I already tried to educate this guy once about money and interest and he just doesn't get it. He keeps quoting over and over about how much interest he will have to pay on a loan and just completely refuses to realize that same money he is pouring into the loan to get it paid off sooner would pay him back more than he is paying out.

When confronted with that, he goes and invents all sorts of crazy stories and anecdotes about why he wants to do it his way.

Extreme levels of cognitive dissonance.

1/11/2009 5:46:17 PM

You guys are totally right, the numbers tend to favor investing the rest of the money. However, Im tryingi to get debt free. And paying off my house sooner not only saves me a ton in interest, builds up my equity quicker, but frees us more capital sooner(not having a payment).

By reducing my debt I can lower my risks. Ive had friend who took out 100% loans on thier house and now cant refi to a lower rate bc they owe too much on thier house. I have enough equity built up now that I could sell it for less than I paid and not have to worry about the hassle of short sales or additonal loans.

Its just my goals to try to get completely out of debt.

nattr, as soon as I ask you for money then Ill accept your advice or cirticism.

1/11/2009 6:28:41 PM

Whatever you say Dave Ramsey.

1/11/2009 7:37:02 PM

The ignorance is overwhelming

1/11/2009 7:57:22 PM

I never said get a 0 down interest only loan. Just don't rush to put every free penny into your house. I'm going to put a lot in the market this year. We'll see who comes out ahead.

1/11/2009 7:58:39 PM

(I was calling the other guy ignorant..in case that was to me)

1/11/2009 8:03:01 PM

Nah, I was also too lazy to put arrows.

1/11/2009 8:03:43 PM

Quote :

"You guys are totally right, the numbers tend to favor investing the rest of the money. However, Im tryingi to get debt free. And paying off my house sooner not only saves me a ton in interest, builds up my equity quicker, but frees us more capital sooner(not having a payment). By reducing my debt I can lower my risks. Ive had friend who took out 100% loans on thier house and now cant refi to a lower rate bc they owe too much on thier house. I have enough equity built up now that I could sell it for less than I paid and not have to worry about the hassle of short sales or additonal loans. "

The second paragraph (actually, only the risk part) is a valid, though slightly paranoid, reason to pay down a mortgage early. The first paragraph is nonsense, because of the opportunity costs others mentioned. If you're wired such that you need the security of debt-free finances to sleep at night, then fine. But don't pretend your bottom line will be better because of that security.

1/11/2009 8:08:00 PM

I love dave ramsey David, how could you tell.

Geez whats the problem fellas. I asked if anyone knew the rate for the 15 and 20 yrs bc that is what my plan is. If yours is different fine, im not telling anyone else how to live here I was just answering a guys question.

Ive already said if you play the numbers you are exactly correct, it is the best thing to do to put the money in teh market, but many dont have the discipline to take the extra money and put in all in savings vs. spending it. I know how I am with money and would prefer not to have the stress of a lot of debt in my life, so Im working towards that. I still make monthy payments into my retirement accounts.

The one thing any of us know for sure is that you will save a TON of money in interest by paying down your mortgage sooner. But the trends do favor you doing much better returns on your money with the market, but I dont view my house as an investment, I view it as a purchase.

To each his own, I havent insulted anyone in this thread and respect YOUR personal decisions.

1/11/2009 10:47:55 PM

Quote :

"I love dave ramsey David, how could you tell."

Because you sound like the kind of guy who would pay off a loan ahead of time even if it was at 0%.

1/12/2009 10:34:11 AM

I don't see a huge problem with wanting to pay off a house as fast as possible, especially if you plan on staying there for the long haul. You can't really put a price on the psychological effect of knowing that you own your house outright and being debt free.

Financially it may not be the best possible move, nor what I would do, but it's certainly a better move than what the average American will do with spare cash.

To answer the original question, check the link i posted last week. It has 15 and 20 year mortgage rates as well. They're slightly up from last week though, although other lenders might have better deals.

1/12/2009 10:42:34 AM

Yeah, just don't end up like one of those 50 ish year olds who have their houses paid off but not a dime saved for retirement.

1/12/2009 10:45:26 AM

Thanks bobby.

David, no worries I already said I do monthly withdrawls towards retirement. I plan on doing more once my wife gets out of school. The thing you have to worry about is me buying some stock or mutual funds you own... They will be worthless in 6 months time, going by my past track record... Consider that a warning.

[Edited on January 12, 2009 at 10:53 AM. Reason : .]

1/12/2009 10:51:53 AM

Buy some more funds so I can pick them up in 6 months.

1/12/2009 11:17:41 AM

^^Why can't you do a 30yr fixed (potentially at a lower %) and then just pay extra as you have it? That allows for much more flexibility especially if you were to lose your job or get injured. An $800 payment is much easier to pay then a $1500 one if something happens.

[Edited on January 12, 2009 at 11:19 AM. Reason : .]

1/12/2009 11:18:47 AM

Quote :

"Why can't you do a 30yr fixed (potentially at a lower %) and then just pay extra as you have it? That allows for much more flexibility especially if you were to lose your job or get injured. An $800 payment is much easier to pay then a $1500 one if something happens."

That's what I was thinking. There's no reason not to do it this way, especially since the 15/20 yr rates aren't that much better.

1/12/2009 11:22:20 AM

Yeah, maybe 1/4 of a point lower at most.

1/12/2009 11:40:53 AM

smooth, I already have a 30 yr fixed rate. With the rates at what they are i can go into a 20 yr loan and roll in closing costs into the new loan and keep the same payments, thus knocking off 7 years of interest and payments.

You are right about not saving that much on the rate, but you will save a lot in interest and build equity a tad bit quicker. Its a great thought of paying a 30yr loan like a 15 or 20, but the thing about a 20 yr loan is its always paid off in 20 yrs. I have an emergency fund in the event I lose my job, and I can sell the house too if that should happen.

1/12/2009 12:33:09 PM

The way I see it, this financial crisis is likely going to result in rates that will be the lowest in our lifetime, particularly once the pain of fixing our broken financial system and American debt continues to skyrocket. I for one believe we'll never ever again see rates this low.

Given that wouldn't it make most sense to lock in a historic low rate for the longest possible term to maximize the leverage provided by a rate we'll never see again?

1/12/2009 12:43:51 PM

personal preferences aside, YES.

1/12/2009 12:45:57 PM

I plan to buy a house in nearly exactly a year (very early 2010..jan/feb time frame)..I guess I'll post in here more closer to that time. But :

Quote :

"Why can't you do a 30yr fixed (potentially at a lower %) and then just pay extra as you have it? That allows for much more flexibility especially if you were to lose your job or get injured. An $800 payment is much easier to pay then a $1500 one if something happens."

is pretty much the stance I have taken on this so far.

1/12/2009 12:51:43 PM

^^^^ I too currently have a 30yr fixed, been living there for 1.5 yrs, but I have paid the equivalent of 5years off already. I plan on getting another 30yr at a lower rate with NO CLOSING costs. I am smart enough to pay the bank money when I have money to spare, I'm a big boy, I don't need them to tell me how much to pay each month, I can have it paid off on my terms in 15years if its convienient.

By the way, there is no way you can know what your financial status is for the next 15-20yrs, so thinking that you should plan it all out now is unrealistic.

If you have extra money laying around now why not apply that to the principal now... that would save you tons of interest, or you could sign up for a math course or two.

[Edited on January 12, 2009 at 1:39 PM. Reason : .]

1/12/2009 1:35:21 PM

Quote :

"smooth, I already have a 30 yr fixed rate. With the rates at what they are i can go into a 20 yr loan and roll in closing costs into the new loan and keep the same payments, thus knocking off 7 years of interest and payments."

You can also knock off a few years simply by paying on a bi-weekly basis instead of a monthly basis. Ask your mortgage company for details.

1/12/2009 1:40:23 PM

smooth you will either pay closing costs or they will charge you a higher rate, unless you mistaked closing costs with points and origination.

You are right smooth, you are doing very well. But the only thing you can know for sure is that a 20 yr loan will save you a lot in interest over a 30 yr loan. Sure you can pay extra but that is a variable.

For me, switching to a 20 is a no brainer for my situation. I basically have the same payment, get a lower rate, and shave 7 yrs off my loan.

Biggun, ive already looked into it. Once my wife gets out of school im def going to do it. Right now her expenses are a little unpredictible. But thanks for the suggestion.

[Edited on January 12, 2009 at 1:42 PM. Reason : .]

1/12/2009 1:41:41 PM

Quote :

"If you have extra money laying around now why not apply that to the principal now... that would save you tons of interest, or you could sign up for a math course or two. "

...because of the opportunity cost associated with paying down a loan at 5% when you could be making 10% on that money.

...which you could then use for your own math course or two.

1/12/2009 1:45:08 PM

^^ I did not mistake any sorts of costs. The rates are so low right now that in order to keep "good borrowers" (currently using Wells Fargo) they have to offer to lower your rate for free or you will simply go somewhere else. I've talked to several banks so this isn't an isolated thing.

I wasn't trying to brag about my situation, just trying to establish some credibility so maybe you read and think about a post before dismissing it b/c you think the 20yr is the best thing for you.

If you were to take a 30yr fixed, and pay the same monthly amount as your 20yr/15yr fixed you would save more on interest and build equity faster. Really the only thing you need to be looking at is how much interest you are paying the bank each month. On a 30yr you would likely be paying less interest from the start, and if you paid the extra each month the amount of interest you would save would only increase, in fact you would likely finish paying off the loan before 15years.

Quote :

"You can also knock off a few years simply by paying on a bi-weekly basis instead of a monthly basis. Ask your mortgage company for details. "

Also a good point.

[Edited on January 12, 2009 at 1:52 PM. Reason : .]

1/12/2009 1:52:07 PM

Quote :

"...because of the opportunity cost associated with paying down a loan at 5% when you could be making 10% on that money. ...which you could then use for your own math course or two."

He already made excuses for why to ignore the oppotunity cost.

Where can I make a guaranteed 10% return on my investments?

1/12/2009 1:58:11 PM

I definitely agree with the math that says you can beat your interest rate and somewhat with people talking about doing stuff like that with their car loans and stuff too...but at some point it just becomes more stuff to keep track of than I really want to.

I feel that I am fairly responsible with my money. 20% of my after tax money each month is set aside in savings, and 20% of my salary is in retirement funds (mainly 401k right now but I am looking at notching the 401k down and maxing out a Roth IRA). So its not like I have a problem setting money aside, I just am not fully comfortable with the idea of pumping money into the market to try and beat my interest rate with returns if I can pay something early. Maybe that will change once I get married and we start to look at stuff together, but right now I would rather pay something off early like a house or car than invest the money. /shrug

[Edited on January 12, 2009 at 2:08 PM. Reason : ]

1/12/2009 2:07:36 PM

Quote :

"I plan on getting another 30yr at a lower rate with NO CLOSING costs. "

Let me know when you actually find a place that will do this.

1/12/2009 2:11:39 PM

I have to agree with others about this. I would refinance at a lower rate but a 30yr fixed versus 20yr. Just like everyone has stated it's easier to pay over your current payment, when you can, to bring down principal and pay it off faster but when times get rough or you would like to save up some spending cash for a trip, or other expense you could. Without having to shift money around or get strapped.

Another reason that I am not sure anyone noted was that having interest on a home is a great tax right off. If you pay off the house faster you can't benefit from the tax advantages you get from owning your own home. Granted it might be off balance in the beginning but in the long run it would be really helpful if you own stocks, or other income generating assets to offset deductions. I'm no expert by any means but these are some thigns I've learned over the years.

1/12/2009 2:16:57 PM

Keeping a mortgage simply for the tax advantage is pretty poor management of your money, imo.

Calledtoarms, you seem to be doing a great job saving. I take my hat off to you. I max out my 401k match with my employer, max out my roth, and put some into a mutual fund each month. Im having no problem paying my current mortgage, so why not keep the same payment just knock off 7 years of payments. I dont pay extra on my first mortgage bc I when we bought hte house I put down 10%, and took a 80% 1st and 10% second loan bc our investments were doing well. I will have my second mortgage(where my extra cash is going currently) paid off in a couple months. It seems like a no brainer to refi now.

1/12/2009 2:30:48 PM

Quote :

" "I plan on getting another 30yr at a lower rate with NO CLOSING costs. " Let me know when you actually find a place that will do this. "

It's not like I specifically mentioned an example in my post.
But here you go lazy ass:
https://www.wellsfargo.com/mortgage/refinance/loans/descriptions/costsaver

[Edited on January 12, 2009 at 2:42 PM. Reason : .]

1/12/2009 2:42:01 PM

http://thetop10reasons.com/the-top-10-reasons-no-closing-costs-mortgages-are-a-myth

good read on "no closing costs" myth

1/12/2009 2:45:51 PM

^^^

Quote :

" Im having no problem paying my current mortgage, so why not keep the same payment just knock off 7 years of payments."

We've told you why not, so stop asking.

I too am giving up on educating you, you've clearly made up your mind.

[Edited on January 12, 2009 at 3:15 PM. Reason : .]

1/12/2009 2:46:40 PM

Quote :

" Recommeded for: * Homeowners with little equity * Borrowers with high debt ratios"

They are going to fuck you on the rate, aren't they?

1/12/2009 3:03:48 PM

Quote :

"Where can I make a guaranteed 10% return on my investments?"

You don't have to make 10% to beat your interest payment.

With 5% interest, you only have to have a return of ~3.5% to make more than you're paying in interest when you take into account that the interest is tax deductible (assuming a 30% tax bracket)

that's more than doable.

1/12/2009 3:07:48 PM

^^ Currently have a 6.625 they offered 5.75 a month ago when rates were around 5.25 . I'm sure they can improve that % now, if I can ever get through to a person when I call.

I know that there are better rates etc, but not knowing what I will be doing or where I will be living 3+ years from now I need something with a quicker return. That said I'll probably end up going with Coastal Fed Credit @ 4.875 which will cost around 2.5k (unless WF can do 5.25 with no closing).

[Edited on January 12, 2009 at 3:11 PM. Reason : .]

1/12/2009 3:10:25 PM

If you are deadset on paying the loan off as early as possible, I personally think its a no brainer to take the longer loan 30 vs. 20 if the difference in rates is negligible.

1. Get Quote for monthly payment on 20 year loan
2. Get Monthly Quote on 30 year loan
3. Accept 30 year loan
4. Pay amount from Step one in times of prosperity
5. Have ability to pay the lower amount from step 2 when shit hits the fan
6. ...I won't go so far as to say Profit, since you already admit you could make more money in investments

1/12/2009 3:41:30 PM

Quote :

"I personally think its a no brainer to take the longer loan 30 vs. 20 if the difference in rates is negligible."

Apparently, this guy has less than a brain. I agree with you though, if you're dead set on paying it off earlier, it makes vastly more sense to just take the 30 and pay it off ahead of time. For someone who seems to operate on "peace of mind" rather than math and logic, being committed to a lower monthly payment should be a rather sound peace of mind.

Quote :

"but many dont have the discipline to take the extra money and put in all in savings vs. spending it. I know how I am with money and would prefer not to have the stress of a lot of debt in my life, so Im working towards that."

You said all the same horseshit the last time we had this discussion. You pointed out that "many people" have problems not saving their free cash when we aren't talking about many people.

1/12/2009 4:23:54 PM

Not home related but I thought I'd throw this out....

If anyone is interested in Auto Loans, my credit union offers as low as 3.99% APR and if you sign up and use a member as a reference, they'll give us both $25 bucks. So if anyone wants a good deal on a auto loan, send me a message.

Ohh yeah, checking accounts get 3.5% interest and free reimbursements for ANY ATM fees anywhere. So even if you dont want an auto loan, you can still get hooked up. You would honestly have to be a fool to bank with BB&T or Wachovia over a non-profit credit union. I took every CD I had and put it directly into this checking account and draw 60 bucks a month and its all liquid.

1/12/2009 4:28:54 PM

Quote :

" if you're dead set on paying it off earlier, it makes vastly more sense to just take the 30 and pay it off ahead of time. "

I have no trouble paying my current loan payment nattr. I can get a lower rate on the 20 and pay extra on it as my income allows, thus paying it off sooner(than even the 20yr). We can debate how to better invest the money, which is absolutely a great arguement(traditionally), but the one KNOWN FACT about having a shorter loan is that you will waste less in interest every single time.

Nattr, I believe we are using the same logic just on a different time frame. For example the 15 yr payment is doable, but it could get tight so I choose the longer term and will make extra payments when I can to pay it off sooner as many have stated. If you really really believe to take out the lowest payment, pay extra, and invest the rest to get better returns, why not go for a 50 yr loan.(its kinda sad they offer these isnt it. )

[Edited on January 12, 2009 at 4:40 PM. Reason : .]

1/12/2009 4:33:04 PM

^^which cu are you with?

1/12/2009 4:34:39 PM

^^ Which bank? I'd like to look at their rates, etc?

1/12/2009 4:37:51 PM

corning credit union

1/12/2009 4:44:22 PM

Quote :

"That said I'll probably end up going with Coastal Fed Credit @ 4.875 which will cost around 2.5k (unless WF can do 5.25 with no closing)."

Let me know what you end up going with.

1/12/2009 4:52:12 PM

my broker said the average rate right now is 5.5%... i thought it was in the 4s but i really don't know much about it

1/12/2009 7:59:53 PM

Looking for a good refinance closing attorney in the RDU area.....mortgage broker wants to charge 500. I know I can better.

1/15/2009 9:10:41 PM

We just got an estimate for a 4.875% with ~$5500 in total closing costs (1% Orignator fee, appraisal fee, commitment fee, application fee, prepaid items/reserves).

The closing costs seemed on the high side, and thats with an excellent credit score (740+) and 31% down.

Forgot to ask the question. Is that normal for closing costs or can we find a better deal with around the same rate?

[Edited on January 15, 2009 at 11:01 PM. Reason : ]

1/15/2009 10:58:06 PM

You can do better. Right now its at 4.5 with 1% origination fee, or 4.75 with no origination.

1/15/2009 11:05:45 PM

Wow we got a lock today for 4.5% with less than 4k closing costs. That seams high.

1/15/2009 11:07:50 PM