Help with some financial planning
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Financial Planning - Financial planning in general. (Moderated) 

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Subject Author Date
Help with some financial planning AB 09-24-2006
Posted by jIM on October 2, 2006, 7:15 pm

TYPO

> John was right and I do NOT think bad he made that conclusion (even if it
> were wrong). When I started with this company we were paid once per
> month at the END of the month. That was tough first 6 weeks.
>


Posted by Shhhh on October 1, 2006, 4:46 pm
What do you say to people who have the cash flow to afford a mortgage, but
do to past credit problems can't get approved for anything but interest
only... These people are fixing their credit so in a few years they'll be
able to refinance into a better mortgage. Seems unfair to suggest problems
in the past should keep someone (even a family man/woman) from owning a home
and sharing in the "american dream"

Just my 2 cents,
Shhhh

> An interest-only or zero-amortization loan might make sense for investment
> property like a rental house. It would reduce the amount of money the
> investor had sunk in the property and would increase his monthly cash
> flow.
>
> An interest-only loan is totally inappropriate in my opinion for one's
> residence. However if you already have a zero amortization loan, there
> may be other loans that should be prepaid first before attacking the
> mortgage. Any very-high interest loans, or any loans with a low balance
> should be retired first -- then start paying down or refinance the
> mortgage.
>
> Best regards,
> Bob
>


Posted by John A. Weeks III on October 1, 2006, 7:01 pm

> What do you say to people who have the cash flow to afford a mortgage, but
> do to past credit problems can't get approved for anything but interest
> only... These people are fixing their credit so in a few years they'll be
> able to refinance into a better mortgage. Seems unfair to suggest problems
> in the past should keep someone (even a family man/woman) from owning a home
> and sharing in the "american dream"

I am all in favor of you sharing in the American Dream. But if you have
bad credit, buying a home is just as likely to become a nightmare. You
would be far better off renting for a few years. That would let you
rebuild your credit so you can get an inexpensive traditional loan.
It would also let you live for less, so you can save up a much larger
down payment. That way, once you do buy a house, it is a slam dunk
good deal, and you will not end up back in foreclosure soon, or have
that balloon explode on you.

-john-

--
======================================================================
John A. Weeks III 952-432-2708 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================


Posted by John A. Weeks III on October 1, 2006, 6:58 pm

> > I'd love to see a link to what you are referring to. It must have
> > been some rather specific advice since I myself do not advocate that
> > in general.
>
> See
> http://groups.google.com/group/misc.invest.financial-plan/browse_thread/thread
> /4ac52caf9f6bd6a2/b0d7f9afcef2ee22?lnk=st&q=group%3Amisc.invest.financial-plan
> +author%3AWeeks&rnum=15&hl=en#b0d7f9afcef2ee22

Thanks for looking it up. That was a somewhat special case. The poster
in that case had a 1% income ($175K), and had liquid cash in excess
of his mortgage, and at that time (and since then), both the market and
CD's are returning equal to or higher than his interest rate. In that
case, he could invest the money, look for upside, but if worse came to
worse, he could pull the money and pay off the mortgage. Few people
have that kind of non-qualified funds sitting around like that.

> In many cases you're right. But wouldn't an interest-only sometimes
> make sense for those who purchase property, but move often?

I am going to give in. Yes, there are occasionally times when an
interest only loan makes sense. But that is not how the vast
majority are being used. Just on Friday, the US Government had to
issue a warning to lenders that most interest only loans that have
been issued recently were given to people that could not afford them.
If you avoid them altogether, you will be right 99% of the time.

If a person moves often, they should rent. Renting is a great deal
right now. It doesn't make sense to pay closing fees on the way in,
and real estate commission on the way out to get in and out of a
home. Renting eliminates all those costs, and adds a great deal
of flexibility.

-john-

--
======================================================================
John A. Weeks III 952-432-2708 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================


Posted by jIM on September 25, 2006, 4:59 am

> Here is my current situation:
> 28, 27 Married couple, no children.
> Combined monthly income: 7300
> Combined Mortgage (1st and Heloc): 3000
> Monthly bills: 1850-2100 (includes school load payment, utilities, food,
> property taxes)
> Car payment: 400 (two more years)
> Combined savings: 8000
> Current Stock Holdings: 2000 (mostly Google)
> I am a computer programmer and my wife is a graphic artist/marketing
> coordinator.
>
> My current home loan allows for several payment options which include:
> Min Payment: 1300
> Interest Only: 2600
> 30 year amortized: 2850
> and 15 year amortizes: 3830
>
> What is my best option here? I have been making Interest only payments on
> this load since its inception in June 04. Am I better off letting my loan
> increase as I save and invest an additional 1300 a month? Would the
> question be whether I can invest that 1300 a month to get a better yield
> than the increase in principal to my loan when I only pay the minimum?
>
> I could afford the 30 year amortized... an extra $250, but is that really a
> better solution?
>
> I really appreciate any help you can offer.

I see $2200 as free cash flow each month.
I did not see a breakdown on HELOC vs standard mortgage payment.

rule 1a- pay $2850 each month on mortgage. If this payment is too
touch, downsize the house.

rule 1b- spend only what you make (avoid credit card debt).

rule 2- have a plan. It sounds like you have an objective (have kids
within 2 years), but no plan. Get the plan down... like 401k, asset
allocation, savings rate, debt reduction. Prioritize the plan... not
everything can be done at once.

If you ae thinking of kids, you also need to think about life
insurance.

Other things to consider- new cars vs used cars, taxes and tax
deductions, retirement, reducing workload of wife.


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