Posted on: 05-11-09 21:46:52
Hi,
Has any one tried to re-amortize their mortgage to reduce the monthly payment (given that you've paid your principle reasonably well). My lender is offering to re-amortize for the remaining period so that I pay smaller monthly payment compared to what I started originally. Lender confirms that this change wouldn't impact the original re-finance date. Let us say, my mortgage started April 25 2007, my renewal date is April 25, 2012. With this change, the renewal date will continue to remain on April 25 2012.
Means, I could start re-amortizing the principle balance for another 22 years ( I started with 25 years and I am about to complete about 3 years ) and my renewal date will still remain the same ie.., two years from now.
With this, I could lower my monthly payment and I could re-finance in 2 years expecting the interest rate could further be lower 
(Hope), I don't see any issues other than the need to continue to pay the mortgage much longer than I originally planned but the reduced monthly mortgage commitment provides an advantage of considering other investment avenues. Being a late adopter of sucker rally I - It isn't really my big interest to pay off my house fully but have the principle to the extent possible. The rally - II is reeeaaally scary...
Appreciate your input.
Thanks,
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The cowards never started,
The weak died on the way,
Only the strong arrived.
http://www.youtube.com/watch?v=_yK1i9cLAMM
Quote:Is that the only reason you want to increase your amortization?
Originally posted by JRF
but the reduced monthly mortgage commitment provides an advantage of considering other investment avenues.
There are two issues with this approach - first, you are assuming that you can make better returns after tax in the stock market than you can by paying off your mortgage.
What % returns are you expecting in the stock market? What is the level of risk? Have you run the numbers to make sure you are not losing money (since the mortgage money is after tax money and any stock investing returns are pre-tax).
Secondly, you are leveraging against your home without any tax benefit.
It may be better to keep paying your mortgage, but take out a HELOC and use that to invest. That way at least the interest will be tax deductible.
But even then, it's a risky game.
And a game at which most investors don't come out ahead.
It is hard to keep making better returns than mortgage interest consistently for 25 years.
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
The interest rates will NOT go lower than they are right now.
The interest rates are headed only one way UP.
Bring what you owe on your house down first and then try other investments..
This should only be done during hard times (job loss etc) where you have less income and want to live in your house.
Once the balance is low then think about other investments, pehle Roti, Kapda aur Makaan and then stocks and other investments.
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Live and Let Live
Thanks Chitt & Prat.. my focus is on the cash flow. With much hard work I've paid 3/4 of the original value I bought 3 years ago. I don't want to take the appreciation part of the last 3 years as I do not want to see my residence as an investment.
Though the loan has been paid substantially, the monthly payment doesn't recede and it continues what I started originally hurting the cash flow now. Having the major portion paid-off, re-amortizing will give me the benefit of making smaller monthly payment even though I need to continue paying interest longer. This interest (and payment) is going to be smaller in terms $$ and the spousal income could take care of that, but if I don't do that, I am tied up to pay a larger monthly payment for next 2 years that would prevent me to channel funds to the next initiative of buying another property, let us say a piece of land in India where I see the prospects are bright given the resources I have access to.
I still believe the traditional economy which substantially relies on Gold & Land, If I keep a watchful eye open and shed the yellow metal as it starts to decline in response to the recovering economy, it could be profitable. RE in India at this point doesn't seem to decline but it could slow down. It is very difficult to make a decision to shed Gold when it is in its peak as we never know what is its next peak. So some loss is inevitable but I absorb this as part of my strategy.
With this in my plan, I am thinking of leveraging the HELOC at an acceptable level provided the interest rate doesn't leap, we know that it is bound to increase though.
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The cowards never started,
The weak died on the way,
Only the strong arrived.
http://www.youtube.com/watch?v=_yK1i9cLAMM
I think it applies to me now.
Quote:
Originally posted by chittesh
Once the balance is low then think about other investments, pehle Roti, Kapda aur Makaan and then stocks and other investments.
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The cowards never started,
The weak died on the way,
Only the strong arrived.
http://www.youtube.com/watch?v=_yK1i9cLAMM
Yes 3/4 of a mortgage paid off is a good starting point to look at other investments.
Try to take the remaining of your mortgage amount as LOC, pay off your mortgage and invest the amount and write off the interest..
I wish i were in your position (have a lot of years to go..)
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Live and Let Live
Thanks.
Can you shed some more light on the write-off part. How would obtaining LOC and pay off your mortgage would be written off? Aren't you referring Smith maneuver.
Investing in an apartment in India? would that qualify for interest write-off.
Quote:
Originally posted by chittesh
Yes 3/4 of a mortgage paid off is a good starting point to look at other investments.
Try to take the remaining of your mortgage amount as LOC, pay off your mortgage and invest the amount and write off the interest..
I wish i were in your position (have a lot of years to go..)
-----------------------------------------------------------------
The cowards never started,
The weak died on the way,
Only the strong arrived.
http://www.youtube.com/watch?v=_yK1i9cLAMM
