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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127812  
Subject: Re: Tough refinancing question! Date: 6/29/2001 1:13 AM
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Hi headaix,

however, i plan to do the "every 2 week" plan, so 23 years i would have the extra to PAYOFF the student loan, instead of making the min. (interest) payments.

You've got this a little backwards, by my reading...
What you want to do is pay OFF the more expensive, non tax-deductible interest costing student loans and consumer credit BEFORE you pay off the cheaper, tax-deduction treated mortgage loan. Eliminate the expensive stuff first.

also, i could sock some back into the 1st to get the L/V under 80 faster to eliminate the PMI.

My recommendation is to finance w/o PMI in the first place... either by using a combination loan package (80-15 or 80-20 recommended)

cashflow, to me, seems the answer. free-up cashflow to give me options and eliminate unsecured debt.

You're thinking on-track here... so now you need to review your tendency to overpay for the fixed period of your loan. You'll notice the last loan you got you paid the rate for a full 30 year fixed term, but here you are refinancing for a lower rate.

You might correctly think to yourself; "Self... rates just ain't gonna git so low ever again that it'll make sense to refi for an even lower rate than I'm a gittin now!" And you would be right...

However, in 5-7 years you will (with statistical certainty of over 80%) decide to refinance to get your built up EQUITY out of your home, OR you will SELL your home to move up or move away. Yet, if you get another 30 year fixed, you'll again be paying much more than you need to for a loan you'll never use to the end.

So... what's the answer? 30 year loans fixed at extra low interest rates for only the first 3, 5, or 7 years... the shorter the fixed period, the more savings during that period. None of the FORCE you to refi, since there are no balloon payments involved... they just slide into adjustables after the ficed period.

Either just before, right at, or near after the fixed period ends, you can refi to take out your excess equity (so it can be invested in a much better growth investment which will eventually grow to equal and be more than your mortgage) and lock in another 3, 5, or 7 years of lower-than-30-year-fixed rates. The amounts you saved during the shorter fixed periods at the lower rates will be plenty more than the transaction costs of the refi, you will have had the benefit of compounding interest on the savings if you'd invested them with discipline, and you'll have the transaction paid-for to get the excess equity out and working again... it's all good!

Here are a few bits I wrote detailing this all in more detail.
http://boards.fool.com/Message.asp?mid=15252631

http://boards.fool.com/Message.asp?mid=15227155

http://boards.fool.com/Message.asp?mid=15223863

Hope that's helpful... if so, "tell a friend!"
Dave Donhoff
Lic. Mortgage Broker
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