I am finally doing my re-fi. I gave up with the one for USAA that required the Verizon blight gone. I decided to pay off all the credit cards with the savings, and when I did that I found I didn't even need a jumbo loan anymore.
So I found a great loan, ran the numbers, and started the re-fi. Its one of those crazy 5 year loans + 1 balloon payment. The ones everyone is warned about. I'm serious :} I'm going with ING, an internet bank I have several accounts with. Closing costs are ~$4000 total.
But this is how the numbers work out:
The loan is set up for 30 years, biweekly payments. The rate is fixed for 5 years at 2.5% (my mortgage was at 5.37 and home equity at 2.99). In 5 years I can refinance the remaining balance for $1600 total closing costs.
If I pay the amount I am currently paying just for my mortgage I can pay off the new mortgage in 11 years (without a rate change, see below). If I add in what I pay for the home equity, and what i save monthly for my 6 month emergency fund, I can pay off this mortgage in 8 years. I will have to get funds for taxes and insurance ($6000 a year) so money will be a bit tight.
There was also $19,000 that wouldn't go into this loan that needs to be paid off, I got a personal loan at 10.39%. Ouch, but they gave it to me right away. Money was in my account within a day. I have to pay it towards the home equity so ING can close it. The payments are $500/month, but I have a few thousand already for it and figure it will get paid off completely within a few months.
The big scary negatives about this are .... we have to refinance in 5 years. 1) K and I need good credit. K currently has a 760 and I have a 748 (with the verizon blight). I can't see that changing. 2) the interest rates are going to go up. I know they were high in the 70s. But I don't think they are going to jump there in 5 years. The worst is a percent a year, and 7.5% isn't that bad interest to pay. It will only delay repayment a year or so. 3) the house could go down in value and we could only refinance 80% of the value, which means we'll have to have $$. We can always get $$ from loans or credit cards. If I pay it off as planned we will have 65% equity of what the house is currently valued at. It would have to lose a lot of value to go under water. 4) we could lose some income. My planned payment is about 30% of our take home income. So if we lose some income we can still afford the accelerated payments. I may have to give up a few international trips, or actually ask for travel money.
If more than one bad thing happens, it could get tight. Could end up with a big payment that's hard to refinance at high interest. If everything continues to be peachy keen, we can make real headway into paying off this debt. And then I'll use the house for collateral to buy property for the business :}
So, I know its a crazy loan. But I've run the numbers many times and it works out. I think these are all the risks, and I think they are low/bearable.
I am really impressed with the INGdirect re-finance process, BTW. Its all electronic. I can upload the documents, and there are easy checklists to follow. I already have everything signed, they have reviewed/approved most of them (I saw that they needed the second page to one so I uploaded it, got it to them within a day). I'm already in touch with the title company for closing and have sent all the forms and arranged a RemoteClosing, where we have to go to a notary and approve the docs and someone else to sign in person. So we don't have to arrange for a time for someone to come here. I just love living in the future.
I am finally doing my re-fi. I gave up with the one for USAA that required the Verizon blight gone. I decided to pay off all the credit cards with the savings, and when I did that I found I didn't even need a jumbo loan anymore.
I did my charities - I keep all the solicitations and go through them all at once (every quarter or so) and decide who to donate to. So when that type of mail comes in I throw it in a pile till I shuffle through it. I used to donate as the solicitations came through, but I found I was donating depending on my mood, and not how I felt about the non-profit or the cause. So now I try to be more systematic.
I donate to many causes, and some I have been supporting for years. Like Alley Cat Allies, http://www.alleycat.org/
I also sponsor all my friends who do walks/charity drives/etc. Regardless of cause, I support them 'cause I like activism and empathy.
I believe a lot in microlending and have thousands of Kiva loans - www.kiva.org My portfolio is worth about $8000, and I can withdraw it if I want. I might, if I need it later on in life, and its nice to know that other people got to use the capital in the meantime instead of the banks.
One of the best ROI is a donation I make monthly. I bring snacks to the VA hospital so they can give out food to vets who can't afford to eat. They used to sometimes steal and end up in jail, but since I've stared bringing snacks (4 years ago) it hasn't happened. I buy flats of noodle soups - 4 for $20 with my monthly purchase of paper goods (toilet paper, paper towels), cleaning, etc. K knows to buy them if he does the monthly run and he puts them in my trunk. So I just carry them to the building, get a tax write off, a hundred vets get fed, they don't go to jail. For about $20 bucks a month and 5 minutes extra of my time. And I get lots of kudos for being the snack lady. Such a win win situation.
I applied for the second time to refinance. It was denied today. They can't do the loan till they see it off my credit, the fax that states it will go off (from Verizon) won't do. I did get a number that my bank uses for the credit report, apparently they might help speed things up with getting the blight removed from my credit.
I am dealing with USAA bank and they are fantastic. The underwriters are in the building so they can put me on hold and get questions answered.
But, in the meantime, I've almost paid off all my credit cards. They will all get paid off within a month. That includes K's cards. I have almost nothing in savings anymore though. But it will build up again.
What a week.
Signed all the documents for the refinance last weekend but had some issues with some of the numbers so decided to call the bank rather then send them in. I was concerned because it was listed like I had all the assets (and k had only a few), etc. The bank said not a problem they just put down minimums. The guy started looking to see if there were any other issues... after about an hour on the phone, he took it over to the underwriter.... ... Came back DENIED. I have a big ding on my credit, something went to collection.
[backstory - in 2007 I switched my phone from verizon to AT&T. Verizon charged me $300 for breaking the contract. I hadn't had a contract with them for years, they tried to say that when they sent me info and I didn't do anything that was a contract. So I called the Government commission listed on the phone bill, and they looked into it. Ruling was in my favor.]
So the loan was stopped. There are other loans that allow that ding, but they didn't have good cash out or APR and some wanted me to come up with $40,000. [one good point, was on the phone for 2 hours and the bank guy said I was the most calm, composed person he ever had to deal with, even after this unexpected screw up].
So then I called the government commission and found out their databanks don't go back that far.
So then I called Verizon. Got transferred a few times, hung up on a few times, and finally got through to someone who knew what I wanted and looked me up and said the credit was off the books and he would forward that to the reporting company and fax me a letter within 24 hours. YAH!
I got the fax the next day. It said the bill was paid off. I called my bank, and read them the fax, and they said it wouldn't work. The ding has to be totally removed from my credit. I asked them specifically what the magic buzz words to use were. They said it can't say collections, and it can't indicate I was ever late.
So I called back Verizon. Got transferred and hung up on a few times. But I'm persistent. Got through to the right place. Told them the buzz words. They said they could do it. They are sending the credit people another update, and faxed me a paper that said the ding will be totally removed from my credit.
I will call my bank at the end of the week and ask them to do a hard pull on my credit (I asked what the magic buzz words are) to see if its gone. And then restart the loan procedure. They can use most of the signed disclosures, so it won't be so bad.
I am planning on sending Verizon an invoice billing them for at least 4 hours of my time (more if its not done yet). Apparently this works sometimes.
The bank figures the ding was only noticed so late in the procedure because my score was so high, they just assumed I couldn't have anything big on it. Who knew.
So I transferred k's 401 from his old company (invested in a hodge podge, he tends to just equally choose funds) into an IRA brokerage account. He wants me to invest. Its a bit scarier playing with someone else's money. I'm going to probably go with low cost index funds and a few choice stocks. I don't think we will be adding to this fund. He has a retirement fund with his work (which I think discredits you?). I am trying to put money in roths for both of us, but maxing it out is $833 a month to save, and right now that's not happening.
The refinance was going to include paying off $16,000 I have in 'business' debt. Since I am sole owner the debt is mine. I consider it 'business' because it was used to buy inventory, and I was hoping the business would make enough to pay it off. But I am trying to grow the business, its currently in my house and I would eventually like to move it out. My dream is that k and I will buy the property and the business will incorporate and rent it from us.
The business is internet based, we sell custom clothing. There are currently over 10 people who help with production and shipping. The sewers are mostly stay-home-moms. It started off as a make-income for my friends with babies and I've had friends running it. I took over a few years ago and changed the business model a bit and did massive organization, before it was limping along making enough money to pay everyone and pay me enough for the bother of it in my house and the work I did on the occassional weekend. But I decided to build it up to move it out to a retail store which would significantly increase business. The plan is to move it out when I know I can afford all the expenses from the current business. And I want to have most of the stock. I don't want to grow in debt.
But I am in debt now, I used the card to make some major stock purchases last year, and to cover cash flow. Its only been 5 months since we re-organized and I am now taking an active role and making sure everything is progressing. I am not involved in daily production or shipping. I am doing the finances, logistics, and web work. I'm also making sure the house (my house) has room to expand. And, like all owners of small businesses, I take out the garbage. I am the direction. I have great people doing the work. I think its going to grow well. Its already shown it can limp along without even good pictures of our products.
And my point was... The $16,000 credit card debt for the 'business'. I'm going to pay it off with my 6- month emergency fund. It will wipe it out. I have been putting $1200 a month towards it, so it will grow again. I have psychological issues with putting my money towards the business debt, but I really need to get over them since its all me. (sole owner) Yes, I can write off credit card interest as a business expense. But its an unnecessary expense. And its better the business invest in itself and not have debt. So as the credit cards come in, I will pay them off.
I would still like to take the cash from the refi to pay off k's card. its at $12,000.
I spoke with my bank and they offered me a great refinance.I'm getting more than I want, besides the first and second I'm going to get enough to pay off the credit cards, and the payments will be less than the one payment for my current mortgage.
However - it has to be a 'jumbo' and I'll be on a direct government loan (so they back it but my bank still administers it)and its not fixed. I never thought I would consider a not fixed loan - but this one is 3.125% for at least 5 years. In 5 years it will get adjusted, but not go up more than 2%. IT will keep getting adjusted every 5 years, but NEVER go more than 5% over initial (8.125%). And it will take at least 20 years to get that high, and that's only if interest rates rise.
I should have at least an extra mortgage payment a month if I consolidate and have no other debts (and we both keep our jobs). I ran the numbers and that would allow me to pay off the mortgage in about 10 years. I'll be 10 years from retirement.
Since k and I aren't married we have to both be on the line to initiate the loan, so we're going to do it at 7am tomorrow before he goes to work. We're talking a May closing and first payment July. Its a full doc loan.
Sure will be a lot simpler to consolidate all of this.
My monthly transfers to savings went through. It really has been helping me to have them all go at once, and knowing what paycheck is used to pay what. I refer to my chart a lot.
This month I did what I did last month, which was to transfer a few of the deposits to k's credit card. I took it out of my savings, house savings, car savings, bill savings (to get a head of mortgage when k wasn't working) and taxes. I know I need to save for these things, but I think paying the credit card is better at this point. Together its another $1000 or so to the card. I am not touching my emergency savings (now at $18,000!, the cat savings (for vets) now at $4500, or any of my trip funds (saving for England and Italy and friends come visit). k's credit card balance should drop to $11,500. And he has been ok with not charging too much.
I have been seriously thinking about the refinance. I've run a few numbers, and even signed up with lending tree. Just checked the email, they are "confident that we can find a loan option that fits your financing needs." My current mortgage is $317,000 at 5.375 (8 years in). I also have a home equity loan at $131,500, variable but currently at 2.99%. (this was run up by a lot of things that were beyond my control and really bothers me, perhaps some day i'll figure out how to blog about it nicely. but for now, lets just call it debt and accept it.)
Total is about $450,000. I think I should combine them (I think I might even have to.). The house is valued by Zillow over $600,000 so we have at least 20% down. I know I have 'excellent' credit (750 I think, was checked within a few months) and I assume k does also. I'm sure we make enough with income we can document to satisfy the mortgage, our combined take home is about $8000, and that's after retirement withdrawals.
I currently pay about $2000 for my mortgage payment (not counting taxes) and $340 for the loan which is just covering interest. I was going to start working on it after k's credit card. But its such a huge debt I think it would be better handled with the mortgage. Interest rates are going up.
So I have been running numbers. And I signed up with lending tree to see what they could do. (Anyone have experience with them?).
I got an offer for 3.75% for 30 year fixed. That would give me a payment of $1922. If the rate is 4%, its $2148. These numbers aren't that different to me, and both are in the range of my current mortgage payment (without the home equity loan). So I could combine my loans and pay about what I am paying now. If I took the monies I am currently paying the loan ($340/month) and my emergency savings ($1400/month) I have almost a mortgage payment, so if I add that to the mortgage as additional each month (and a bit more) I can pay off the entire thing in about 10 years.
So it looks like the thing to do is combine the loan and look for a fixed rate 30%, and even 4% is ok.
HomePlus Mortgage offered 3.75% and no points. Anyone know anything about this?
My current loan is with GMAC through USAA. I tried running the numbers through both their online refinance calculators but got loans that required $45,000 or so down. I am planning on calling them on Monday to see what they can offer me, telling them about the 3.75% fixed with no points for the full amount I've already been offered. Then I will call HomePlus and see what they can really offer :}
What I want is - the entire amount refinanced. No points. Low closing costs. I'll accept a higher APR for these.
I would like to refinance with the bank I already have. But I need to think about how to evaluate/choose another bank. How much does it matter who I pay a check to?
Should I be doing anything to prepare for the refinance? Should I pay off the credit card? Does $11,000 in debt mean anything when you're borrowing half a million? I have quite a few credit cards with no balances. I don't know what my total line of credit is (but, now that I think of it, that's probably something I should be figuring out and blogging about since its 'financial'). I do recall that I had to close a few cards when I first bought the house, but that was when credit was still crazy and they kept increasing my limits every year (and I was getting bombarded with credit card checks). I do recall my credit card limit then was some ridiculous amount like $150,000. My mortgage person joked that I could almost have bought the house on my cards. I am sure my limit isn't that high, but I can think of several cards that have a $20,000 or more limit, so perhaps I should figure that out and close/limit some accounts. TODO - organize credit cards & figure out limits and close accounts if not needed. Or max them all out and run off to an island. Should always keep that option open.
I just changed my TSP to transfer 65% of my current savings (1300) to the 'c' fund (S&P index with expenses of 0.025) and routed all my current contributions to that fund. My other choices are tracking the Dow or International index. Or the 'lifestyle funds' which have a different percentage of the other funds. S&P index fund with low fees works fine for me.
I got an estimate on my taxes, the business lost $17,000 so I am getting $6000 back. I had a choice of putting $5000 in a ROTH or $2700 in a trad IRA (and getting more back). Decided to do the ROTH.
I started an automatic monthly withdrawal of $250 for taxes. I need to save more ($833.34 is full ROTH for k and I) but I also need to pay off k's card.
Aren't I done yet? Actually, I guess I'll never be done. Money is like food, something you have to keep doing all the time. Can't stop eating. Must keep buying food and cooking and cleaning. Good thing I like cooking. And I like money stuff too.
K could never do all this, it would drive him crazy. When I met him his financial strategy was to own a house, figure out what his bills were and what was reasonable to spend, and put the rest in his 401K. He actually told me that he couldn't take me on a real date for a few weeks till he changed his withholdings 'cause girlfriends weren't in the budget. He likes it simple. Me, I'm more complicado.
K does appreciate all I do though. And he does listen. I had to talk with him about his spending a few days ago, he spent ~$1800 on his credit card last month. None of this was bills, about $500 was necessary (doctors/drugs/gas) plus food. I don't know what's reasonable to spend on food for him, but he needs to eat better. Less fast food. He's agreed to seriously curb his spending, and I know he will. He just forgets. As I do. I spent $3600 on my credit card last month, and most of the food I buy is cash at the farmers market. There were 2 trips on this - one for $1000 for my niece to go to London in Nov I had to buy it now to get a specific seat beside her mom, and its the only direct flight option so I was going to choice that flight anyhow. My flight can wait since there are at least 6 direct ones per day to choose from. I had the money to pay for this in a savings account. The other flight was a friend visiting (in 2 days!) for $600. I bought more household things than usual because I started buying things online to help pay my friends student loan through Upromise. (my contribution is up to $104 so far!).
I'm going to go work on K's retirement for a bit. I'm confused. It looks like one of his accounts he had with a job he only had for 8 months or so got cashed out. In the fall, and it was $3000 so I should remember. Sigh. Glad I"m keeping track now. :}
So much for my discipline of posting every day and keeping up. Now I have to remember what I've done lately.
I know I've spent some money. Bought my nieces ticket for the Europe trip in Nov. My sister is flying on points and had to book and I wanted them to sit together. (I"m paying for her kid 'cause I am bringing her as my friend, I"ll bring her other 2 kids on different trips). The flight was $900, I paid on a credit card and paid it off already from the funds in my 'London' account. The London account is drained to $600. I am waiting to book my plane till we get closer, I have many options, there are several airlines that fly direct which is the only way I fly, its a HUGE difference between a 10 hour flight and a 7 hour flight, 5 hour wait, then 5 hour flight. Given how much it costs to be at the destination and how short a time one will be there, I like to minimize jet lag. (I'm still waking up and my English is not coming out well, sorry). I also ramble..... even more than usual.....
What else did I do? I did go through all my brokerage accounts and made sure stocks were bought. I had a limit order in for today, just checked and it looks like it went through.
I set up an automatic monthly transfer of $200 to go into k and mine's joint brokerage account. I did this before and bought 99 cent only stock, and it made a few thousand that was useful a few years back when k lost his job. I kept a few shares for nostalgic reasons, and they got sold in January when the company went private. So I had a bit of cash in the account. But now its all invested, and I'll keep doing that each month when the money gets transferred. ING has a great program where they will automatically buy stock for you, and you can buy partial shares and use your entire payment.
I also set up my online banking at USAA so it can see a lot or my other accounts, like firsttrade and ING. That's helpful.
I also helped k set up an IRA, and I need to start the process of rolling it over for him. He currently has funds in a few Fidelity funds from a job he no longer works at. I don't like them because of the fees. I am really against fees, I rarely see funds that are worth it. (I have some notable exceptions). I would rather his money be under his (my) control where we can either put it directly in stocks, or in a low cost index fund.
I had $8283 in my S/D SEP IRA brokerage cash account, and decided to pick up 2 on my list - Chipotle (CMG) and Cost Plus (CPWM). I bought approximately equal amounts - $90 more of Cost Plus. Chipotle stocks are very expensive - $4097 only got me 11!
The trades haven't gone through yet but I set the limit price well within todays dailies so they should trigger it.
Its exciting buying stock.