skipt@inuxm.UUCP (M Tourville) (03/19/86)
PERSONAL GOALS NEED MORE EMPHASIS IN THIS DISCUSSION: One aspect that's been left out of the 15/30 discussion is personal goals. Issues like job stability are sort of like "goals", but I think personal goals should have more emphasis in this discussion. I understand the numbers, use spreadsheets, consider taxes, etc, and it is obviously time for me to refinance. 15 or 30? My goal is to provide college funding for my child who is now 3. This means the money must be available in 15 yrs. I could take a 15 year note, so that when my mortgage payments stop, I then use them for college. Or, take a 30 yr note and invest my increased cash flow in a college saving fund of some sort (another subject). Since it is extremely unlikely that I will live in the same place for the next 19 years (15 year note plus 4 years of college), I choose the 30 yr plan. (Of course, you could argue that I could borrow against the paid-up house after 15 years.) After you finally understand all the numbers and technical options of refinancing, be sure to factor in your personal issues before you do anything. If your object is long term capital appreciation, and you believe that real estate will appreciate faster than other investments, and you are not disciplined enough to accelerate payments on a 30 yr note, then a 15 yr note may be right for you. As Bob Rindfuss so elegantly pointed out in an earlier article, the numbers usually come out fairly close if taxes, investments, and so on don't go haywire. So the bottom line is first do your homework, then make your decision based on where you personally are and where you want to go. POINTS: Points, strictly speaking, are a cost you pay for buying money. As such they are deductable. If you pay them up front, they are deductable in the year paid. You can also fold them into the loan, in which case you can only deduct what you pay each year. Part of your refinancing fees are also a cost you pay for buying money, but some are not. Get a careful breakdown of loan origination charges to make this determination.