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To all you Wonderful Fools out there:

Wow!! I was so happy to read all of your responses to my post. I cannot thank you all enough for your wonderful advice. And I am going to take it. I will NOT be refinancing to pay off my credit card debt. And boy do I feel good about that. I'm telling you there is nothing like words of encouragement to help you through something difficult like this. My entire mind set is different after reading your posts. I really feel like I can and will get through this and honestly I don't feel half as embarassed about it as I did just two days ago. Still feel sick to my stomach about wasting sooo much money but not half as shameful. There is something to be said for stating your problem outloud. It does force you to do something about it.

I have already gotten by 15.9% rate on my Discover lowered to 9.9%. Today I am sitting down with my long list of monthlty bills to see where and how I can cut all of those. I am positive I can. I think I'm on my way thanks to you all.

I am still thinking of refinancing to lower my current rate of 7.35% on my mortgage. For $600 I can have my rate lowered one of two ways: 1st) 15 year fixed @ 5.75% and cut 6 years and about $60,000 off the loan my current mortgage is $880/month it would be $954.00 Only a $74.00 a month difference or 2nd) 30 year at 6.375% Which do you think would be better to take? Again any advice is greatly appreciated.

I will be checking the boards frequently and sharing my story so again I thank you. Sitting down and posting here was the best thing I could have done.

I'm on way to no cc debt, good Cash Flow, Great Savings, and some much needed Empowerment!!!!!

mom4boys4

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mom4boys4,

Good to hear from you again! Congratulations on taking the reigns and heading in the right direction.

I am still thinking of refinancing to lower my current rate of 7.35% on my mortgage. For $600 I can have my rate lowered one of two ways: 1st) 15 year fixed @ 5.75% and cut 6 years and about $60,000 off the loan my current mortgage is $880/month it would be $954.00 Only a $74.00 a month difference or 2nd) 30 year at 6.375% Which do you think would be better to take? Again any advice is greatly appreciated.

I would recommend you pose that question over on the "Buying and Selling a Home" board (http://boards.fool.com/messages.asp?mid=20281077 ). There are a couple of mortgage brokers that hang out there and love to help people.

Congratulations again on your first big step to financial independence!

-Agg97
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By the way, mom4boys4, if you want to reply to a message and still stay within an existing thread, click the "Post Reply" link while reading one of the messages inside the thread. If you want to create a new thread with a different title, click the "Post New" link.

-Agg97
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There are several schools of thought on paying off mortgages, and you should do what makes YOU feel good.
The Ric Edelman school is, borrow as much as you can on your house, and never pay it off. In other words, just make the payments you must on as long a term mortgage as possible. He figures mortgage money is pretty cheap money and you can invest and do better.
Retired, you'd probably rather not have to come up with a mortgage payment when you have retires.
Some people are just not happy knowing they owe $110000 or whatever the amount is on the house.
You need liquidity. If you've paid all your available cash on your house, and there is an emergency, it would be difficult to do the refi from a hospital bed with tubes sticking from every orifice. So you need enough cash to cover emergencies very well before tying up more cash than necessary in the house.
Definitely, if you can chop a bunch off the interest rate, the refi is worthwhile. Watch out for closing costs, "origination fees" and the like. Calculate the time to "break-even". That is, how many months/years of the new, lower interest rate does it take to recoup your closing costs? Is it longer than you expect to be in the house? If so, not a good idea.
Best wishes, Chris
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<<Wow!! I was so happy to read all of your responses to my post. I cannot thank you all enough for your wonderful advice. And I am going to take it. I will NOT be refinancing to pay off my credit card debt. And boy do I feel good about that. I'm telling you there is nothing like words of encouragement to help you through something difficult like this. My entire mind set is different after reading your posts. I really feel like I can and will get through this and honestly I don't feel half as embarassed about it as I did just two days ago. Still feel sick to my stomach about wasting sooo much money but not half as shameful. There is something to be said for stating your problem outloud. It does force you to do something about it.

I have already gotten by 15.9% rate on my Discover lowered to 9.9%. Today I am sitting down with my long list of monthlty bills to see where and how I can cut all of those. I am positive I can. I think I'm on my way thanks to you all.
>>


All right. Your enthusiasm and good intentions win you a spot as a Seattle Pioneer Favorite Fool. But understand --- that's ALL the new credit you get! We are hoping to see reports on your success in actually paying off your debt load.



Seattle Pioneer
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I am still thinking of refinancing to lower my current rate of 7.35% on my mortgage. For $600 I can have my rate lowered one of two ways: 1st) 15 year fixed @ 5.75% and cut 6 years and about $60,000 off the loan my current mortgage is $880/month it would be $954.00 Only a $74.00 a month difference or 2nd) 30 year at 6.375% Which do you think would be better to take? Again any advice is greatly appreciated.

So you have 21 years left on the current mortgage, correct? I would not recommend the 30-year mortgage. That means that putting the two mortgages together that you would have a mortgage for nearly 40 years--yuk!

I would like to be in a paid for home by the time my daughter goes to college--that, in a sense, is her college savings. I take it by your ID that you have kids.

I do not buy into the mortgage being "good debt" like some of the so-called gurus do, so if your income can handle the 15-year, I say go for it.

Just curious, I wonder what a 20-year mortgage would do to change your situation. Also, was I right about guessing that you are still paying PMI?

Fred
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I would definitely go with the 30 year mortgage. The lower monthly payment will free up more cash now to pay down your credit card debt, which will take a huge weight off your shoulders and give you a better return on your money. (Paying off the highest rate credit card will save you a lot more money than paying down a lower interest rate, tax-deductible mortgage.)

After the credit card debt is gone, then you can aggressively pay down the principal on the mortgage or stick with the standard payment and invest the extra cash elsewhere -- it's your choice.

Good luck!

LF
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I would definitely go with the 30 year mortgage. The lower monthly payment will free up more cash now to pay down your credit card debt, which will take a huge weight off your shoulders and give you a better return on your money. (Paying off the highest rate credit card will save you a lot more money than paying down a lower interest rate, tax-deductible mortgage.)

After the credit card debt is gone, then you can aggressively pay down the principal on the mortgage or stick with the standard payment and invest the extra cash elsewhere -- it's your choice.


There are two main schools of thought when it comes to mortgages:

1) Buy a fixed-rate mortgage
2) Buy an 5-year ARM

Arguments for both go something like this:

Pro fixed rate: A fixed-rate mortgage is a great deal because you've locked in your rate for so long that those last few payments will be CHEAP compared to what they are. There is also security in knowing that this payment won't change for a long time. I'd definitely worth an extra 1% on the interest rate to have that kind of security!

Pro ARM: Are you kidding me? I live in the real world, jack! Statistics show that 90% of all mortgages are terminated within the first 5 years, either due to refinancing or the homeowner selling the house. The percentages go up to a staggering 95% within the first 10 years. So, why pay a 1% premium when the statistics are in my favor that an ARM will save money NOW. And if I'm super smart, I'll still pay the same monthly payment as a 30-year fixed mortgage, but my outstanding balance will be significantly lower than yours at the end of those 5 years!

Which one do you choose? Only YOU can make that choice. There's pro's and con's to both. It depends on your personality, temperment for risk, and a myriad of other options. The people over on Buying & Selling a Home are the experts on this sort of thing...go start the never-ending debate once more with them!

-Agg97
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Thank you Agg97 for that little tip I have to poke around here a little more to see exactly how things work. And thanks for your info I think I am going to take a look on the other board as well just to see what they have to say.

Mom4
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SeattlePioneer,

Oh I definitely intend to start paying off this debt. Just writing everything down on paper and looking at the actual $'s going out of your house each month it hits you right between the eyes there is no denying it. It's really incredible. Everyone should do that write it down what an eye opener. After you get over how ridiculous you feel for never having done this earlier, you deveop a great determination to get rid of all of it.

I know I can cut down on so many different things: homeowners insurance, car insurance (can shop around for a much better rate), cell phone bills, cable bill, phone bill, heating, not eating out as much (learn to be a better cook) a miraid of things. Always loved a good challenge.

Thanks Pioneer! I'll be back

Mom4
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cell phone bills, cable bill

You NEED neither of these, convenient yes - need no!
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Way to go!

This board is a real eye opener, isn't it? It's really great to realize that you're not in that boat alone. Lots of us here are in there with you and we're just as determined to hit that beach running.

Good job on taking the reins, as another smarter Fool said, and realizing that you CAN control your money, rather than have it control you!

I'm there with you and we can do this!

3MM
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<Pro ARM: Are you kidding me? I live in the real world, jack! Statistics show that 90% of all mortgages are terminated within the first 5 years, either due to refinancing or the homeowner selling the house. The percentages go up to a staggering 95% within the first 10 years. So, why pay a 1% premium when the statistics are in my favor that an ARM will save money NOW. And if I'm super smart, I'll still pay the same monthly payment as a 30-year fixed mortgage, but my outstanding balance will be significantly lower than yours at the end of those 5 years!
Pro ARM: Are you kidding me? I live in the real world, jack! Statistics show that 90% of all mortgages are terminated within the first 5 years, either due to refinancing or the homeowner selling the house. The percentages go up to a staggering 95% within the first 10 years. So, why pay a 1% premium when the statistics are in my favor that an ARM will save money NOW. And if I'm super smart, I'll still pay the same monthly payment as a 30-year fixed mortgage, but my outstanding balance will be significantly lower than yours at the end of those 5 years!
>>


Ummm. I'm unimpressed by this line of argument right now.


Interest rates have been declinging for twenty years, and are at historically low levels. The likely trend for the future is HIGHER interest rates, not lower ones.

When that happens, people will find they cannot easily get out of ARMS, and that their ARM payments will go up substantially over time. When interest rates were rising in the 1960s and 1970s, people hung onto their low fixed rates mortgages and transferred them to the new owners when they sold their homes. Those low interest rate mortgages were worth higher sales prices when properties sold.


In 1985 when I bought my house, I did use a one year adjustable ARM. But interest rates were very high then, and my expectation was that they would decline over time, reducing my expenses and saving me the costs of refinancing. That judgement proved to be exactly right, and I paid off the last of the 1 year arms mortgage twelve years later.


But I would not do that now. The risk of higher interest rates are significant. I suppose there are conditions where an ARM makes sense, but even if you are planning to sell in five years, a fixed rate mortgage at todays interest rates may be an attractive sales feature when you sell your home at that time.

There's a lot to be said for locking in a low interest rate.



Seattle Pioneer





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You HAVE to go with the 15 year, if you can eek out the $74 per month.

Can you get a second job to get the debt down faster?
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Boy isn't that the truth my money has controlled me for far too long but not anymore thanks for the post and the words of encouragement!


Mom4
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Hello there hunnypot,

Yes I can eek out the 74.00 per month. So that is what we are going to do my husband spoke with the mortgage company yesterday and already started the process. Knocking 6 years off the mortgage is a great thing and we save a lot of money. And I will still be realatively young and NO mortgage payment. Love that idea. I can eventually get a second job. I have a baby at home right now so when he goes to full day pre-school next year - yes that is a definite possibility.

I have realized during this lets-look-and-see process here that we just throw away so much money a month. In all of our years of marriage we have never really sat down and looked at just what we spend and what we spend it on. We just literally waste money. Like I have said before it really makes me ill to realize just how MUCH money we have wasted over the years and where we could be today if we were smart years ago. But there is nothing I can do about the past so I am starting with right now and working from here.

I know we can have a couple hundered extra dollars a month to throw towards those credit cards each month after I sit down and start cutting my expenses.

I might go a little stir crazy. I will have to devise ways to have fun and do things that don't require so much cash. And the boys will just have to realize this as well.

Mom4boys
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The ages of 9-18 are the most expensive of raising kids (in my experience anyway (if you are not counting college)). Better to get out of debt now and prepare for those ages. You will have sports equipment, school activities and of course the legendary food bills.

Good luck.

Cheryl B.
(mother of 3 daughters, 24, 23 and 16)
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The ages of 9-18 are the most expensive of raising kids (in my experience anyway --Cheryl B.
(mother of 3 daughters, 24, 23 and 16)


Boy do I agree with this one!!! What's with the child tax credit ending when they turn 17? It should be at least 18 or the year they graduate HS. The last 2 years of HS are expensive to say the least!

sharon
youngest child an 18 year old senior this year...
Senior pictures, graduation package, college app.fees, yada, yada, yada
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I am still thinking of refinancing to lower my current rate of 7.35% on my mortgage. For $600 I can have my rate lowered one of two ways: 1st) 15 year fixed @ 5.75% and cut 6 years and about $60,000 off the loan my current mortgage is $880/month it would be $954.00 Only a $74.00 a month difference or 2nd) 30 year at 6.375% Which do you think would be better to take? Again any advice is greatly appreciated.


I'm sure you'll get varying opinions here, but what I like to do is take the 30 year mortgage, and yes I do realize that I pay a small penalty for that in the interest rate, but then pay it at the 15 year rate. This allows you to have the flexibility of paying the lower amount should you need to for some reason, but it also doesn't just stretch your mortgage out for the entire term of the loan. I prefer the security of knowing I can make the lower payments if I need to.

In your situation where you are cutting expenses and trying to dig out of debt, I'm wondering if that $74 wouldn't be better spent at this point in time on the credit card debt instead of paying down the mortgage. Yes, I realize you'd pay more in interest on the mortgage in the long run than if you went for the 15 year mortgage, but I also see that the 30 year rate is already almost a full point lower than your current mortgage, so I'd be inclined to take whatever that difference is and throw it at the cards. When those are gone, then you can kick up your mortgage payment to the 15 year payment schedule if you choose.

But I am a huge proponent of flexibility, and I think this would give you that while helping you to get out of your credit card debt.
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When those are gone, then you can kick up your mortgage payment to the 15 year payment schedule if you choose.


Just make sure the 'extra' payment goes on the principle and there is no penalty for extra payments. probably not, but it pays to make sure.

Jean
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2gifts,

I tried to highlight part of your message but my computer isn't letting me do it. I highlighted it but then it won't let me cut copy or paste I wonder why not.

Anyway I see what your saying but with cutting my expenses (Food is a huge one) and my husband being able to work overtine I still think going with the 15 might be a better choice for us. My DH is leaning that way as well. But I haven't signed anything yet. Paperwork is on it's way.

Mom4
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Anyway I see what your saying but with cutting my expenses (Food is a huge one) and my husband being able to work overtine I still think going with the 15 might be a better choice for us. My DH is leaning that way as well. But I haven't signed anything yet. Paperwork is on it's way.


As as you have considered all the info, then whatever decision you make on this is the right one for you. In our case, we did the 30 year mortgage and will mostly likely have it paid off in about 17 years, so the flexibility that I like will cost me about 2 years in payments, but I'm OK with that especially as I am expecting to be laid off on Tuesday so we may have to drop down to not prepaying til I have a new job.

I just like people to have considered all the angles in these types of decisions, and it certainly seems as though you and your DH have done that.
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I have realized during this lets-look-and-see process here that we just throw away so much money a month. In all of our years of marriage we have never really sat down and looked at just what we spend and what we spend it on. We just literally waste money. Like I have said before it really makes me ill to realize just how MUCH money we have wasted over the years and where we could be today if we were smart years ago. But there is nothing I can do about the past so I am starting with right now and working from here.

Starting with right now is great, it's just a fantastic thing to do. "Start where you are" is the title of one of my favorite books, by Pema Chodron. I really like the idea that wherever you are, that's the best place to start, rather than waiting until you're a better or more together person to do whatever it is you want to do. Start right here, right now.

I tend to be kind of a perfectionist, and what slows me down a lot is thinking, "Oh, I didn't that right, I didn't do that perfect." And then I think it's ruined and I want to give up. Or that even if I finish it, it won't be good enough or something. Well, horse puckey. :-) Start here, start now, that's the perfect place and time, won't get any better. You've got exactly the right idea. And you're gonna do it!


--Booa
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