Hi Dadoes, I ran a very simplistic Excel analysis... a great deal of complexity was left aside, but leaning toward conservatism in each case. One mistake I made (I realized as I was lying in bed last night) was that I credited a full annual rate of return EACH MONTH... rather than 1/12th of a return rate each month... so "the regain to whole" was artificially accelerated in my previous example... but probably not by too much. The $31.5K-ish 2008 yearly expense includes $705/month for the mortgage payment. Shouldn't that be eliminated as part of "retirement" income requirements? Or is it insignificant? It never went away, the principal portion isn't an expense. You're simply pulling from your working cash to deposit into real estate equity. You *could* eliminate it from a future projected income budget... but you'd be better off eliminating the principal burden today in order to keep your funds working (if possible) and leave the future carry costs in place. Your scenario has all retirement income coming from personal savings/investments. Social Security is headed for (or is it already in?) a crises. One cannot expect to receive any benefit 10 years from now? 20 years? 30? 40? SS benes are fairly insignificant, if they're available to you at that point at all (we'll very likely be seeing means-testing hurdles put in plalce, as well as the stretching forward of qualifying ages.) Only the interest saved is considered for regain? Not the full $705 payment that'd no longer be going out each month? Right, only the interest is actual expense. Value of the home (purchased $245K, current tax appraisal $227K) is also disregarded? Which of course, I know it doesn't have any cash value unless sold ... but downsizing could happen years from now. The value of the home would reflect the monthly principal portion of the $705... which is why its immaterial. Its not a gain, its simply your money... you took it from one pocket and transferred it to your shoe. Those funds very likely would have more safely and suredly helped you achieve financial freedom had they been seperately compounding in growth accounts. AGAIN... we're not diving into sharpened details here, nor using analytical models that include variables of increasing tax burdens, inflation, real estate appreication, stock market cycles, health cost concerns, etc. etc. When we "sharpen the pencil" and start getting even more accurate, the truth stands out in even more stark relief. As a VERY SIMPISTIC rule of thumb... If you're not a financial hazard to yourself, you are far better off sending every additional dollar above your reserves into growth accounts UNTIL you have reached financial independence BEFORE considering the surrender of your mortgage leverage. Cheers, Dave Donhoff Leverage Planner

As I've made a substantial number of moves during my lifetime and have not owned a home, I've been buying some stocks and regular, mainly equity-based mutual funds, not recently for the latter, with a few ETFs. Down about 10% ... last week. There was to be a buyout of Canada's largest phone company, arranged before the recent market slide ... and partially to be underwritten by the Royal Bank of Scotland ... which the British government is now assisting ... so some say that their participation in this supposedly ironclad buyout is becoming quite problematic (read "improbable"?) ... recent slippage in the stock price leads one to think that is in the cards. While checking with my bank about spread between borrowing using fully-secured L O C and margin account with stockbroker, was told Thurs. Oct. 2 that I have only unsecured L O C, that they can only accept GIC or a home as collateral, so thought that if the policy-makers at the bank say that my stock and more diversified mutual funds are of nil value ... they aren't worth much to me, either ... but didn't plan to sell much, if any ... possibly because they'd gone down so much. Planned to write some friends in investment groups about that experience ... didn't do so till after big fall, last Mon., then included an apology. On Wed. I found that my L O C is still fully secured ... that my origininal informant is wrong. But I would have been well advised to have sold some, 10 days ago, as there has been major drop, this week. However - which one(s) to sell? Some go down a great deal more than others, and often it's hard to judge which one(s)will/may? suffer the big dip. On the other hand ... we have been told for years that those who try to time the market, hopping in and out, don't do well, as guessing wrongly a few times ... means that one will likely miss out on some substantial increases. Those who invest a given amount, regularly, do best in the end. I have far too high a percentage of my total asset in North America, mostly in Canada ... we've been living much higher on the hog than our descendants will be able to do, and we need substantial assets based elsewhere ... and other than based in Dollars, whether U.S. or Canadian ... ... for when the U.S. gets a sniffle ... Canada gets pneumonia, since so much of our exports go over that one border. I live on much less than my pension income, so am not under pressure to sell assets when I don't choose. I have few needs - most seniors are cutting down, rather than adding to their possessions. As each year goes by, perhaps especially now, as I near age 80, I become more aware of it: the number of my future years on this dimension of life decreases - annually: my short candle is getting shorter! However - my bequests will be to two offspring, neither of which will be under any pressure to liquidate the asset over the short term, and one of which is much shrewder as a manager of money than the other. Quite likely some assets will be transferred intact to a central charitable institution, which produces a major tax benefit to my estate, and the agency is quite well versed in shrewd money management and will disperse various amounts to operating agencies over an extended period. The major reason to liquidate some assets over a short period following my death will be to pay income tax. So - I'm not getting upset about short-term fluctuAtions in the market ... but I doubt that recovery will be nearly as fast as in former cycles, this time. ole joyful P.S. For further info on my recent financial issues and opinions (plus a discussion re money management and taxes with local Member of PArliament currently running for re-election), see thread regarding "Mortgage"s, titled something like "Mortgage Woes", over on "Money Saving Tips", I think (or here). o j

>patser-I worked for 30 years in the investment industry up until this past April. For the last 5 of those years I worked overseeing the riskiness of my bank's securities trading groups, specifically the bond trading groups (which includes mortgage backed securities trading). We oversaw trading in the far East, Europe, and North America. In the early part of my career, I worked in the treasury group of a major US bank which had financial problems and was ultimately absorbed into/bought by another major US bank. My group was the area that was in daily, direct contact with the US regulators and I was involved in way too many conversations about a bank that was going down. I ultimately lost that job due to a later and different merger 10 years after the original financial problems. I consider myself to be a well informed pretty recent ex-banker. "Involved in way too many conversations about a bank that was going down?" What is that supposed to mean? Now that you are no longer working there, would you care to share what these specific problems were? "I consider myself to be a well informed pretty recent ex-banker." Did you know Fannie and Freddie were going to be taken over by the government over the weekend? Does it matter that their shares have plummeted over 90% in value over the past year? Do you have stock with either of these companies and did you buy or sell any shares within the past 6 months? Do you think the Fannie and Freddie CEOs that were pushed out by the government this weekend should be rewarded with fat pay packages, go on to live in massive homes and become high-paid consultants? Or do you think a jail sentence is in order? >I would have absolutely no hesitancy about putting up to $100,000 into an FDIC insured account at Bank of America or Wachovia. Quite honestly, I think the original post in this chain is very similar to chicken little saying "the sky is falling, the sky is falling". While some financial entities clearly have been negatively affected over the last 18 months, to imply a widespread panic is around the corner is malicious fear mongering - in my opinion. I find it both interesting as well as amusing that you would accuse tricia, a fellow member of the industry, of being a fear monger. She posted information about the FDIC that SHOULD be freely available to the public yet you think this is 'too much' information for the average taxpayer to be able to absorb without 'overreacting' in a way that might protect their life savings. Sharing information with the public about damaging accounting scandals, questionable management, inadequate capital reserves and a crashing residential real estate market, is NOT fear mongering. I think most of the readers at the GardenWeb forums are mature enough to be able to tell the difference. As for 'implying a widespread panic". What is your opinion about the many high-ranking government officials in the 1970s who swore the S&Ls were safe, even as thousands of thrifts were failing all around them? How about those FDIC and Federal Reserve officials in the 1980s who vehemently denied the threat to commercial banks, even as the bank failure rate surged to the highest since the Great Depression? Or the state insurance regulators in the 1990s who swore to the safety of annuities and life insurance policies, even as six million policyholders were being trapped in failed companies? Last but not least, lets not forget the auditing firms like Arthur Andersen, KPMG, and Deloitte and Touche that facilitated or even encouraged accounting distortions and cover-ups and those major Wall Street firms of the early 2000s that consistently affirmed "hold" and "buy" ratings for the shares of hundreds of companies that were going bankrupt. What has changed to correct this? Nothing. The lies continue, no one gets punished and fat cat CEO's continue to prosper at the TAXPAYERS expense. Is it any wonder why investors don't want to play this 'casino game' anymore, or why depositors don't trust their banks to tell them the truth? I think it shows utter contempt for the American people to assume we are too stupid to be able to be told the same things that insiders already know about our crippled economy. I don't know when the reality of this will dawn on the "denialists." But when it does, I'm sure they will be remembered along with some of the 'experts' (below) who thought everything would be just fine 80 years ago. September 1929 "There is no cause to worry. The high tide of prosperity will continue." â" Andrew W. Mellon, Secretary of the Treasury. October 14, 1929 "Secretary Lamont and officials of the Commerce Department today denied rumors that a severe depression in business and industrial activity was impending, which had been based on a mistaken interpretation of a review of industrial and credit conditions issued earlier in the day by the Federal Reserve Board." â" New York Times December 5, 1929 "The Government's business is in sound condition." â" Andrew W. Mellon, Secretary of the Treasury December 28, 1929 "Maintenance of a general high level of business in the United States during December was reviewed today by Robert P. Lamont, Secretary of Commerce, as an indication that American industry had reached a point where a break in New York stock prices does not necessarily mean a national depression." â" Associated Press dispatch. January 13, 1930 "Reports to the Department of Commerce indicate that business is in a satisfactory condition, Secretary Lamont said today." - News item. January 21, 1930 "Definite signs that business and industry have turned the corner from the temporary period of emergency that followed deflation of the speculative market were seen today by President Hoover. The President said the reports to the Cabinet showed the tide of employment had changed in the right direction." - News dispatch from Washington. January 24, 1930 "Trade recovery now complete President told. Business survey conference reports industry has progressed by own power. No Stimulants Needed! Progress in all lines by the early spring forecast." - New York Herald Tribune. March 8, 1930 "President Hoover predicted today that the worst effect of the crash upon unemployment will have been passed during the next sixty days." - Washington Dispatch. May 1, 1930 "While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States - that is, prosperity." - President Hoover June 29, 1930 "The worst is over without a doubt." - James J. Davis, Secretary of Labor. August 29, 1930 "American labor may now look to the future with confidence." - James J. Davis, Secretary of Labor. September 12, 1930 "We have hit bottom and are on the upswing." - James J. Davis, Secretary of Labor. October 16, 1930 "Looking to the future I see in the further acceleration of science continuous jobs for our workers. Science will cure unemployment." - Charles M. Schwab. October 20, 1930 "President Hoover today designated Robert W. Lamont, Secretary of Commerce, as chairman of the President's special committee on unemployment." - Washington dispatch. October 21, 1930 "President Hoover has summoned Colonel Arthur Woods to help place 2,500,000 persons back to work this winter." - Washington Dispatch November 1930 "I see no reason why 1931 should not be an extremely good year." - Alfred P. Sloan, Jr., General Motors Co. January 20, 1931 "The country is not in good condition." - Calvin Coolidge. June 9, 1931 "The depression has ended." - Dr. Julius Klein, Assistant Secretary of Commerce.

Hi lafilmfan, The problem in my eyes with a 5 year ARM is it's too risky after those five years are up. If you're only looking at the risks of rates rising at the highest & fastest acceleration (and they STAYING that high,) you fall prey to the risks of over-paying interest in all the other cases when interest rates do something else... like stay low, or rise a little & drop back a little, or rise a lot, drop back a little, and stay put, etc. etc. etc. Paying too much interest simply to take a 30 FRM isn't necessarily the best (nor cheapest) way to avoid interest rate market risks. You'd possibly be losing any savings you might get from refinancing. But, what ARE the typical closing costs? If you are able to see the naked, fully-transparent, actual costs of all the services & personnel involved in a typical mortgage file, it normally runs about 3-5% of the loan amount, with a minimum in the $5,000 range. I think for my 200K mortgage refinance they were saying about $4700. That seems kind of high for me. You're used to seeing fees after the industry subsidizes the costs by raising the offered interest rates. MOST of the unaware public focuses more on what they see in immediate fees than the effects of a few basis-points higher in interest rates... so the banking sales industry plays a lot of "shell game" numbers tricks to make things look cheaper than they really are. And on a related note, is there a way to refinance with the bank that already holds your mortgage? It wouldn't be in their interest to make less, well, interest on the loan, but it would be even less in their interest to lose the loan to another bank. Sure! Just apply with them again, same as you did the first time. You can always REQUEST a loan modification, rather than a straightforward refinance (which comes with the inescapable transaction cost burdens,) but if you have good credit your prior loan was doubtlessly sold on the secondary markets anyway, so you'd have no choice but to get another ticket for the financial merry-go-round joyride we all know as the mortgage application terror... err, process, I mean. Luck! Dave Donhoff Leverage Planner