Todays posting is on interest rates, loans and refinancing. The story is that Miel and I made the same mistake with our investment property as we did with the loan on our primary residence. We got an adjustable rate mortgage (ARM)! Grrr!

Well, we talked about it and decided to refinance this property also. Right now we are planning on getting a 30 year fixed with a 10 year interest only option. This will help to manage our exposure to interest rate risk as the rate on the loan will be fixed and not linked to an underlying index of interest rates like our current option ARM.

All it all, it looks like the total fees, points and closing costs will be about $6,000. Not too bad in the general scheme of things. I assume that over a 5 five year period the refinance will save at least $4,200 (assuming a $70 per month profit due to the refinance). On an investment of $6,000, $4,200 represents a return of approximately %70 over five years. While it may not be as much as some investments yield, least we’ll have piece of mind that we’re not loosing money every month.

Enjoy!

-James

MANAGE YOUR MONEY TOGETHER

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1) Collaborate: Meet regularly to talk about money, set goals together, track and monitor them.

2) Understand and respect your partner. Take time to understand your partners values about money.

3) Watch the numbers. Get a budget, monitor your spending and track your net worth.

4) Max your retirement. Maximize contributions to your tax deferred retirement accounts.

5) Invest in stock. Stocks perform better than bonds or cash.

6) Avoid high interest debt. Credit cards and title loans are financial cancer.

7) Diversify. Don't put all your eggs in one basket.

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