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Be Fearful When Others Are Greedy...

March 6th, 2020 at 03:52 pm

& Be Greedy when others are fearful.

That pretty much sums it up right now.

**15-year mortgage at 2.25%

**London non-stop flights $350 (round trip) from San Francisco

I'll run the mortgage #s this weekend, but seems a no-brainer at this point. Even with our only 5-ish years timeline in our current home. Heck, if we were further along on the college process I'd maybe even cash out some. (I am not participating in scammy student loans. Borrowing close to 2% for college without all the "student loan" red tape is another story). But it's too early, it's still very likely MM(16) will pick a college that costs pennies.

We are probably going to lock in some airfare this weekend (planned trips to Austin and Orlando). We may also consider some unplanned trips.

6 Responses to “Be Fearful When Others Are Greedy...”

  1. Creditcardfree Says:

    Wise! I need to decide if we fully fund our Roth IRAs for the year. Usually, we invest monthly. Of course, could go down more...which then feels like I am trying to time market, and just can't do. Which puts me back at dollar cost averaging.

  2. MonkeyMama Says:

    Yeah, the whole investing thing is pretty "meh" to me. Too much panic. Big whoop, so the market is where it was just 6 months ago. My asset allocations isn't even off $100 at this point. This makes sense because I last rebalanced a few months ago. So it's pretty *shrugs* at this point. If the market dips "lower than it's been in years" then it will get my attention. & even then, probably the only sensible thing to do is rebalance.

  3. ceejay74 Says:

    Thanks for the note! I'm weighing a trip to NY/NJ/CT and just checked to see that airfare is pretty low right now.

    Not ready to refinance--we're about to launch into a kitchen reno which will probably affect our valuation--but it's good to know those rates are lower right now.

  4. ceejay74 Says:

    Well, it looks like our reno won't happen for a while due to lockdown. I'm wondering if I should try to refi. Can I ask you what you usually look for in a refi--lower interest rates, no points? What's more valuable over the long term? Do you do 15-year loans usually to get a lower rate?

  5. MonkeyMama Says:

    I personally just run the amortization table for each scenario (versus current loan) to evaluate if it is worthwhile. When we planned to be in our home "forever" the test would be if the payoff would be sooner (if we just kept paying old larger monthly payment). Because we only plan to be in our home 5-ish more years I just compared the loan balances (current loan versus refi loan) at the end of 5 years. The longer you plan to be in your home the more valuable it can be to pay points.

    {I personally don't want my loan to be sold all over the place, so that is mostly what I look for. In the old days I chose banks who didn't sell their loans. I last refied with my credit union which has been *amazing* and so since they were willing to give me 2.5% 0-points with a reasonable cost, I prefer to just stick with them. I did not shop around.
    Managing debt is so much more to me than just "interest rates". If I have to have this massive red tape, I want it to at least be with a sane lender and to make it as uncomplicated as possible. But that's just me personally}.

    In general, the longer you stay in your home, and/or the bigger the mortgage balance, and/or the bigger the interest rate drop, the more lucrative a refinance is. I've never had a mortgage more than $200k-ish so I expect bigger loan balances to greatly magnify interest rate savings. $200k x1% =$2k interest saved in Year 1. $400k x1% =$4k interest saved in Year 1. It gets more substantial very quickly.

    That said interest rates are rising right now (due to high demand) and I would definitely keep an eye on it but maybe wait a bit. Unless you can drop 1%+ today. I locked it in because I am too much of a "one bird in the hand is better than two in the bush" personality. & also interest rates were insane low the day I locked in. Interest rates have bounced up significantly since. Everyone expects rates to drop eventually, once the smoke clears from this refi stampede. Eventually unemployment will also affect how many people can refi. Which would be a reason to wait if you have steady employment or to rush to refi while you have income. You can't refinance if you don't have the income to support the loan.

  6. MonkeyMama Says:

    Ceejay - we never did 15-year loans all the years my husband was unemployed. We did not feel comfortable with the 15-year. Interest rates were much higher most years, that said. (These days, would probably have done 15-year and would encourage most people to, if the interest rate is only 3%!). If we can reasonably afford the 15-year (in the worst case) then we do it. This is the first time since 2001 that we have a 15-year loan. But the payment is only literally +$10/month compared to our old 30-year loan. It's a no-brainer at this point.

    If I had to add +$100/month or +$200/month I probably would still not be comfortable with the 15-year. It's not a matter of affording it or current budget, but just that it makes me uncomfortable if we had to go through a period of unemployment. It's worth noting as we enter a period unprecedented economic uncertainty. I wouldn't fault anyone for being careful and keeping the 30-year loan. In fact, it may be prudent and wise to stick with the 30-year.

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