Poll

I want to refinance, however

"I will NEVER pay off my loan. Refi me to a lower 30 year rate and payment"
6 (33.3%)
"I don't want a new 30 year loan. Set up the refi to pay off in 2x years"
5 (27.8%)
"Debt is the money of slaves. Give me a 10 or a 15 year loan"
6 (33.3%)
"Pay off? I don't need no stinking pay off! Give me an interest only loan"
1 (5.6%)

Total Members Voted: 18

Voting closed: January 25, 2016, 01:00:24 PM

Author Topic: 30yr or 29yr? Odd number amortizing refi question.  (Read 5078 times)

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Offline Soylent Green Is People

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30yr or 29yr? Odd number amortizing refi question.
« on: January 20, 2016, 01:00:24 PM »
Now that a refi season may soon be upon us, I'm curious what TI readers might find most important about a refi - low rate, low payment, or lowering their balance.  When I talk to someone about "odd year refinancing" the concept seems foreign to many since 29 or 24 year refi's aren't quoted as often. A curious question from an inquisitive soul.
My .02c

SGIP

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Offline bones

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #1 on: January 20, 2016, 01:16:28 PM »
Interesting question. I'm option D. My spouse is option B/C. So we compromise with option A (but with an arm).

Online nosuchreality

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #2 on: January 20, 2016, 02:16:08 PM »
Where's the money is cheap, give me the thirty and I'll just pay off when i want?

I'd do 20ish loan, but the industry tends to be pretty sleazy for getting what is advertised anyway and as soon as you the borrower start to ask anything non-herd goes super sleazy, IMHO.

Offline Compressed-Village

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #3 on: January 20, 2016, 02:19:34 PM »
Now that a refi season may soon be upon us, I'm curious what TI readers might find most important about a refi - low rate, low payment, or lowering their balance.  When I talk to someone about "odd year refinancing" the concept seems foreign to many since 29 or 24 year refi's aren't quoted as often. A curious question from an inquisitive soul.

I frankly think this is an excellent option of continuing to pay off your loan while lowering the payment a tad. If, you have already a year or two or a few into the loans. I hate starting over again. I, would love to be debt free of housing payment, but the funny thing is as soon as we pay off the house, we then worry about having nothing to write off. So I voted for B although, I love to have a deed burning party again.

Offline AW

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #4 on: January 20, 2016, 02:35:23 PM »
Where's that 40 year loan.
Oh noes, "4"0, guess it'll never work

Offline qwerty

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #5 on: January 20, 2016, 09:51:05 PM »
   I hate starting over again. I, would love to be debt free of housing payment, but the funny thing is as soon as we pay off the house, we then worry about having nothing to write off.

Why would you want to pay a $1 of interest to save 25-35 cents? Wouldn't you rather pay 25-35 cents in taxes and save the rest?

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Offline Bullsback

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #6 on: January 21, 2016, 08:49:25 AM »
Yeah...call me old fashion, but I want to pay that thing off and not have that payment overhanging. I want to own my house free and clear and when refi, I'd go with the odd year approach (I certainly wouldn't want to extend it).

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Offline zubs

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #7 on: January 21, 2016, 09:02:20 AM »
   I hate starting over again. I, would love to be debt free of housing payment, but the funny thing is as soon as we pay off the house, we then worry about having nothing to write off.

Why would you want to pay a $1 of interest to save 25-35 cents? Wouldn't you rather pay 25-35 cents in taxes and save the rest?

Is there any scenario where getting a huge mortgage for the tax shelter would be financially smart?

Offline qwerty

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #8 on: January 21, 2016, 10:46:38 AM »
   I hate starting over again. I, would love to be debt free of housing payment, but the funny thing is as soon as we pay off the house, we then worry about having nothing to write off.

Why would you want to pay a $1 of interest to save 25-35 cents? Wouldn't you rather pay 25-35 cents in taxes and save the rest?

Is there any scenario where getting a huge mortgage for the tax shelter would be financially smart?

The tax benefit of a mortgage should be seen as a cherry on top. You should not get a mortgage for the purpose of saving on taxes for the aforementioned reasons.

For the same house, if you were renting it for 3,000 per month but you could buy it with  PITI of 3,300 before tax savings, let's say the interest was 1500 and your combined (fed and state)  marginal tax rate of 40%, your tax benefit would be 600. So your PITI after tax becomes 2700 vs renting for 3000. In that case you should buy the house because the tax benefits make it cheaper to own than rent.

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Offline bones

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #9 on: January 21, 2016, 11:01:17 AM »
   I hate starting over again. I, would love to be debt free of housing payment, but the funny thing is as soon as we pay off the house, we then worry about having nothing to write off.

Why would you want to pay a $1 of interest to save 25-35 cents? Wouldn't you rather pay 25-35 cents in taxes and save the rest?

Is there any scenario where getting a huge mortgage for the tax shelter would be financially smart?

The tax benefit of a mortgage should be seen as a cherry on top. You should not get a mortgage for the purpose of saving on taxes for the aforementioned reasons.

For the same house, if you were renting it for 3,000 per month but you could buy it with  PITI of 3,300 before tax savings, let's say the interest was 1500 and your combined (fed and state)  marginal tax rate of 40%, your tax benefit would be 600. So your PITI after tax becomes 2700 vs renting for 3000. In that case you should buy the house because the tax benefits make it cheaper to own than rent.

#pesomath

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Offline nyc to oc

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #10 on: January 21, 2016, 11:38:33 AM »
   I hate starting over again. I, would love to be debt free of housing payment, but the funny thing is as soon as we pay off the house, we then worry about having nothing to write off.

Why would you want to pay a $1 of interest to save 25-35 cents? Wouldn't you rather pay 25-35 cents in taxes and save the rest?

Is there any scenario where getting a huge mortgage for the tax shelter would be financially smart?

there is an asset protection component. housing equity is not protected from creditors except for a really minimal amount, whereas ERISA qualified retirement accounts generally are (401k, etc). So if you're deciding between putting all your extra money to pay off the mortgage versus maxing out your 401ks, etc, then maxing out the 401k would be safer from an asset protection perspective. But I don't believe IRAs are exempt. Something to consider if you are in a high risk profession.


Offline Perspective

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #11 on: January 21, 2016, 07:52:46 PM »
   I hate starting over again. I, would love to be debt free of housing payment, but the funny thing is as soon as we pay off the house, we then worry about having nothing to write off.

Why would you want to pay a $1 of interest to save 25-35 cents? Wouldn't you rather pay 25-35 cents in taxes and save the rest?

Is there any scenario where getting a huge mortgage for the tax shelter would be financially smart?

there is an asset protection component. housing equity is not protected from creditors except for a really minimal amount, whereas ERISA qualified retirement accounts generally are (401k, etc). So if you're deciding between putting all your extra money to pay off the mortgage versus maxing out your 401ks, etc, then maxing out the 401k would be safer from an asset protection perspective. But I don't believe IRAs are exempt. Something to consider if you are in a high risk profession.

Whoa, that's some very marginal legal advice. In most states your primary residence is protected from creditors in one way or another (homestead provisions). If you have a considerable net worth or a very nice household income, you need to increase your liability coverages and add an umbrella policy, not divert cashflow from debt reduction to retirement (not that this is bad).

Offline nyc to oc

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #12 on: January 22, 2016, 10:44:14 AM »
   I hate starting over again. I, would love to be debt free of housing payment, but the funny thing is as soon as we pay off the house, we then worry about having nothing to write off.

Why would you want to pay a $1 of interest to save 25-35 cents? Wouldn't you rather pay 25-35 cents in taxes and save the rest?

Is there any scenario where getting a huge mortgage for the tax shelter would be financially smart?

there is an asset protection component. housing equity is not protected from creditors except for a really minimal amount, whereas ERISA qualified retirement accounts generally are (401k, etc). So if you're deciding between putting all your extra money to pay off the mortgage versus maxing out your 401ks, etc, then maxing out the 401k would be safer from an asset protection perspective. But I don't believe IRAs are exempt. Something to consider if you are in a high risk profession.

Whoa, that's some very marginal legal advice. In most states your primary residence is protected from creditors in one way or another (homestead provisions). If you have a considerable net worth or a very nice household income, you need to increase your liability coverages and add an umbrella policy, not divert cashflow from debt reduction to retirement (not that this is bad).

The homestead provision in California covers $100,000 of equity for married couples. 75K if single and not disabled. Or 175K if disabled, over 65, or single over 55 with very limited income (under 25K/yr)  Hence why I said minimal protection, especially compared to the typical value of a house in SoCal.

Disclaimer: I am not an attorney. This post is not to be construed as legal advice. Only things which I looked up myself on commonly available lay websites like nolo.com, and based on some things my estate lawyer told me.  If you need advice about asset protection, consult an attorney.
« Last Edit: January 22, 2016, 10:50:30 AM by nyc to oc »

Offline Bullsback

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #13 on: January 22, 2016, 12:43:00 PM »
NM. 

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Re: 30yr or 29yr? Odd number amortizing refi question.
« Reply #14 on: January 22, 2016, 03:41:44 PM »
Cash rich > house rich....aka I prefer to be liquid than not liquid.  Mortgage debt is the cheapest debt out there and deductible for 98% of people. 
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