Refinance or no? Need advice

**kork13** · 01-07-2009, 06:49 AM

Originally posted by janiebird06 View Post

My husband and I are 60 years old. We owe 102,000.00 on our house. The interest rate is 6 and a half and we have 13 more years. Our payments are 1278.00 a month. Our credit rating is excellent. We are thinking about getting a 30 year loan at say 5 percent to make the payments as low as possible and putting all our extra money in the bank, just in case god forbid my husband would lose his job. We don't have a BIG reason to fear this but we have gone thru years of unemployment in the beginning of our lives together in the late 70's, and the insecurities persist. We figure if we get the payments low enough, we will be able to make those payments easier, in case of possible unemplyment? Anyone have any thoghts on this?

Just in my brief look, I would caution against a 30-yr mortgage refi for you... Do you really want to have a mortgage over your head until you are 90yo? I'm not sure how rates compare, but I would recommend looking instead at a 15-yr mortgage refi. That would give you a shot for a lower rate (and thereby lower payments) while not extending your payment term by too much.

Originally posted by janiebird06 View Post

What is better putting your money in the bank or on your mortgage?

As for this, in most cases paying down the mortgage is better for you. You'll find alot of people here who put an extra few hundred dollars per month toward their mortgage payments. Reason is that you will almost never make a higher return with a bank than you're paying for your mortgage. Yes, investing the money could potentially top a mortgage rate, but if you're wanting to set the money aside specifically for the mortgage, it wouldn't be wise to invest it against that hope... it could turn out for the worst and then you'd be screwed.

**janiebird06** · 01-07-2009, 06:55 AM

Thank you Kork13, we did think about that but we were thinking we would always be able to afford the lower payment, but actually, in my mind I've always thought it better to pay off your house as soon as possible. t I'm thinking what we should do is have a large emergency fund (like 2years at our age) and then just put all the extra money toward the mortgage.

**noppenbd** · 01-07-2009, 07:14 AM

As a compromise, I suggest looking into refi'ing into a 15-year fixed mortgage. I think rates are around 5% for 15-yr loans. This would not extend the term of your loan much but would probably lower your payment a bit. I would continue paying the current payment (extra going to principal) which will keep you on the 13-year payoff schedule.

**snafu** · 01-07-2009, 07:28 AM

Before making a final decision I suggest you think about your long term goals. Your current mortgage continues for 13 yrs. at which time DH will be 73 y/o. Is it his plan to continue working beyond age 65? Do you work? Do you both want to live in that house as long as possible or would you want to downsize at some point? Do either of you have any health issues that could affect your decision?

**jIM_Ohio** · 01-07-2009, 07:38 AM

Originally posted by janiebird06 View Post

My husband and I are 60 years old. We owe 102,000.00 on our house. The interest rate is 6 and a half and we have 13 more years. Our payments are 1278.00 a month. Our credit rating is excellent. We are thinking about getting a 30 year loan at say 5 percent to make the payments as low as possible and putting all our extra money in the bank, just in case god forbid my husband would lose his job. We don't have a BIG reason to fear this but we have gone thru years of unemployment in the beginning of our lives together in the late 70's, and the insecurities persist. We figure if we get the payments low enough, we will be able to make those payments easier, in case of possible unemplyment? Anyone have any thoghts on this? What is better putting your money in the bank or on your mortgage?

At age 60, you want to think about paying off house before you stop working (maybe age 70?). Not paying off house before age 90.

Go for the 30 year fixed (to get payment as LOW as possible). Compare to a 15 year fixed (both should be around 5-5.5%). Then make the same payment you are making now. You will probably pay off house in 13 years or less... and if you lose a job, just lower payment to the minimum.

Do you have cash in the bank? I might suggest having 6 months of expenses in the bank, so if you do lose a job, you don't lose your house.

What is your income, budget and retirement plan?

**tripods68** · 01-07-2009, 09:07 AM

I wouldn't recommend 30 year, but 15 years at a lower interest would work. The idea of owing a mortgage past your 90 is just crazy.

**janiebird06** · 01-07-2009, 09:28 AM

Well, how about getting the 30 year mortgage, putting extra money in the bank and then at 65 we would have money in the bank and availble to go ahead and pay it off. We currently have enough in the bank to cover expenses for over 2 years. That way, we have lots of cash in case of losing a job.....the money would just be in the bank instead of the mortgage..but we could swiftly ..switch it over to the mortgage. So we would not have payments at 90, when he retires in 5 years, we will pay it off or just keep it in the bank. How's that sound?

**jIM_Ohio** · 01-07-2009, 09:30 AM

Without knowing retirement plan, I would question adding more money to bank in hopes of investing the money instead of paying down mortgage.

I doubt you could invest the money in a cash instrument and beat the 5% cost of the mortgage.

You have two years expenses in cash. IMO that is excellent and a reason to direct new money to higher yielding investments (either invest in stock market or pay down a 5% mortgage).

What is your retirement plan?
How much do you have invested?

**KatieNK** · 01-09-2009, 05:54 PM

Are the 15-year mortgage rates as good as the 30 year?

**maat55** · 01-09-2009, 07:16 PM

How much equity do you have in the home?

What are your chances of selling and buying less home?

If at all possible, you need a solution that gets you saving much more towards retirement than keeping too much house. IMO.

Refinance or no? Need advice