yes, but I probably doesn't make sense for most people.  Your payment probably goes way up.  The amount of interest you pay over the life of the loan will go way down.  Again, interest on your home is tax deductible, so keep that in mind.  There is a reason most people get a 30 year mortgage.

[Bonez3]

The downside is you never payoff your mortgage.  This has been the American way for the last 20-25 years?  Buy house, refinance house, take cash out.  Refinance again, cash out, refinance again, cash out.  Then housing prices fluctuate and you owe more than the house.  You are cashing out for a project and paying it back with interest for 30 years?  What's the downside? 

 

 

Yea... Good location, built new & custom in 2012 and still estimates well over anticipated loan. So, even with another housing crash, I'd like to think its a break even at worse. 

 

With that, any other downside? Like I said, can escalate payments over next few years with new rates and 'catch up'. 

[chipwhich]

Your payment probably goes way up.  The amount of interest you pay over the life of the loan will go way down.  Again, interest on your home is tax deductible, so keep that in mind.  There is a reason most people get a 30 year mortgage.

 

People get 30 year mortgages because they couldn't afford a house otherwise.  The tax break doesn't offset the interest costs you accrue over time.

 

Borrowing $1,000 $5,000 $10,000 on a refinance and paying interest on it for 30 years isn't worth the tax break either.

With that, any other downside? Like I said, can escalate a payments over next few years with new rates and 'catch up'. 

 

Just what I posted above.  If you wanted to buy a hot tub (making something up) and you needed $5,000.  So you refi and take that $5,000 out.

Now amortize that over 30 years with interest and tax break?  It's not a good deal.

[PleaseBlitz]

People get 30 year mortgages because they couldn't afford a house otherwise.  The tax break doesn't offset the interest costs you accrue over time.

 

Yes, that was exactly my point (if you missed it).  Anyone COULD get a 15 year mortgage.  Very few people do because they can't afford the monthly payment.  IN ADDITION, there are tax implications.

 

 

 

Borrowing $1,000 $5,000 $10,000 on a refinance and paying interest on it for 30 years isn't worth the tax break either.

 

No, but it might be worth it for whatever project he plans on doing and can't pay for in cash up front (hopefully, mancave with whiskey cellar).  IN ADDITION, there are tax implications.

[Bonez3]

People get 30 year mortgages because they couldn't afford a house otherwise.  The tax break doesn't offset the interest costs you accrue over time.

 

Borrowing $1,000 $5,000 $10,000 on a refinance and paying interest on it for 30 years isn't worth the tax break either.

 

Just what I posted above.  If you wanted to buy a hot tub (making something up) and you needed $5,000.  So you refi and take that $5,000 out.

Now amortize that over 30 years with interest and tax break?  It's not a good deal.

 

Yea... But if I accelerate payments and get that money at 3.85% I'm ok. And based on PB's post, my 'number' where I'll be breaking even is well past how long I plan to be where I'm at. 

[Vilandil Tasardur]

Are you looking to refinance because you want to do the project, or because you want the lower rate? If you want to do the project, I would save for it (you seem to indicate that paying extra is an option, so presumably saving is as well). If you want to refinance for the lower rate, I'd look to do so without adding years, though you aren't far enough in for that to seem like a good option.

[chipwhich]

Yea... But if I accelerate payments and get that money at 3.85% I'm ok. And based on PB's post, my 'number' where I'll be breaking even is well past how long I plan to be where I'm at. 

 

LOL Accelerate it into your next house you buy and perpetuate the loan for life?  The refi question is separate from the refi and also borrow money question.  His calculation is assuming you don't borrow.

It's not a smart financial decision, but if it satisfies what you want to do, that's your prerogative.