Between Re-Fi's and Foreclosures...

iron_cityMay 3, 2009

Another thread on refinancing got me prompted to post this. Between all the foreclosures and refinancing opportunities with lower rates, does anyone pay off their mortgage anymore? Obviously the foreclosures put some people out of the game for the time being. And the re-fi's reset the 30 year clock if the purpose is to lower monthly payments to make them manageable or to just have more money in your pocket. Generally speaking, how many here are free and clear owners?

I'm 4 years into a mortgage on which I have been paying ahead. I'm refinancing from 5-7/8 to 4-1/2 to lower the obligated payment each month should anything happen to me or my spouse - job loss, disablement, death, etc. My intention is to keep paying the same amount each month but have more of it go to paying the principal. I should be able to payoff the loan in 10 years at the new rate. (We have a rule on home improvements that they're paid out-of-pocket. No home loans which will decrease our equity and put ownership further at risk.)

Many friends, as soon as they pay off their car, immediately buy a new one saying "I'll always have a car payment - It's just part of life!" Do many feel the same way about a mortgage? Is it either something that will always be there or will have to take the full 30 years to pay?

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triciae

Nationwide, about one-third have no mortgages. This number seems to stay pretty constant, or at least it has over my career. There are so many homes in the US that it's hard to move that national number to any significant degree.

/tricia

Here is a link that might be useful: US Census - Mortgages in US

    Bookmark   May 4, 2009 at 6:56AM
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Billl

Just because your friends make bad financial decisions, it doesn't mean you have to as well. Your current goal sounds like a great one! If you can eliminate your debts now, you'll open up a whole world of possibilities later.

    Bookmark   May 4, 2009 at 10:19AM
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chris8796

While the reason for everyone's decision is different, for some it is a calculated financial decision not to pre-pay or pay off a mortgage early. There are good debts and bad debts, not all debt is bad.

For example, I'd much rather have 220K in liquid assets with a 200K mortgage at 4.5%, than 20K in liquid assets and my 200k mortgage paid off early.

    Bookmark   May 4, 2009 at 4:45PM
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brickeyee

"And the re-fi's reset the 30 year clock if the purpose is to lower monthly payments to make them manageable or to just have more money in your pocket."

I usually refi for the remainder of the present mortage.
The latest refi was only 2 years in though, so it is another 30.

Previous refis have been for 20 years on a mortage with 21 left.

You can also keep making the larger payments at a savings in interest but a penalty in liquidity.

It would be pretty risky to borrow in the future (at a likely higher rate) to invest the money elsewhere.

For the time being I am just keeping the savings as cash.

    Bookmark   May 4, 2009 at 5:25PM
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mary_md7

I did a refi a while back, to get a lower rate. Same balance, but I shifted from 30 to 15 years with virtually no change in payment due to the lower rate.

I know many disagree, but I like the fact that my mortgage balance is now much lower than my annual salary. I freely admit that I'm a debt-a-phobe.

    Bookmark   May 4, 2009 at 8:33PM
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gibby2015

I've rarely refinanced but when I have it's usually been from a 30 year to a 15 year. I've also not felt compelled to buy a bigger more expensive home any time in the past 17 years so mine is paid for. Good debt - bad debt - the closer I get to retirement age the less debt I want.

    Bookmark   May 11, 2009 at 10:29PM
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quasifish

Wow, iron city. I could have written your post to a T. Right down to the time line, although you paid ahead a little bit better than I did. We closed our loan Monday of this week. Our new required payment is less than half of the old, but we will keep paying the same amount as the old mortgage each month and reaping the rewards of much more additional principal each month.

The main reason we refied was because I am forever in disaster preparedness mode and that seemed the best way to cut month to month necessities if, heaven forbid, we need to.

    Bookmark   May 13, 2009 at 9:12AM
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