Monday, June 27, 2016

Mortgage Update for June 2016

Another $1,200 contribution to the principle of my mortgage for a total of $32,099.  1 year 10 months to go.  It is great to have this break from thinking about my nephew's school progress, but, with the extra room in my brain, I have started thinking about how I can speed up my plan.  Nothing has worked out so far.  When I have to consider another person in my plans, it is best to just continue as I am doing.

Here are some of the things I thought:

Get a cash-out refinance because my current interest rate is 4.5% and the 15 year interest rate is 2.8%.  Take out $20K, fix up the kitchen and master bath in my house and be ready to sell (or rent it out) as soon as he leaves for college next year.

Or, the super-fast forward version:  Take out $50K, pay back my mother for the barn-shed, fix up the house to sell, finish off the barn-shed interior.  Everything finished by the time he goes to college.

But, from what I read, cash-out refinances are not a good choice because of the high closing costs.  Home equity lines of credit are a better choice because there are no closing costs.

Ok, so a home equity line of credit would work for the kitchen and bath remodel.  But then I went out to the property to get the mail and check on the cat food/water.  In the mail was a big packet for BACK TO SCHOOL.  Medical forms, open house, meetings, deadlines, fundraisers, senior, choir and youth group activities, yearbooks, cap and gowns, HOMEWORK!  My brain suddenly froze up and those lofty ideas of doing remodeling while having a full time job and parenting a senior in high school flew away.  I should stick to my plan of paying off my mortgage and downsizing until he is 18 years old and securely planted in college.  One more year and then I can revisit my options for accelerating semi-retirement.   We can do this!


Dave said...

My advice - divide and conquer, Daizy. Not counting the "We can do this!" comment, the last 2 sentences in your post should be your plan.

About your current mortgage, you are aware that at the end of your loan you are paying mostly principal and relatively low interest, so the interest rate doesn't matter much. I went through this when I paid off a lot of my mortgage back in the 1990s and interest rates were rising (I had a 1-year ARM), The rising rates mattered very little compared to early in the loan when I was paying mostly interest (which is why refinancing saved me $200 a month for a few years).

Daizy said...

Yes, but with a cash out refinance I would have a large mortgage again and get the 2.8% interest rate. Tempting but no.

George said...

I think you would lean towards the payoff plan as scheduled. The refinance "cash" for improvements, in actuality, sometimes goes towards more lavish things like vacations, luxury things, fur coats, and before you know it, you have the debt without the remodel completed. Not saying this is you, but, it could happen. If it would be a refinance for a rental, you could get the money "tax free"; no sale, no tax, but on a personal home, no tax would be due anyway.

Best of luck, and stay in the shade; it's hot!

Also, off topic, I have been trying to go to a Naugles place in Fountain Valley, but they are only open certain business hours; do you remember that food place back in the 80's?

George(Orange County California)

Daizy said...

I have enough "live" fur coats for now. Lol. I do spend a lot of money on them. I could build them a wading pool like Cesar Milan's.
I don't remember Naugles. My parents preferred Tasty Freeze and McDonalds on the rare occasion we ate out. I did get a Del Taco bean burrito once when I went to work with my dad. I read the Naugles info on Wikipedia. What a fascinating story! I hope you can find it open sometime. Sounds like following his blog and Facebook page will help.