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  1. #681
    Darth Small Macheath's Avatar
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    Quote Originally Posted by liuv View Post
    Fidelity required the medallion signature guarantee before I could roll my old 401(k) into what was then my new 401(k).
    Interesting, when I moved from the startup over to Intuit after a year, I was able to roll my 401(k) from Paychex into the new one at Empower by filling out a form, from what I can recall. Maybe it was a small enough amount that they just shrugged and said, "sure."

  2. #682
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    Quote Originally Posted by liuv View Post
    My credit union does a "Rapid Refinance" which is a 12-year fixed that is currently at 2.99%. They advertise only $149 closing costs, but you might have to pay $200-400 for an assessment. I don't know if it's limited geographically or if you meet the size and LTV requirements, but check it out:

    https://www.uwcu.org/HomeLoans/RapidRefinance.aspx
    Oohhh, that's very nice. I've been paying down my mortgage aggressively enough that... I suspect the difference between my current ~6 year plan at 4.625% and a hypothetical 10-15 year plan at 3.00% is so negligible that it would be rubbed out by even $500 worth of closing costs. But this is exactly the research I'm going to do in the next month or so. Maybe I'll crunch some numbers and see, because that looks like a nice program.

    EDIT: Looks like there's another credit union here in San Diego that offers "term buster" loans. I do not know what a term buster is, but they have zero closing costs. This may require investigation. They have a 5 year plan at 2.875% with zero closing costs... that would remove my need for big annual lump sum payments (my version of "aggressive repayment") but make each month significantly less comfortable.
    Last edited by Macheath; 08-06-2017 at 01:40 PM.

  3. #683
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    Okay... I did some math.

    Current: 4.625% with extra lump sum payments annually, paid off in full Sept. 2022
    Term buster: 2.875% with no extra payments, paid off in full Aug. 2022

    The "term buster" plan saves me $3848 in interest, or roughly $64 per month. The monthly payments are many times bigger, but there's no annual lump sum.

    With the current plan, I have the flexibility to push off the lump sum payment in a lean year if necessary. That flexibility might be worth $64/month in wasted interest payments.

  4. #684
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    Quote Originally Posted by Macheath View Post
    .. 529 plans, ..
    crap! I forgot we have one of those over there too! I was fixated on my old IRA and forgot all about it. Better get the paperwork for that one too.

  5. #685
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    Quote Originally Posted by Macheath View Post
    Interesting, when I moved from the startup over to Intuit after a year, I was able to roll my 401(k) from Paychex into the new one at Empower by filling out a form, from what I can recall. Maybe it was a small enough amount that they just shrugged and said, "sure."
    Yeah, I hadn't had to do that before so I asked the guy what was up. He said it was based on whether the two companies had existing agreements in place and what those agreements were. He's just a phone "advisor" so the computer tells him what he needs. Some are as simple as an account number, others required getting stuff notarized, and this one required getting a medallion signature guarantee.

    Quote Originally Posted by Macheath View Post
    Okay... I did some math.

    Current: 4.625% with extra lump sum payments annually, paid off in full Sept. 2022
    Term buster: 2.875% with no extra payments, paid off in full Aug. 2022

    The "term buster" plan saves me $3848 in interest, or roughly $64 per month. The monthly payments are many times bigger, but there's no annual lump sum.

    With the current plan, I have the flexibility to push off the lump sum payment in a lean year if necessary. That flexibility might be worth $64/month in wasted interest payments.
    I was seeing similar numbers in the math I did. I don't know your numbers or how the repayment of you ARM is structured, so I treated it as a 6-year fixed at 4.625%. I came to the conclusion that a 12-year fixed at 2.99 would be more expensive, but paid off in 6 years would be about $5,000 per $100,000 cheaper. With the standard TVM calculations I used, the 12-year-in-6 payments were smaller than the 6-year fixed payments (not by much).

    I gather that your required payments are smaller than what one would expect from a fixed rate mortgage. I'm just realizing that I don't know how the payment size is set for an ARM. Obviously you can't calculate a full amortization with unknown rates after x time period. Do you know how that's calculated? Is the annual lump some something you're doing on your own or is that a required thing?

  6. #686
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    Quote Originally Posted by liuv View Post
    I treated it as a 6-year fixed at 4.625%.
    As long as you account for the annual lumps, that's a good way to calculate it; I don't plan to stick around long enough for another rate increase. Or, at least, by the time it increases again my loan will be so tiny it won't matter.

    Quote Originally Posted by liuv View Post
    I came to the conclusion that a 12-year fixed at 2.99 would be more expensive, but paid off in 6 years would be about $5,000 per $100,000 cheaper.
    Same here. At first, I wasn't impressed by the 12-year fixed, but then I realized it wasn't a fair comparison unless I made extra payments to get it done in 6 years. At that point, it was a bit cheaper. Then I searched around for CUs in San Diego, found the 5-year fixed at 2.875, and compared it directly against "my plan" with an increased lump payment to get it down to five years (note that in the comparison above, they're paid off within a month of each other).

    This makes the "term buster" look like a decent idea, as long as you don't mind amortizing the (100% optional) annual payments across all 12 months in the form of (0% optional) straight mortgage payments.

    Quote Originally Posted by liuv View Post
    With the standard TVM calculations I used, the 12-year-in-6 payments were smaller than the 6-year fixed payments (not by much).
    That may well be true. I'd expect them to be nearly equivalent over a 6 year time span.

    Quote Originally Posted by liuv View Post
    I gather that your required payments are smaller than what one would expect from a fixed rate mortgage.
    Well, my payments are very small because I still have 25 years on the loan. I make up for it by pumping a large sum of money in every November.

    Quote Originally Posted by liuv View Post
    I'm just realizing that I don't know how the payment size is set for an ARM.
    It's dynamic. If you "simulate" the loan by counting down months, then you can get the payment in any given period (given the remaining months) like so:

    Code:
    private static double getMonthlyPayment(double currBalance, double currRate) {
        // http://www.mtgprofessor.com/formulas.htm
        return currBalance * (
                ( getC(currRate) * Math.pow(1 + getC(currRate), getRemainingMonths()) ) /
                ( Math.pow(1 + getC(currRate), getRemainingMonths()) - 1 )
        );
    }
    
    private static double getC(double i) {
        return (i/100d) / 12d;
    }
    Quote Originally Posted by liuv View Post
    Is the annual lump some something you're doing on your own or is that a required thing?
    They'd be happy to take my money for 30 years. This is a plan I came up with myself to counteract the increasing rate before it actually increased. As I learn more about the math behind ARMs, I find that my guesstimation math was better than expected.

  7. #687
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    Quote Originally Posted by Macheath View Post
    Well, my payments are very small because I still have 25 years on the loan. I make up for it by pumping a large sum of money in every November.
    Yeah, I looked into it a bit and realized that ARMs still have an expected payoff length. I guess that's not said in most cases because the whole idea of an ARM is generally that you're not going to be paying it for the full term. 5/1 ARM is what I hear said, but it's really a 30-year 5/1 ARM.

    Quote Originally Posted by Macheath View Post
    They'd be happy to take my money for 30 years. This is a plan I came up with myself to counteract the increasing rate before it actually increased. As I learn more about the math behind ARMs, I find that my guesstimation math was better than expected.
    Is there a particular reason you do an annual lump sum? Larger monthly payments should save you even more in interest. If you're saving up or structuring your budget so that you can make the big annual payment you'd be better off just making bigger monthly payments. Unless there are extra payment penalties, or November is when you get your bonus, or some other thing allows you to make a lump sum payment without structuring your budget the rest of the year around having that money available in November.

  8. #688
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    Quote Originally Posted by liuv View Post
    Yeah, I looked into it a bit and realized that ARMs still have an expected payoff length. I guess that's not said in most cases because the whole idea of an ARM is generally that you're not going to be paying it for the full term. 5/1 ARM is what I hear said, but it's really a 30-year 5/1 ARM.
    Yep, they have a period, same as fixed-rate mortgages.

    The big difference is, if you make an early payment on a fixed-rate mortgage, you're pulling up your end date; one extra payment means you'll be paid off in a total of 359 months. With an adjustable rate mortgage, the monthly payment is recalculated every time the interest rate changes. So in contrast to fixed-rate, extra money dumped into an ARM makes future payments smaller (once they're recalculated), but it doesn't change the end date.

    Normally with an ARM, when the rate goes up, you'd expect your payments to go up. I wanted to counteract that, so I made extra payments sufficient to keep my monthly payments around the same size, assuming I jumped from 3 to 5 percent at the five year mark. In reality, I made larger-than-necessary "lump sum" payments, and my rate went to 4.625 percent (rather than 5)... my recalculated payments will be lower for the next five year bracket.

    Quote Originally Posted by liuv View Post
    Is there a particular reason you do an annual lump sum? Larger monthly payments should save you even more in interest.
    I thought it through without doing any math. Seems to me that in order to save interest, you want to pay earlier, not more frequently. This isn't dollar-cost averaging. Therefore, why not pay all your extra monthly payments for the year up front, at the start of the year? And since you're now boiling it down to an annual payment, does it really matter when in the year it comes, after you've started doing it?

    Maybe if I did the math, there'd be some truth to the advantage of monthly payments. It just seemed counterintuitive to me five years ago. The important thing was getting the money into the loan, and it's easier to save up and schedule one large payment.

  9. #689
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    Quote Originally Posted by Macheath View Post
    The big difference is, if you make an early payment on a fixed-rate mortgage, you're pulling up your end date; one extra payment means you'll be paid off in a total of 359 months.
    Not exactly. When you make a payment, they calculate how much interest accumulated since your last payment, use your payment to cover that interest, then if there's any payment left the rest goes to principal. Making extra full payments should therefore remove slightly more than 1 payment.

    I just did the math. Making double payments on a 30-year fixed will result in it being paid off in 141 months.

    Some banks will take an extra payment and hold it until your next due date rather than applying the extra to principal if you don't specify that the extra should go to principal. Those banks are a-holes.

    Quote Originally Posted by Macheath View Post
    I thought it through without doing any math. Seems to me that in order to save interest, you want to pay earlier, not more frequently.
    You're right. Earlier is the key. Interest due is calculated every time you make a payment, so getting the principal lower, sooner, will decrease the interest you have to pay. I just did the math and it really depends on WHEN in the lifetime of your loan you're making the big payment, but even so the difference is small.

    For a 3.00% 30-year fixed mortgage of $100,000, paying to schedule will take the full 30 years and cost $51,777.45.

    Paying an extra $100 per month will take 262 months and costs $36,322.17. That's $17,561.82 cheaper than paying it straight.
    Paying that extra $1,200 at the end of the loan year (months 12, 24, 36, etc.) takes 264 months and costs $36,829.65. $507.49 more than paying extra monthly.
    Paying that extra $1,200 at the beginning of the loan year (1, 13, 25, etc.) takes 260 months and costs $35,812.81. $509.36 less than paying extra monthly.

    So, first of all, paying extra is the BIG benefit. Timing of that extra payment is min-maxing. If you start with the lump sums immediately, you can save more than by making extra monthly payments, but if you could start the lump sums on payment 1, why borrow so much?

    Quote Originally Posted by Macheath View Post
    The important thing was getting the money into the loan, and it's easier to save up and schedule one large payment.
    You're right, actually making the early payments is the biggest savings. I'm just saying that if you've got a "Future Lump Sum Payment" savings account that you fill over the course of the year, then empty in November, you could save slightly more interest by making bigger payments all year long rather than saving up.

  10. #690
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    Quote Originally Posted by nynnja View Post
    I've got to figure out where to get the medallion signature guarantee now. That article talks about paper stocks, but I'm guessing Vanguard uses it as a security measure because everything else is online(?).
    Got the signature from my credit union. Apparently it's more serious because they charge $15 for it, and my CU hardly charges me for anything. So that paperwork is in the mail and I need to send a check to settle the fee balance on my old account. I also sent a nice breakup email to my old adviser and he was polite about it.

    Also found out that you can (and always could) administer 529 plans through www.edvest.com directly. Wish I would have known that long ago and never paid a broker to do it for me.
    Last edited by nynnja; 08-09-2017 at 12:02 PM.

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