Cash Out Re-finance put in VBTLX or Put Back to Principal??

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Cash Out Re-finance put in VBTLX or Put Back to Principal??

Postby isufan71 » Fri Feb 08, 2013 10:09 pm

Hi --

I recently did a re-finance on a mortgage and got a 2.75% 15 year fixed loan. I got some cash out as I thought I needed it to help our mother-in-law move turns out may not be needed.

The house is worth about $300,000. Loan was for about $225,000 and so at closing they gave me $132,000 which I put in vanguard total bond market index fund as I figured it was about as risky as I wanted to go with the money.

My question given my mother-in-law may not be moving anytime soon would it be better to put the money back towards principal or do you think a Total bond market index fund would likely outperform this low mortgage rate over the next 5 years or so?

I'm having a bit second thoughts [political comment removed by admin LadyGeek]. Perhaps I should be happy with a 2.75 rate and merely put it back in principal.

Looking for some opinions on course of action.... I want this money fairly secure so not considering stocks but happy to discuss other alternatives.

Thank you!!!
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Re: Cash Out Re-finance put in VBTLX or Put Back to Principa

Postby Snow Boarder » Fri Feb 08, 2013 10:56 pm

isufan71 wrote:I got some cash out as I thought I needed it to help our mother-in-law move turns out may not be needed.

So at closing they gave me $132,000

If you decide to put the money back into the principle call the lender before you do it. Tell them you want to "recast" the loan based on an unscheduled
pay-down. They will reamortize the remaining balance over the rears remaining on the loan.
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Re: Cash Out Re-finance put in VBTLX or Put Back to Principa

Postby isufan71 » Fri Feb 08, 2013 11:21 pm

I fail to see how recasting is that helpful as I'm not really looking to lower my payments my idea if I choose that route would be to pay off the loan quicker (ie. make a large principal payment to reduce # of years to payoff)??
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Re: Cash Out Re-finance put in VBTLX or Put Back to Principa

Postby Snow Boarder » Fri Feb 08, 2013 11:40 pm

isufan71 wrote:I fail to see how recasting is that helpful as I'm not really looking to lower my payments my idea if I choose that route would be to pay off the loan quicker (ie. make a large principal payment to reduce # of years to payoff)??


It will be the same interest rate and you can pay extra principle to reduce the number of years to pay it off. But if things go bad Lay-off etc you can dial back on the extra principle if need be.
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Re: Cash Out Re-finance put in VBTLX or Put Back to Principa

Postby bdpb » Sat Feb 09, 2013 10:15 am

isufan71 wrote:I'm having a bit second thoughts [political comment removed by admin LadyGeek]. Perhaps I should be happy with a 2.75 rate and merely put it back in principal.


[Response to political comment removed by admin LadyGeek]

Do you max out all available tax preferred accounts? If not, use it to fully fund them before taxable investing. Otherwise, just pay down the mortgage.
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Re: Cash Out Re-finance put in VBTLX or Put Back to Principa

Postby LadyGeek » Sat Feb 09, 2013 12:59 pm

As a reminder, political comments are off-topic. See: Forum Policy

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Re: Cash Out Re-finance put in VBTLX or Put Back to Principa

Postby isufan71 » Sat Feb 09, 2013 4:09 pm

bdpb wrote:
isufan71 wrote:

Do you max out all available tax preferred accounts? If not, use it to fully fund them before taxable investing. Otherwise, just pay down the mortgage.



Yes, I do. Thanks for the recommendation.
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