NerdWallet's Smart Money Podcast - Fruitful Yard Sale, and When Not to Refinance

Episode Date: May 23, 2022

Want to get rid of your junk and earn a buck? To start off this episode, Sean and Liz give you tips for a successful yard sale, including how to make your wares look more appealing to buyers and how to price items.  Then they answer a listener’s money question about when it doesn't make sense to refinance a mortgage.  Send the Nerds your money questions by calling or texting the Nerd hotline at 901-730-6373. You can also email your voice memos to [e-mail]. Timestamps: This Week in Your Money segment: 0:00 - 13:00 Money Question segment: 13:01 - 29:12  Like what you hear? Please leave us a review and tell a friend.

Is refinancing your mortgage always a good idea? Given recent market conditions, the equation may have changed. Welcome to the NerdWallet Smart Money Podcast, where we answer your personal finance questions and help you feel a little smarter about what you do with your money. I'm Liz Weston. And I'm Sean Piles. Let the nerds answer your money questions. You can leave us a voicemail on the nerd hotline at 901-730-6373. That's 901-730-NERD. Or email us your voice memos at podcast at nerdwallet.com. And being a podcast, we want to actually hear from as many of you as possible. But we will reluctantly accept your written money questions too. You can shoot us a text or write us an email at podcast at nerdwall.com.

This episode, we're answering a listener's money question about when it's not a good idea to refinance your mortgage. But first in our This Week in Your Money segment, we're talking about how to have a great yard sale because I finally had one. I want to hear all about it, Liz, because this is something I've been thinking about. I have some junk piling up. So where do you think folks should start? Well, first of all, think about your goals. If your primary goal is to make money, maybe a yard sale is not the way to go

because you're basically pricing things super cheaply to get rid of them. Yeah. On the other hand, if your only goal is to get rid of stuff, to declutter your house, donating is a much faster and easier way to go. So the yard sale is kind of that sweet spot in between, I need to get rid of all of this crap, and I want to earn some money. And you have plenty of time to put all of this together. Because as you wrote in your column about this, it takes a decent amount of time to get everything

set up and then actually conduct the yard sale and make sure you're doing it the right way, right? Yeah, it's kind of like painting. If you've ever painted a room, the best way to do it is with a lot of prep. Maybe prep is half the time that you're investing. And I found the same thing with the yard sale. The more time I put in up front, the better the result. And just like painting a room, it goes a lot faster if you have some people to help you with it. You point out that collaborating with your neighbors can be a great way to have a yard sale. Yes, it really helps with having extra hands around and extra stuff. The more stuff that you have to offer, I think the more interesting it is for people to stop by. And we had three households chipping in, which was great. And that gave us the ability to say,

hey, this is a multifamily sale, which seems to be the term that you want to have. You want to be able to tell people, yes, there's a lot of stuff here to go through. It's kind of like the yard sale equivalent of going to a vintage mall where you know there are all these different vendors. Each one has their own flavor of stuff to sift through and you never really know what you're going to find because there's a lot of variety. Yes, variety is key. And when I talked to experts about putting together yard sales, and of course there are experts in such things, they said that camping goods, kitchen items, tools, stuff like that seem to have really broad appeal. And if you have a lot of baby stuff, that's great, but it can't be all baby and kids stuff. It really needs to be a nice variety of things. One thing that I found

helpful is that it can be good to know your customer base. Like in Portland, I find that whenever I go to a yard sale, the vinyl is almost always sold out immediately because there are a lot of folks here who love vintage vinyl. But then in ocean shores, a lot of people want more nautical knickknacks and beachcombing accoutrement because that's what they're there for. Oh, that's really great. So maybe go around and check the other yard sales to see what the real good stuff is going to be. Exactly. Did you encounter anything like that when you were setting up your yard sale? Is there something that's like specific to L.A. that a lot of folks are going for? It's strange, but costume jewelry. Even though I said no early birds, a guy came to my gate a week in advance and wanted to buy all my costume jewelry. At the time of the sale, there were three people that were specifically

there for that. In fact, two of them almost got into a fistfight. It was really pretty intense. And I was asking one of the experts, like, why is that? And there are a couple of reasons. One is that they're hoping you make a mistake, that you put something that's actually good quality, real gold, real silver, whatever, in with the costume. But also, vintage costume jewelry is a thing. And if it's got a mark on it, there are certain types that seem to be more valuable than others. And they apparently are making a living reselling this stuff. Interesting. To me, items like that might be a good thing to sell somewhere else like eBay, because you know, you can make a little bit more money for it. If you want to have a secondary sale in addition to your yard sale, that is sites like let like Letgo, OfferUp, eBay, even Craigslist,

if you have something that you can be patient with and look for buyers, then probably that's a much better way to sell it. Again, as we were talking about earlier, if you want to get rid of stuff and make some money on it, the yard sale is the way to go. If you're trying to maximize the dollar, yeah, use those other alternatives. Yeah, just like it's helpful to know what might be a good hit with your potential customers. It's also worth knowing what isn't going to be a good item to sell like anything that is dirty or broken. And you wrote in your piece that use electronics are pretty hit or miss like a VCR and a princess phone didn't sell. And I honestly would expect both of those things to sell on novelty alone. Yeah, you would think so, wouldn't you? But there's enough of them out there that I

don't think there was a huge interest in it. But as you said, vinyl records. Now there's some outdated technology that has come back. And so people are really interested in it. Right. I wouldn't say categorically that a princess phone will never sell or a VCR will never sell. But the more outdated the technology, the less you should expect to be wringing from it. Another thing you categorically that a princess phone will never sell or a VCR will never sell. But the more outdated the technology, the less you should expect to be wringing from it. Another thing you wrote about was that it's a good idea to price as you go, as you're sifting through all the items that you might want to put out for a yard sale or a garage sale. Can you talk about your process for deciding on prices?

I used to make the rookie mistake of waiting until the last minute and it's just exhausting. There's just too much stuff and you're not thinking straight by the time you're done with it. So this time as I went online and I got a couple price lists, just what other veteran yard sailors would suggest for various things. And when I wasn't sure, I'd started about 25% of the retail price and go from there. Sometimes it's even lower though. Sometimes you got to say 10% of the retail price and go from there. Sometimes it's even lower though. Sometimes you got to say 10% of the retail price. The people who come to yard sales are not looking to pay top dollar. They want to get a bargain.

Can you give an example of something that you had listed at a discounted rate like that? Because I think it would vary so much based on the item that you're selling. Sometimes you'll see hardcovers for a dollar and the paperbacks for 25 cents. That seems to be very common around here. We wound up selling things for 10 cents each just to get rid of them. So that was something else that towards the end of the day, we started bundling things up, slashing prices just to get it off the driveway. Thinking about having a potential yard sale at our place here in Portland, we've been here for a few years. The junk is kind of piling up. I was looking at all of what I have.

And I was thinking that everything that I own kind of falls into two categories where there's something that is like totally priceless. And then the other category is just complete junk. And maybe that's just my own issue is that I have a hard time getting rid of stuff unless it's totally just done for. But I have a hard time getting rid of stuff unless it's totally just done for. But I have a hard time thinking about how much I would resell like an old microphone for or an old VHS because it's kind of personal to me. It has some sentimental value. Yeah.

And that's something actually a yard sale can help with. What we did was we put things in boxes in our entryway. There was something psychologically freeing about that. And then when you do start doing some research and figuring out prices and putting a sticker on it, that's another move away from that emotional attachment to it. And again, once it's out in my driveway, man, I could care less, take it away. So maybe that will help you break up with some of this stuff. And also sometimes that process of researching what a decent price would be helps break that idea because we think our own stuff is so valuable. But once you go out there and look at what it's selling for, it's like, you know what?

It's not. And it's taking up space. I want to get rid of this. Yeah. There's a school of thought that if you're considering getting rid of something, that's the sign that you should just be getting rid of it because you're already halfway there. And I think it's about time I look through all of my old vintage clothes I haven't worn in a couple of years since the pandemic and get rid of half of them.

Another thing that you write about is the importance of getting the word out. And it's not just as simple as making a sign and putting it on a street corner. You really do have to have a strategy here, right? Craigslist, Nextdoor, Facebook Marketplace, Facebook itself are all great places to get out the word. Those are free, so it doesn't require any kind of investment. And if you have social media

that you feel comfortable having your address on or just telling your friends, hey, stop by, that can get the word out as well. And one thing you can do is just put the name of your community and yard sale or garage sale and see what pops up. There's a series of sites that allow free listings, or you can pay a certain amount to have your yard sale promoted. I want to say it's like 30 bucks and it's promoted across six sites. So if you really want to maximize the

number of people that come to your yard sale, maybe think about that. And then there are some old school ways. I found some signs at the dollar store that were bright yellow, and you put those up on the intersections and just your address and the times and the date of the sale is all you need to put up there because drivers are going by pretty fast. So you want them to be able to absorb that information quickly. I can't tell you how many times I've seen signs in ocean shores or in Portland that say yard sale this way with an arrow. And then suddenly I'm on a goose chase and I'm wondering where is this yard sale? And I drive around, drive around and I can't find it when all I need is just the address, Google Maps in my phone, I'm going to be there.

But just include that important information and you'll get so many more people coming to your sale. Yes, and take down the signs afterwards. Oh my gosh, maybe you were on some of those goose chases because it was like three months ago. Right, and then once you have the date and the time and everything is priced, it can be really important to make sure you're knowing how to set up what you're selling. And there's a certain amount of making your yard

sale a shopping experience that can make it so much more exciting. Think about when you go to a vintage mall and there are all these little vignettes of old plates or a cool rack of vintage clothing. And you want to make everything inviting and engaging for people as they're looking through your stuff. Yes. It's the opposite of dumping everything on a blue tarp or putting everything in cardboard boxes on the ground. You want it up off the ground. You want it on tables. Borrow some clothes racks. Your friends might have some. We borrowed a canopy to keep some of the areas shaded. All those things can make it so much nicer for people. If they're just driving by, if they weren't planning to come and they see a nicely set out yard sale, they are more likely

to stop. How did you approach haggling or making deals with people? My daughter and I had completely different approaches. She priced her stuff a little bit high, assuming that there would be haggling. I priced my stuff low and assumed there would be haggling as well. But keeping the goal in mind that you really want to get rid of this stuff, most people make pretty reasonable offers in my experience. So I'm always open to it. But if you don't have a price on an item, a lot of people won't ask. They aren't going to be haggling. If you go to flea markets and things like that, you expect to haggle. With yard sales, people might be reluctant to ask, especially if English isn't their first language. So to me, I'd rather have the price on there because

otherwise I feel like I'm losing sales. You just want to make it as easy for them as possible to actually buy your stuff. Yes, exactly. But then that said, at the end of the day, you might want to make bundles, cut prices, do whatever it takes to get your stuff out of there. Yes, absolutely. And Sean, have you had a yard sale yet? I have not had a yard sale probably since high school when I was getting ready to move and go off to college. It's been a very long time in part because I didn't really have a yard or a garage to sell stuff from. But now, as I mentioned, my partner and I have been at his place in Portland for a few years. We've been in ocean shores for a year. There's some junk piling up and people here love to buy junk.

So I think that we're probably about due for one. We'll see if we get around to it this year. If nothing else, it might be something that we do toward Labor Day at the end of the summer season and just clear everything out going into fall. We had a great time. A bunch of our neighbors dropped by and we met some new neighbors. They came over that we hadn't met yet. So it can be a fun social experience if you set it up right. Great. Well, if anyone else has had a great yard sale recently or plans to, please let us know. We would love to hear your story.

Okay. Well, let's get to this week's money question. Sounds good. This episode's money question comes from a listener's voicemail. Here it is. Hi, this is Kate. And my question is, when would it not make sense to refinance my mortgage for a lower rate? Does it always make sense to do so? Thanks. And to help us answer Kate's question on this episode of the podcast, we are joined by another Kate, mortgage nerd Kate Wood. Welcome back to the podcast, Kate. Thanks so much for having me back. So from one Kate to another, can you help our listener understand what refinancing is? Sure. Refinancing is getting a new home loan without getting a new home.

So you are replacing your existing mortgages with a completely new loan. It's different than if you hear someone talk about taking out a second mortgage. That's a loan that's in addition to your regular mortgage, more commonly called your primary mortgage. So refinancing, you're getting a new primary mortgage. And there are a number of things that you can do when you refinance that will alter the terms from your previous loan, correct? Absolutely. Because again, it's a brand new loan. So standard refinance is often referred to as a rate and term refinance, because your rate will essentially always change. Mortgage interest rates are unfortunately at the moment, always changing. And so when you refinance, you're always going to get a new rate.

So in 2020 and 2021, when rates were hitting record lows, tremendous number of homeowners refinanced to take advantage of lower interest rates. But with a rate and term refinance, you can also change the term of your loan. You don't have to necessarily start from scratch with a 30-year loan if that's what you have. Depending on your money goals, you might want to refi to a shorter term, like a 10 or a 15-year loan. And maybe we should talk about the different reasons people refinance because it sounds like Kate's kind of focusing on the interest rate, but there's a lot of different reasons to change your mortgage, right? Absolutely. There are a ton of reasons that you might need to change the terms of your loan other than simply getting a lower interest rate.

One is just to add or remove a borrower. So for example, say in the case of a divorce where one party gets the house, the person who's getting the house would need to refinance to remove their ex from the mortgage. Your lender isn't just going to say, oh, you're not married anymore. No problem. They're off the hook. Yeah, doesn't happen. That would be nice, but not the case. If you had an adjustable rate mortgage, say you had a really nice rate for your intro period, but now it's going to start fluctuating. Some people would say, now's a good time for me to refinance to a fixed rate mortgage. Another one, if you have a home loan that's backed by the

Federal Housing Administration, more commonly known as an FHA loan, FHA mortgage insurance generally lasts for the life of the loan. It's very different from private mortgage insurance on a conventional loan, where you can cancel it when you reach usually 20% equity, sometimes a little bit less. If you have an FHA loan, so long as you have an FHA loan, you are going to have to continue paying that insurance. So people will sometimes refinance to get away from having an FHA loan just so that they no longer have to pay that insurance. Whereas in contrast to private mortgage insurance, as you were mentioning, it can automatically be canceled without having to refinance. Absolutely. Yes. So let's also talk about cash out refinances because there are a

lot of people, myself included, who bought houses a year or two ago and the values have skyrocketed and they're sitting on a decent amount of equity. They can tap that when they refinance through a cash out refi, correct? That is correct. So a cash out refinance, basically you are taking out a new mortgage that's for a different amount of money than what you already owe. With a rate and term refinance, you're changing the rate, you're changing the length of the loan, but the amount you owe remains the same. With a cash out refinance, you're taking advantage of that value appreciation that your home has had, and you're getting a larger mortgage. And basically, that's where you're getting that cash out from. It's the difference between the two. It is a way that you could turn some of

your home equity into cash that you could use for, say, college tuition, doing a really big remodel, otherwise covering a major expense. Got it. And with a cash out refinance, do the interest rate and term also change? So the interest rate is always going to change. That's really the rub. The term doesn't necessarily change. Again, it really depends on your goals and kind of what you want to do with the loan, whether you change the term. In some cases, lenders will even let you say you are three years into a 30 year loan, rather than starting over at 30. They might let you just take that 27 years and have that be your new term. So the term is really flexible. But if you do a cash out refinance, you are going to be looking at a new interest rate. And given the

interest rate climate we're in now, that might not be advantageous to you. Well, and also, if you're getting close to retirement, you want to think about having that loan paid off. There's been a trend for people to refinance and refinance, and they don't think about the fact they're signing up for a 30-year loan when they're 50 or 60, and they're going to be dragging that thing into retirement. Most people don't want to have a lot of debt in retirement. You really do want to have that thing paid off. So shortening the term can make sense.

Conversely, you may have gotten all enthusiastic about a 15-year loan and realized, hey, these payments are pretty high. Sometimes you can refinance to a longer loan and get those payments down, even if the interest rate is higher than the one that you initially chose. And Kate, I presume we have a house view about how to choose your term when you're refinancing. We do, Liz. In general, if you are looking at paying off your loan more quickly, we tend to recommend that you do that by paying extra on your current loan rather than making it official by switching to a 10 or a 15 year. And that makes sense.

Yeah. The reason for that is that with that shorter mortgage term comes a higher monthly payment. And so you need to be sure that you are always going to be able to make that larger monthly payment. Whereas if you keep that longer term, but you're adding some extra money to your principal with your regular payment each month, you're paying down faster. But if you hit a month where you can't make that extra payment and you really need to just pay your minimum, you can just do that. Yeah, you've got the flexibility built in. And so that's something personally that I do. I had been paying extra toward my mortgage very aggressively for several months. But then I needed that money because my home needed a septic system. I live

in a very old house and I needed the money for that. Right. Well, now I want to talk about some potential drawbacks of refinancing. What are your thoughts on this, Kate? You know, Kate, not me, Kate, the listener, her original question was about whether refinancing to get a lower rate is ever a bad idea. And the sort of conventional wisdom on this is that if you could save 1% on your interest rate, it's worth refinancing. But it really, really depends on what your situation is and what rate you could get. Healthful hint, we do have a mortgage refinance calculator on the NerdWallet website that you can use to crunch the numbers and see what your situation might be if you were to refinance. Rates are rising, but depending on when you got your

original loan, who knows, you might still be in a position to save. It occurs to me it would also be helpful for people to know their break-even point. Basically when the money they're saving potentially through a refinance would break even with the money that it takes to actually refinance. Yes. This is a really big consideration with refinances. You're essentially buying your home all over again. You're not going through the home search. You don't get an inspection, but you're going through most of the other steps of buying a house, you're going to have to do all this documentation, there'll be a new appraisal. And with all of that, that means that you are paying closing costs all over again. So it's

usually about two to 5% of the loan amount, say you're refinancing $200,000, that means closing costs of $4,000 to $10,000. Ouch. Yeah, it's a decent chunk of change. Once you bring in that new origination fee, third party fees, there's just a lot of stuff. So if you aren't intending to stay in the home that much longer, it might not make sense to refinance just because you won't necessarily see that break-even point, which again is when the savings are greater than the amount that you spent on refinancing. Liz, I have a question for you because you have in the past described yourself as a serial refinancer. And how do you think about this aspect of refinancing?

Well, I'm a little impatient. If I can't recoup the cost of the refinance within, say, a year, at the most 18 months, I probably wouldn't do it. Now, again, we talked about all the other reasons people might want to refinance. But if you're simply doing it to save money, that's where my break even is. No, I really enjoy the idea of having a personal break-even point. It is a lot of hassle, right? There's a lot of documentation you have to come up with. It's kind of a pain in the butt. So if you're not saving a significant amount and saving it fast, to me, it's like, eh.

You want to make sure it's worth your time and effort. Yes. On the other hand, I talk to people who have ridiculous interest rates who missed out on the whole decline in interest rates because they were so afraid of the refinancing process. So that's the other end that you are so stuck or so busy doing other things that you miss out on some great rates. Although, you know, we're not seeing such great rates right now, Kate. I mean, what could people expect going forward with interest rates? How does that affect the refinancing process? So we're actually already seeing impacts of that for the first time in quite a while, the proportion of new loans in the United

States that are purchases is higher than the proportion that are refi. That has not been the case in a while because again, people were so really avid with the refinance there. Rates have been rising really, really quickly, much more quickly than experts anticipated in 2022. Part of this is that the Federal Reserve is increasing the federal funds rate. And that is one element that's contributing to the rising rates environment, even though mortgage rates aren't indexed to that rate. They are also pulling back on purchases of mortgage-backed securities, and they're going to actually begin selling them. So there's a lot going on economically that is contributing to mortgage rates increasing. Overall Overall rate and term refinances

are becoming much less enticing. There are fewer people who would benefit. But like Sean was pointing out, at the same time, because home values have increased so much over the last few years, even people who are relatively new homeowners can find like,

you've kind of got a good amount of equity there, which could make a cash out still seem somewhat enticing. But one thing that we're thinking is going to end up happening is that home equity loans, and in particular, home equity lines of credit are going to become much more alluring to people. Oh, yeah. And we should explain what those are. Home equity loans and home equity lines of credit are both types of second mortgages or junior liens. As the second and junior implies, they are secondary to your primary mortgage, to that original home loan that you have. That means that you are keeping your rate and term on your original mortgage. You're just adding a second loan to it. With a home equity loan, you are borrowing a lump sum.

And it's pretty much what it sounds like. You're borrowing against your home equity and you choose, you know, along with your lender, the dollar amount. And that usually has a fixed interest rate. A home equity line of credit works a bit differently. With a home equity line of credit, you have your total amount of your credit line, but you draw from those funds on an as-needed basis.

So you're just kind of like using it as you need it. And so this can be helpful, especially if you're doing something like a big renovation where you don't know exactly how much things are going to cost. These days with the way that materials prices have gone up so quickly, that's been a really big impediment to people remodeling that, you know, one day this is the quote you're getting for lumber or siding. And then the next day, you're seeing very different numbers. And so a home equity line of credit gives you a bit more flexibility.

And also, they are variable rate products. And why are the changing interest rates making these more appealing in some ways? If you were one of the people who was able to refinance when rates were extremely low, or if that was when you bought your home, you do not need to touch that interest rate. Also, we were talking about that refinancing can really be a huge hassle. With a home equity loan or a home equity line of credit, you usually do not have to go through even remotely as much with your lender. Additionally, in some cases, there are virtually no closing costs with a home

equity loan or a home equity line of credit, which is an extremely big difference from a refi. Kate, do you have any final thoughts for our listener, Kate, or anyone else that is interested in potentially refinancing right now? Yes. So be aware that borrowing against your house is always risky because worst case scenario, should you default on that loan, even if, you know, with a home equity loan or a HELOC, even if that's a secondary loan, you are still putting your home at risk. And so it's really important to weigh those considerations. Right.

Well, Kate, thank you so much for sharing your insights with us today. Thank you for having me back. And with that, let's get on to our takeaway tips. Liz, will you please kick us off? My pleasure. First, know why to refinance. There are many reasons you might refinance, including to get a better interest rate. Next up, get the timing right. The right time to refinance depends on more than just prevailing interest rates. Think about your money goals and how long you plan to stay in that home. Finally, explore other options. There are ways to access your home equity without refinancing.

With a second mortgage like a HELOC, you keep the interest rate on your primary loan. And that is all we have for this episode. Do you have a money question of your own? Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com and visit nerdwallet.com slash podcast for more info on this episode. And as always, remember to follow, rate, and review us wherever you're getting this podcast.

Here's our brief disclaimer thoughtfully crafted by NerdWallet's legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time,

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