Daily Roundup: Interviews, Charities, and Bike Mortgages
Friday, 22nd June 2007 (by J.D.)This article is about Spare Change
I’ve been swamped by stories from GRS readers lately. I’ll do my best to get most of these posted before I leave for Europe.
Earlier this month we debated whether it’s better to invest or to prepay a mortgage. On a related note, Lynn at The New Homemaker has a nice introduction to the bi-weekly mortgage. It’s worth reading if you’ve considered going this route.
Jim from Blueprint for Financial Prosperity and FMF from Free Money Finance are teaming together to raise money for the Make-a-Wish Foundation. They’re each matching reader donations up to $500. Go lend them a hand!
Finally, I’d be remiss if I didn’t mention a couple of interviews I’ve done recently. They’re blogging-centric (as opposed to money-centric), but may give you some background on this site if you’re new here. Kevin Mulligan has posted the first part a conversation we had. At Daily Blog Tips, Dan posted a side-by-side interview with me and my colleague, Trent from The Simple Dollar. I’ve also completed an interview for Canadian Dream; I’ll link to that when it appears. (I plan to interview him soon, too!)
If you have a personal finance story you’d like to share, please drop me a line. I’m also looking for a few guest entries in the coming weeks — if you’d like to contribute to the site, let me know.
One note about mortgage vs. investing. If you ever get sued silly, isn’t your house one of the few assets they can’t take away from you? Yes, they can put a lien against it. But they can’t make you move & sell it.
I think Lynn’s introduction to bi-weekly mortgages understates the percentage of such plans that are ripoffs. When I was mortgage hunting I talked to several banks/brokers and I found no bi-weekly or bi-monthly plans that actually posted the payment upon receipt — and they all charged an extra fee. I’m sure there are some good ones out there, but it’s way too easy to get hoodwinked.
The easiest thing to do to get pretty much the same result is to make an extra 1/12th of a payment each month (automated, of course) - even the about.com article on bi-weekly mortgages suggests this. It’s a small enough amount each month that you learn to live without it, but it still saves you a lot in interest and helps you build equity a lot faster.
As I said earlier, tax deductible debt is considered good debt. Why not keep your mortgage and invest your savings? If you want to pay down the mortgage, why not use the tax return from the mortgage to pay it down once a year?
FT
“Mathematically it makes more sense to invest”
My intent is not to rehash the pay down vs. invest debate, but this is not a foregone conclusion. Which way the actual math goes is dependant on a number of variables, and does not support one conclusion over the other with any regularity.
You’re right, Dylan. I’ll change my phrase-ology.
Hi all,
I just checked on my mortgage company’s website (CitiMortgage) to see
what they’re rules concerning bi-weekly payments were. I wasn’t
impressed.
First, they have a “plan” called the “BiWeekly Advantage” plan. To
sign up for this plan, they *require* you to allow them to
automatically draft from a checking or savings account. That’s not
something I’m likely to let them do
Second, and this is the part that *really* frosts me, is that they
*charge* you a $375, non-refundable enrollment fee!
You are probably much better off just sending them a check every two
weeks with a note telling them, in no uncertain terms, how much to put
towards principal, interest, taxes, and escrow. At least where I
live, they *have* to abide by your wishes, and here it’s against the
law to charge pre-payment penalties.
While I truly love the idea of paying bi-weekly, I don’t think
enrolling in the “BiWeekly Advantage” plan is an advantage to anyone
but them!
Thanks for the linkage. Didn’t realize you had so many interviews going down!
Oops! For a second there, I thought grs was presenting an in depth look at buying a new bike on credit. something I’ve been tempted to do considering all the stunning handmade bikes in portland,or. vanilla bicycles and ira ryan and sweetpea cycles being just the beginning of my bicycle lust. instead i have a savings account for that, one day I’ll save enough for one of those hand-made beauties. though, the willpower required to wait is considerable. (btw…both my mortgage companies have said they won’t accept two payments in one month.)
Hi all,
Being the one who promted the pay-down vs. invest debate, I’d like to
comment on what I finally decided to do.
After reading all the excellent posts here, and after discussing the
matter further with my financial advisor I decided to leave the money
exactly where it is in the CDs. The CDs are getting between them an
average of 5.25% APY. With my mortgage interest at 5.375% effectively
being closer to 4.0% thanks to itemizing on my Federal Income Taxes,
I’m actually making ~1.25% APY on this money, which is a whole lot
better than *losing* .0125% as I previously thought.
The reason for *not* just paying it down is primarily that there’s no
point. It’s only going to save me 10 years and $3000. I’ve already
made more than $3000 just from the interest earned on these CDs.
The CDs are FDIC insured, so it’s as “safe” a bet for an investment as
there is. And, if I ever run into an emergency such as being
unemployed, that money will take care of my monthly mortgage payments
for a couple of years.
Additionally, I’m working on building up an emergency fund to cover
the bulk of our other expenses modulo the mortgage payment.
So, thanks so much for the great comments and insights you all
presented here. They were quite informative and educational!
JD,
Thanks for the link. For your information I finished editing your interview this morning and I hope to have it up the first week of July.
I’ve actually trying to build up a full week of interviews for that time. Hopefully it all works out.
CD
Thanks Paul…
I was being called daily by Citimortgage (my mortgage company as well - recently closed on an apt) to enroll in the biweekly. I couldn’t find any information about it on their website (although I didn’t spend much time looking) and instead googled and found this website.
So… thanks for your insight on Citimortgage’s “advantage” plan - i know now that i should not spend another second worrying about it.
I read this one because the heading reads “Bike Mortgages”. I enjoy bikes and riding, and have always been amazed at the amount of money a roadie would pay for their carbon bikes (4-6K for a non custom bike). Now that the mountain bikes are catching up….
Anyways, I though you were talking about mortgages from these custom bike builders that have a sky is the limit pricing chart.
Like Seorsa, I am an avid biker(mountain and roadie) and I thought the same thing! I thought they were going to talk about diversifying your portfolio:) A bike is a good investment, but I am not going to shell out 4k for one bike.
Jess- there was a story on the loacl news (Sacramento CA) about a guy who was attacked by some yahoos and had his $14,000 Mt bike smashed. He lived in a very modest house, so perhaps he took out a second