Tilted Forum Project Discussion Community - View Single Post - House refi

DDDDave · 04-04-2006, 07:06 AM

As you can see from the varied responses, there is no 'correct' answer to your question. Almost every financial decision depends on your personal situation, and even your personality. Are you comfortable borrowing money? Some people are very debt adverse. 'Don't owe anybody anything' , 'Pay it off as soon as you can'. Others realize the power of leverage and are comfortable using it. All you can really do is analyze your entire situation and make the best decision for you.

As for the numbers, in the 28% tax bracket, your true cost of borrowing is probably closer to 5% when figuring the write-off for interest and RE taxes. While your mortgage rate is fixed, short term rates are going up and will continue to rise. How far is anybody's guess. If in 5 years CD rates are 7% (very possible), you will be thinking 'I should have borrowed more at the time'. A HELOC is not really an option as it carries a variable rate and defeats the purpose of trying to leverage your borrowing.

Are you able to have a savings account with 30K in it and let it sit there without spending it. That is an important question. It takes discipline. Some people always have it the back of their minds 'No matter what I ring up on my cards, I can always refi and pay it off.' As has been said 'You can't borrow your way out of debt'.

What is your income situation? Two good stable jobs? You never know what might happen. All the pundits say have 6 months savings in a liquid account just in case. Health insurance? Good, not so good, or none? Maybe have a little more set aside if 'not so good'. Kids? College expenses? If so, borrow the money now while its cheap. Maybe half what you think you'll need. If you lose your job or are injured and can't work, it will be much more difficult to borrow the money you may need. .....Only you know the answers to these questions, and only you can prioritize them correctly for your personality and lifestyle.

As for RE prices and such, that is a whole other story. As long as you live in your house and can afford to make the payments, who cares what prices do? It makes for great headlines, but the only ones affected are people who have to sell. It sounds like you have a good bit of equity in the house and even if prices stay flat or decline for a couple of years, so what?

Good luck.

04-04-2006, 07:06 AM	#10 (permalink)
DDDDave Addict Location: Sarasota	As you can see from the varied responses, there is no 'correct' answer to your question. Almost every financial decision depends on your personal situation, and even your personality. Are you comfortable borrowing money? Some people are very debt adverse. 'Don't owe anybody anything' , 'Pay it off as soon as you can'. Others realize the power of leverage and are comfortable using it. All you can really do is analyze your entire situation and make the best decision for you. As for the numbers, in the 28% tax bracket, your true cost of borrowing is probably closer to 5% when figuring the write-off for interest and RE taxes. While your mortgage rate is fixed, short term rates are going up and will continue to rise. How far is anybody's guess. If in 5 years CD rates are 7% (very possible), you will be thinking 'I should have borrowed more at the time'. A HELOC is not really an option as it carries a variable rate and defeats the purpose of trying to leverage your borrowing. Are you able to have a savings account with 30K in it and let it sit there without spending it. That is an important question. It takes discipline. Some people always have it the back of their minds 'No matter what I ring up on my cards, I can always refi and pay it off.' As has been said 'You can't borrow your way out of debt'. What is your income situation? Two good stable jobs? You never know what might happen. All the pundits say have 6 months savings in a liquid account just in case. Health insurance? Good, not so good, or none? Maybe have a little more set aside if 'not so good'. Kids? College expenses? If so, borrow the money now while its cheap. Maybe half what you think you'll need. If you lose your job or are injured and can't work, it will be much more difficult to borrow the money you may need. .....Only you know the answers to these questions, and only you can prioritize them correctly for your personality and lifestyle. As for RE prices and such, that is a whole other story. As long as you live in your house and can afford to make the payments, who cares what prices do? It makes for great headlines, but the only ones affected are people who have to sell. It sounds like you have a good bit of equity in the house and even if prices stay flat or decline for a couple of years, so what? Good luck. __________________ I am just a simple man trying to make my way in the universe... "Go confidently in the direction of your dreams. Live the life you have imagined." - Thoreau "Nothing great was ever accomplished without enthusiasm" - Emerson