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How low can you go?
Topic Started: Jan 26 2013, 10:43 AM (770 Views)
Jolly
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Geaux Tigers!
Interesting discussion occurring in another forum I frequent...Once one is debt free, how close to bill-free can you go?
The main obstacle to a stable and just world order is the United States.- George Soros
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jon-nyc
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Cheers
If you lived itinerantly you could be 100% pay as you go, I assume.
In my defense, I was left unsupervised.
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Jolly
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Geaux Tigers!
True. The less you have, the less it costs to maintain.

The best I've seen, on the thread I mentioned, was $600/month. That was for a single family home, and one vehicle - utilities, insurance and taxes. The family was very creative in their use of solar power and water.
The main obstacle to a stable and just world order is the United States.- George Soros
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VPG
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Pisa-Carp
Rent (gas,elec, A C, incl)
Cell phone
Land line
Cable (couple prem.)
Amex (2) paid almost the day they come in.
Car Insur. twice a year.
No other credit needed. I seem to have one of everything. :cool2:
I'M NOT YELLING.........I'M ITALIAN...........THAT'S HOW WE TALK!


"People say that we're in a time when there are no heroes, they just don't know where to look."
Ronald Reagan, Inaugural, 1971

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Horace
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HOLY CARP!!!
Just closing a refinance today that lowers my mortgage + property tax + insurance bill to 1700/month. But what with my directv and netflix and iphone and gas and electric and hoa and water and trash bills I doubt I'd be competing. I have no debt other than the mortgage.
As a good person, I implore you to do as I, a good person, do. Be good. Do NOT be bad. If you see bad, end bad. End it in yourself, and end it in others. By any means necessary, the good must conquer the bad. Good people know this. Do you know this? Are you good?
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ivorythumper
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I am so adjective that I verb nouns!
Horace
Jan 26 2013, 12:44 PM
Just closing a refinance today that lowers my mortgage + property tax + insurance bill to 1700/month. But what with my directv and netflix and iphone and gas and electric and hoa and water and trash bills I doubt I'd be competing. I have no debt other than the mortgage.
Congrats! We are getting a rate reduction through our banker of about 2%, which will save up about $5000 a year in mortgage interest. It took a lot of hoops to jump through (mostly P&L statements for our business and explanations of payroll) but it is a simple adjustment without any costs to us.
The dogma lives loudly within me.
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Horace
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HOLY CARP!!!
Owning your own business sounds like a paperwork nightmare. God bless you guys.
As a good person, I implore you to do as I, a good person, do. Be good. Do NOT be bad. If you see bad, end bad. End it in yourself, and end it in others. By any means necessary, the good must conquer the bad. Good people know this. Do you know this? Are you good?
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Axtremus
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HOLY CARP!!!
ivorythumper
Jan 26 2013, 01:09 PM
We are getting a rate reduction through our banker of about y%, which will save up about $x a year in mortgage interest.
Congratulations to you too!
Given the y% = $x datapoint, we now know how big your mortgage is. :lol:

(I quote it as y% and $x just in case you want to delete the actual figures from your original post.)
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jon-nyc
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Cheers
It doesn't tell you that unless you make an assumption about rates before and after the 2% reduction and the years left.
In my defense, I was left unsupervised.
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Axtremus
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HOLY CARP!!!
Oh, I just read that as "x-percentage-point reduction translating to $y annual savings in interest." What did I miss?
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jon-nyc
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Cheers
Sorry, my mistake. You need to know the remaining time on the mortgage only.
In my defense, I was left unsupervised.
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ivorythumper
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I am so adjective that I verb nouns!
Axtremus
Jan 26 2013, 01:38 PM
ivorythumper
Jan 26 2013, 01:09 PM
We are getting a rate reduction through our banker of about y%, which will save up about $x a year in mortgage interest.
Congratulations to you too!
Given the y% = $x datapoint, we now know how big your mortgage is. :lol:

(I quote it as y% and $x just in case you want to delete the actual figures from your original post.)
So tell me what amount did you calculate?

And how do you know if we're on a 15 year, 20 year, 30 year, fixed rate or ARM, balloon or not, accelerated bi monthly payment schedule or not, whether part of that saving is over the insurance threshold, just how much I rounded out the numbers, etc?

And wouldn't you also need to know how much we paid down from the original mortgage at the new+2% rate, since the savings is pegged at the new balance?
The dogma lives loudly within me.
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Axtremus
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HOLY CARP!!!
Two percentage points ==> $5,000 a year in mortgage interest

Principal = $5,000 / 2% = $250,000

:shrug:
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jon-nyc
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Cheers
Ax - setup an excel sheet showing interest and principle by month for a 30 year mortgage. Look at the annual amount of interest paid in year 3 vs year 23.
In my defense, I was left unsupervised.
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Axtremus
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HOLY CARP!!!
jon-nyc
Jan 27 2013, 12:47 AM
Ax - setup an excel sheet showing interest and principle by month for a 30 year mortgage. Look at the annual amount of interest paid in year 3 vs year 23.
Thought about that; I'm betting that IT didn't bother with that when he wrote about the two percentage point reduction in rate leading to $5000 interest savings a year (i.e., he made the statement thinking only about the first year of his rate-reduced mortgage).
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jon-nyc
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Clearly he was talking about a single year, but you still don't know where that year sits in the amortization schedule. Ergo you can't infer a balance.
In my defense, I was left unsupervised.
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Axtremus
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HOLY CARP!!!
Technically, you are correct. As a matter of conversational shorthand, I'm betting on him talking about the here-and-now, this year, when the rate-reduction takes effect.
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jon-nyc
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Of course he's talking about this year - but you don't know how long he's had the mortgage. Is 2013 year 5 of a 30 year amortization? Or is it year 12 of a 15 year?
In my defense, I was left unsupervised.
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ivorythumper
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I am so adjective that I verb nouns!
Axtremus
Jan 27 2013, 12:55 AM
jon-nyc
Jan 27 2013, 12:47 AM
Ax - setup an excel sheet showing interest and principle by month for a 30 year mortgage. Look at the annual amount of interest paid in year 3 vs year 23.
Thought about that; I'm betting that IT didn't bother with that when he wrote about the two percentage point reduction in rate leading to $5000 interest savings a year (i.e., he made the statement thinking only about the first year of his rate-reduced mortgage).
What I actually wrote was "which will save up about $5000 a year in mortgage interest", which is a yearly calculation based on the reduced monthly payment which is based on the reduced mortgage interest due in addition to principle. The payment stays the same per month for the life of the loan, the ratio of principle to interest changes, and so with a lower interest rate the ratio shifts while the term stays the same. You would need to know the remaining term of the loan and the remaining principle payoff to be able to state what you did.
The dogma lives loudly within me.
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Axtremus
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HOLY CARP!!!
@ jon (post #18) & IT (post #19)

I am quite willing to admit that I have made a mistake if that is the case and I'd sure like to know what that mistake is and why it is a mistake ...

I just took a very simple interpretation of what IT said about interest savings for him this year, the very same year the reduced interest rate takes effect.

I don't see why I need to know what his original mortgage loan amount was, how many years he has had the mortgage, how his monthly payment was or will be apportioned before or after the reduction in rate, or how many hears he still has to service the mortgage.

This year, without the 2%-point rate reduction, at he would have to pay $A in mortgage interest. With the 2%-point rate reduction, he would pay $(A-5000) in mortgage interest. Anyway I look at it, 2% translate to $5000 for him this year. Regardless of whether this is his 5th year or 16th year or 23rd year into a mortgage, 2%-point still translates to $5000 for him this year.

If a 2% interest of some principal is $5,000 this year, then it follows that the principal is ($5,000/2%=$250,000) this year.

From there, it seems reasonable to deduce that IT mortgage's principal balance this year would be ($5,000/2%=$250,000). No?

I would very much appreciate it if some one can please explain to me why I need to know how many years he's into his mortgage and/or how many years he still has left on his mortgage. :shrug:
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jon-nyc
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Because in a mortgage the payment is held constant and the proportion of principle increases greatly over time. Ergo the amount of interest you pay in an early year is much higher than in a later year. Thus the same 2% drop would result in a different savings in that initial year depending on where you were in the amortization schedule.

I just worked up a quick spreadsheet showing two scenarios:

(1) Year 3 of a 30 year mortgage. Interest rate drops from 5% to 3%. In that year (3) you'd save 5k of interest if the beginning balance was 260k.

(2) Year 13 of a 15 year mortgage. Interest rate drops from 5% to 3%. In that year (13) you'd save 5k of interest if the beginning balance was 975k.

If you'd like I'll email you the spreadsheet.
In my defense, I was left unsupervised.
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Larry
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Mmmmmmm, pie!
It's called the Rule of 78s.



Sure am glad I don't have a mortgage.....
Of the Pokatwat Tribe

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Mikhailoh
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If you want trouble, find yourself a redhead
I'd be happier if Ax would just mind his own business and not worry about how big a mortgage IT has.

Mortgage envy. :lol2:
Once in his life, every man is entitled to fall madly in love with a gorgeous redhead - Lucille Ball
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jon-nyc
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Cheers
:lol:

Although, in Ax's defense this long since quit being about ITs mortgage and became about how much information is contained in the statement 'a rate drop of X% saved me $Y'
In my defense, I was left unsupervised.
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Mikhailoh
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If you want trouble, find yourself a redhead
Can't tell much.
Once in his life, every man is entitled to fall madly in love with a gorgeous redhead - Lucille Ball
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