Quote:
Originally Posted by 67pro-street
Another thing i am looking into is refinancing my home mortgage. With rates as low as 3% i did some math and figured out that if i can refinance @ 3% for 15 year fixed, i would be paying damn near the same monthly mortgage as my current monthly payments are on my 30 year fixed loan. Of course, prices are changing daily and i need to time it properly to lock my rate in a good percentage, but i just thought i would throw it out there since a home is also a long term investment and any money i can save on interest is money i can put into the market and hopefully get a higher return than 3%.
Which I guess this brings me to another point, and i apologize i know i can get long winded sometimes, but what is everyone's opinion on refinancing with another 30 year mortgage where maybe i am paying 300-500 dollars less per month than if i went with the 15 year refinance. My thought is to pay the min. payment for 30 years and take that 300-500 dollar savings and use it for investing. Not only does keeping my home loan help with tax returns, but i also know that i have a fixed 3% loss on interest for the next thirty years (i am just going to use 3% as an example even though that might not be the rate i lock into...). From what i have gathered so far, the stock market will generally have a ~7% RoR. so even though i am "losing" money by paying interest on my home loan that has been dragged out for 30 years, i know right now that the interest rate will always be 3% for the life of the loan. So if i take the money i save per month by having a 30 year loan as opposed to the 15 year loan and invest it, i can reasonably expect a higher growth than 3% on my investments AND i can afford to invest more money now, rather than later because my monthly mortgage payment decreased. So essentially, if what i am trying to say makes any sense at all then i would be making ~4% on my money ([7% RoR on stock market] - [3% interest payment on homeloan] = 4%) and i am doing so 15 years earlier than i would be if i went with a 15 year loan, right?? (i am ignoring salary increases or other forms of income when i say this...).
Once again, i apologize if this doesnt make sense and for being so long winded. Sometimes it is really hard to type what you are thinking in your head...
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My free advice, so take it for what it's worth, is to always get a 15 year loan if you can. Chances are you wont be in the house even that long and on a 15year much more of your payment goes to principal reduction so you're really just paying yourself that money assuming the house doesn't go down in value.
I wouldn't make your decision based on tax deductibility alone either. Doing something just to get the tax deduction isn't a good reason for doing it. If it's a good financial decision and it's tax deductible, then just look at that as a bonus. Don't bank on that interest always being tax deductible either, the gov't needs cash right now and they'll find it somewhere.
You already have the correct mindset though of maximizing the amount of return on your money so just do what feels right to you and you'll be fine. A lot of people just try to focus on the lowest payment and longest term they can get on borrowed money and borrowing as much as they can get.