The "Let's Talk Money" Thread

[techboy]

The other thing to consider is that a lot of people overestimate the tax benefit because they compare the deduction to zero when they really only get the marginal benefit of whatever the deduction puts them over the standard deduction, which they could get for literally doing nothing. A lot of people don't have other deductions equal to or greater than the standard deduction, so much of the deduction of a mortgage is worthless.

[Bonez3]

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.

 

 

I just don't see how getting a lower rate with accelerated payments to 'catch up' to the schedule of original mortgage is a loss in any way regardless of duration of note.

 

If original mortgage rate was X and new mortgage rate is Y and time between X & Y is marginal, why not skim the till? I can't calculate it at the moment, but it seems like you can accelerate payments to be back on schedule and be at rate 'Y' for 20 or so years vs rate 'x'.

 

This is under the presumption you payoff mortgage at same time frame. Correct me if I'm wrong. 

[techboy]

By the way, for the "5% FDIC insured but some work" option, there are now quite a few products:

https://www.fatwallet.com/forums/finance/1434408/

You're not going to beat 5% risk free. Just depends on how much hassle you're willing to put up with.

[chipwhich]

I just don't see how getting a lower rate with accelerated payments to 'catch up' to the schedule of original mortgage is a loss in any way regardless of duration of note.

 

If original mortgage rate was X and new mortgage rate is Y and time between X & Y is marginal, why not skim the till? I can't calculate it at the moment, but it seems like you can accelerate payments to be back on schedule and be at rate 'Y' for 20 or so years vs rate 'x'.

 

This is under the presumption you payoff mortgage at same time frame. Correct me if I'm wrong. 

 

First off you didn't provide enough information to understand the entire picture so nobody could give you a real world scenario.  One would need to know your current mortgage owed, your current payment, your current interest rate, your new interest rate, and how much you want to "skim off the top" for your "project".

 

Additionally you aren't "skimming" you are borrowing from a bank for 30 years, or if you pay it off early and don't refinance or buy another home.

 

You are wrong because you don't have any information to make a decision.

When you refinance it costs you a loan application fee ($100-$300), possibly a loan origination fee (0-1%), an appraisal fee $300, an inspection fee $300, Attorney fee $500-$1000, Title insurance $700, Survey fee $400, then whatever you are "skimming" to do your project.  Just the refi will cost you lets say $3,000 then pretend your project is $7,000.  So refi costs you $10,000.

 

So the question is how much your old payment - your new payment saves ( lets pretend it's $200 a month).  So it would take 4.5 years to make the refi a break even proposition.  But I am being generous in your savings.  I suspect it will take longer.

But you didn't provide enough info.

Plus the odds of you "catching up" aren't typical.  But you can't even discuss because we would need to know how much extra you intend to pay (out of the savings you make from refi).

 

Long story short, most Americans "skim the til" but never catch up.

[Bonez3]

First off you didn't provide enough information to understand the entire picture so nobody could give you a real world scenario.  One would need to know your current mortgage owed, your current payment, your current interest rate, your new interest rate, and how much you want to "skim off the top" for your "project".

 

Additionally you aren't "skimming" you are borrowing from a bank for 30 years, or if you pay it off early and don't refinance or buy another home.

 

You are wrong because you don't have any information to make a decision.

When you refinance it costs you a loan application fee ($100-$300), possibly a loan origination fee (0-1%), an appraisal fee $300, an inspection fee $300, Attorney fee $500-$1000, Title insurance $700, Survey fee $400, then whatever you are "skimming" to do your project.  Just the refi will cost you lets say $3,000 then pretend your project is $7,000.  So refi costs you $10,000.

 

So the question is how much your old payment - your new payment saves ( lets pretend it's $200 a month).  So it would take 4.5 years to make the refi a break even proposition.  But I am being generous in your savings.  I suspect it will take longer.

But you didn't provide enough info.

Plus the odds of you "catching up" aren't typical.  But you can't even discuss because we would need to know how much extra you intend to pay (out of the savings you make from refi).

 

Long story short, most Americans "skim the til" but never catch up.

 

I get it, I'm being rather vague, but I definitely appreciate the feedback. I have actually estimated closing costs, etc. Just wanted some feelers on the feedback and you in particular have been very helpful. I do appreciate it and I follow you in trade thread and respect your opinion. I can crunch the numbers myself and just wanted to throw it out there as it's something I've been considering. 

 

I would almost take it to another level and roll it into some of the 5% options listed here already, but I think I've had enough fun for tonight

[TheGoodBits]

My wife and I are selling our NoVA house and leaving the DC area. As a result we'll have a decent pile of cash to sit on. I'll be the only source of income once we move, so keeping in mind that the money has to be relatively accessible in case of emergency (I lose my job for example), what are my best options for investing it to get a decent return so it's not just sitting in our checking account?

[techboy]

My wife and I are selling our NoVA house and leaving the DC area. As a result we'll have a decent pile of cash to sit on. I'll be the only source of income once we move, so keeping in mind that the money has to be relatively accessible in case of emergency (I lose my job for example), what are my best options for investing it to get a decent return so it's not just sitting in our checking account?

It really depends on how much is a "pile" and how secure your job is.

For a base emergency fund, most people recommend somewhere between 3 months to a year of salary. That's usually kept in something liquid and safe.

You should have at least some of that in checking (or have high enough limits on your credit cards, or better, both), so you can pay immediately for things you need.

Beyond that, you could get several of the netspend style 5% accounts, or an online high yield savings (currently the best are around 1.25%), or CDs, or again, you could go with a short term tax exempt bond fund if you're willing to take a little bit of risk.

If you still have money left over after all of that, and want to take some risk in exchange for more expected return, you can just invest it normally using broadly diversified, very low cost passive mutual funds, and just sell some of it if you need it (which will take a few days, so you still need the liquid amounts from before). You need to watch out for taxes when investing in taxable, of course.

If I were going to go the last route, I'd actually try to do it in a Roth IRA, because it's something you probably won't need (it'd be beyond the normal 3 to 12 month funds), and if it is needed, you can withdraw contributions from a Roth penalty free at any time (just not any gains).

[TheGoodBits]

It really depends on how much is a "pile" and how secure your job is.

For a base emergency fund, most people recommend somewhere between 3 months to a year of salary. That's usually kept in something liquid and safe.

You should have at least some of that in checking (or have high enough limits on your credit cards, or better, both), so you can pay immediately for things you need.

Beyond that, you could get several of the netspend style 5% accounts, or an online high yield savings (currently the best are around 1.25%), or CDs, or again, you could go with a short term tax exempt bond fund if you're willing to take a little bit of risk.

If you still have money left over after all of that, and want to take some risk in exchange for more expected return, you can just invest it normally using broadly diversified, very low cost passive mutual funds, and just sell some of it if you need it (which will take a few days, so you still need the liquid amounts from before). You need to watch out for taxes when investing in taxable, of course.

If I were going to go the last route, I'd actually try to do it in a Roth IRA, because it's something you probably won't need (it'd be beyond the normal 3 to 12 month funds), and if it is needed, you can withdraw contributions from a Roth penalty free at any time (just not any gains).

Thanks. I think we probably will end up with 6 months or so of expenses in a savings account and the rest in a Roth IRA mutual fund. My job is pretty secure for the foreseeable future but I do work (in sales) for a pre-IPO startup, so there is always the risk of being acquired and having my work situation change.

[chipwhich]

Not sure I would ever put a nickel in a netspend account or any of those other "credit card" offers.  That to me is like dipping your toe into the black market.  My daughter got one of those cards.  They are giant scams for people who don't have credit, their help desk is sketchy, and access to the money on the card was at times unacceptable.

 

I am sure with a little "work" you might be able to get the 5%.  To me it's like investing in the black market.

[Forehead]

I did a re-fi once.  No real reason other than a lower interest rate.  I was five years into a 30 year fixed rate mortgage on an underwater home, but thanks to whatever that program was that Obama came up with (HARP maybe?) I was still able to do so without bringing money to the table.  Rates had dropped enough that it made sense, we went from 6.25% to 4.5%.

 

It worked out.  The mortgage reset to 30 years, but it did lower our monthly payment by more than $100 a month, and we had planned on moving a few years later and holding onto the place to rent, which is what we do now.  Thanks to the refi, the renter pays for that mortgage.

[techboy]

I am sure with a little "work" you might be able to get the 5%.  To me it's like investing in the black market.

It's FDIC insured.

[chipwhich]

It's FDIC insured.

 

I am strictly speaking of dealing with their customer service.  Shady is an understatement.  My daughter had a pre loaded NetSpend debit card.  It was like delving into the underworld.  I finally told my daughter to give it back to her BF.  I didn't want her in it.  She had trouble activating it, they were obviously oversees help desk, would ask her for her SSN.  She kept trying to use it but they always said something was wrong and couldn't activate it.

 

FDIC insured or not, it's like putting your money in the black market.  I wouldn't touch that headache with a ten foot pole.  You don't have to believe me, plenty of reviews online.  One giant headache.  I wonder how I get the FDIC to get them to activate my card LOL.

 

Anyways, I wouldn't throw a new investor into that mess.

 

[zoony]

I am strictly speaking of dealing with their customer service. Shady is an understatement. My daughter had a pre loaded NetSpend debit card. It was like delving into the underworld. I finally told my daughter to give it back to her BF. I didn't want her in it. She had trouble activating it, they were obviously oversees help desk, would ask her for her SSN. She kept trying to use it but they always said something was wrong and couldn't activate it.

FDIC insured or not, it's like putting your money in the black market. I wouldn't touch that headache with a ten foot pole. You don't have to believe me, plenty of reviews online. One giant headache. I wonder how I get the FDIC to get them to activate my card LOL.

Anyways, I wouldn't throw a new investor into that mess.

Relationships matter. Trust matters. All of this Internet gaming of interest rates etc. is definitely not for me.

In my personal experience people never truly get ahead that way. I've never seen it

[techboy]

One giant headache.

I did note it could be a hassle. To be fair, I haven't tried it myself, but I know a lot of people have successfully. It's just a question of how much effort one wants to put into it.

It has to be that way, of course. Nobody's going to offer 5% risk free and make it easy, and if they did, they'd get hammered out of existence.

In this case, these products are loss leaders that are intended to draw the traditionally unbanked, so they're not really meant to be used as savings. The idea is that someone that doesn't have a checking account will use it as one, getting direct deposits from work, and spending with the debit card. The careful can use it as a 5% bank account, though.

Again, it all comes down to how much work one wants to do for an extra 4% or so (most high yield bank accounts pay about 1% currently.)

I'm not necessarily recommending it, just throwing it out there as an option with links to explain the rules and highlight people's experiences.

[chipwhich]

I did note it could be a hassle. To be fair, I haven't tried it myself, but I know a lot of people have successfully. It's just a question of how much effort one wants to put into it.

I'm not necessarily recommending it, just throwing it out there as an option with links to explain the rules and highlight people's experiences.

 

I would be shocked if you could ever earn anything on the card.  There are a lot of rules with it about use, and fees for not using, etc.  I think Zoony said it best, it's internet gaming of interest rates.  After my experience, I would be worried about even getting my original deposit back.

[techboy]

I would be shocked if you could ever earn anything on the card.

All I can tell you is that there are a large number of people on several of the other message boards I frequent that have been using these successfully for quite some time. Many have three or four so they can have more invested that way.

[PleaseBlitz]

Well if strangers on the internet do it, sign me up!

[techboy]

Well if strangers on the internet do it, sign me up!

Yeah, yeah.

I just want it noted for the record that the initial request was for a relatively safe investment that pays more than just sitting in the bank.

In this low interest environment, that's not as easily done as typed.

Ordinarily, I wouldn't have brought it up, but it's one of the ways to do it.

[PleaseBlitz]

Just ****ing with you TB.  For the record, I keep my spare money in mexican drug cartel futures.

[techboy]

Just ****ing with you TB.  For the record, I keep my spare money in mexican drug cartel futures.

 

Not bad. Just make sure you diversify properly. There's no compensation for single drug lord risk. I'd recommend a low cost, passively managed fund that tracks the DEA's drug cartel 100 index.

[Springfield]

So, this is a nice conversation between people of knowledge.

Here's my question:

Do any of you think we are heading into another housing bubble? Why/why not?

[zoony]

So, this is a nice conversation between people of knowledge.

Here's my question:

Do any of you think we are heading into another housing bubble? Why/why not?

There are millions of buyers who can't get loans. Inventories are awful. Lending restrictions have swung too far the other way

So, no. However, for regional bubbles, all bets are off

[PleaseBlitz]

So, this is a nice conversation between people of knowledge.

Here's my question:

Do any of you think we are heading into another housing bubble? Why/why not?

 

Ultimately this is a question of time frame.  Yes, there will be another housing bubble at some point.  Is it in 10 years?  I doubt it.  20?  Maybe.  It just gets more and more likely as your time frame lengthens.  When it does happen, it almost certainly won't be as bad as the last one because a lot of the demand has been taken out of the market (i.e., no doc loans, which aren't legal anymore).  Of course, a lot can change, including the law, over a decade or several.   

Lending restrictions have swung too far the other way

 

 

Disagree.  The law right now just says that "lenders must make a reasonable and good-faith determination that a borrower has the ability to repay a loan."  (See link i posted above). I don't really think that is too high a bar.

[Jumbo]

I'm lousy on financial matters and can only wish I was more like techboy---my hero in this area (he slew the dragon McD5). I invested heavily for years, but mainly in cocaine and hookers and now drive the same car as Alfred Morris. I tell people I'm just eclectic, but really I'm broke.

[Corcaigh]

I invested heavily for years, but mainly in cocaine and hookers and now drive the same car as Alfred Morris. 

 

George Best once said ... "I spent half my money on booze, women and fast cars. The other half I squandered."