The Ramsey Show - App - My Husband and I Disagree About Selling the House (Hour 2)

Episode Date: August 27, 2020

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. Thank you for joining us, America. Rachel Cruz, Ramsey personality, number one bestselling author a couple of times over, and my daughter is my co-host today here on the air as we take your calls about your life and about your money. Open phones at 888-825-5225. That's 888-825-5225. Angela starts this hour in Detroit. Hi, Angela. How are you?

Hi. I'm great. How are you? Sure. What's up? I am at baby step number three. My husband and I have been listening to you for several years. We tried budget several times.

I had a lot of heart issues. I actually got a new heart and a new kidney in the last three years so we weren't able yeah a little bit exciting uh god is good been very are you there on plan but i'm sorry you you cut in and out after we heard about the heart and so forth and i lost the last part so can you start again yep can you hear me now yes ma'am okay so we um finally paid off our debt we had around 16 to 20 thousand dollars in debt from different things hospital bills and such um so now we are at between three and four we have about um six months worth of money saved,

and so we're trying to decide whether to start investing or save more for the fact that, good Lord, well, I don't have any more health issues, but I don't know if I should just start investing or build up my fund more. How much do you have in the emergency fund? $15,000. Okay. And what's your household income?

About $75,000. Okay. So you consider $15,000 to be three months or six months? Between three and six. Of expenses. Yeah. Okay. Yeah.

Well, it doesn't hurt to beef it up a little. I mean, if you want to be on the six-month side with the health challenges, I mean, you've had some pretty unique health challenges, right? I did. I did. Yeah. We've had quite the journey. Yeah.

And, you know, medical bills have been part of your life for a long time, so you're a little bit gun-shy. They have. Yeah. Yeah. I would lean towards the six-month side. I mean, if you're making $75, I don't care if you've got $30,000 sitting in your emergency fund, if that makes you feel better.

Okay. If I was in that situation, I'd probably want that. What do you think, Rachel? Well, that's what I was going to say, for sure. I mean, again, yeah, because of the health stuff and not knowing that question mark there, more so than the average person out on the street. Yeah, having more cash available would definitely give you security. That's still less than half your annual income.

We know your expenses aren't the same as your income, but if your expenses were close to your income, that's six months at 30. So you just have a really healthy, beefy emergency fund, and you'll reach the point someday where you have a comfort level where you don't need that. Our emergency fund today is small compared to the old days. But back in the old days, everything was an emergency, you know. And so now that we've kind of gotten past that and we've got better houses and better cars and, you know, fewer things breaking, right, and, you know, more cash flow to do things with.

And so you don't, we haven't touched the emergency fund for an actual emergency in decades at our place. And so you'll reach that as you get further into your wealth building, and you can probably relax that 30 down if you want to. But for today, I'm fine with that. I would if I were in your shoes. So, hey, thanks for the call. We appreciate you joining us. Matt is up next.

Matt is in Tampa, Florida. How are you, Matt? Doing well, Jay. I appreciate you taking my call. Sure. How can we help? Yeah, a company I used to work for, they gave me the option for an early buyout on my pension. So I took the lump sum at $454,000. All but $61,000 pre-tax, I rolled it into an IRA.

Good. The $61,000, they sent me a check. So my question is this. What was the $61,000? Why was that not pre-tax? Because it was employee contribution. What was the $61,000? Why was that not pre-tax? Because it was employee contribution. So when I worked there, I contributed post-tax. Okay, so there was no penalty or taxes due then.

Correct. So you got $61,000 floating around extra money right now. Yeah, so $61,000. So my question is, because that was going towards my retirement, do I invest that $61,000 or do I use that to pay down what is owed on my house? I would go ahead. I mean, because, yeah, if I were you, because you were able to roll everything else over the IRA, I would use that to go ahead and clear up the house mortgage. How old are you? 55.

Okay. All right. So the 450, if it's invested well in good mutual funds, before you get to retirement age, is probably going to be a million. Right. So you're done there, and we need to get the house paid off. What do you owe on the house? Oh, 330. It, $330.

It's worth $730. I just re-flied. What's the household income? $220. Cool. Okay. So if we take $330 and throw the $60 at it, then we take that $220 income, and let's pound that house then.

I'm with Rachel. I agree. Got it. All right. So take the 60, throw it down on the house, and then just use the income to pay down the rest of it. Yeah. And I guess to give you the background or the thinking on it is, A, you're set in your retirement account.

Yes. If you've invested that well in good mutual funds, ding, ding, you've rung the bell. That alone is going to make you a millionaire. Way to go. Excellent job on the one hand the second thing is is it's not taxable it's free money so it says if we looked up and said hey i got 60 000 bucks laying over here in a stock account of some kind what do i do with that and then that immediately triggers baby step six for rachel and me and we're both going yeah put it on the house put on the But in your case, it's even more so because the house is like your last hurdle now. It is.

Yeah, so let's pound that puppy and be done with it, man. I love it. So that's the thinking that led us to that answer, the underpinning, the structure of how we arrive at those answers. So that lets you know how to do it for those of you out there listening. Open phones at 888-825-5225 the interesting thing about the baby steps rachel is obviously they are not we didn't get them from the bible we made them up so the only thing that has made us even more stringent on them is that for now almost 30 years,

we find very few reasons that it is logical to violate them. So they've really stood the test of time. Well, and a hundred percent. And what I find that it helps so much is specifically with money. People just kind of wonder through life, right? They're like, Oh, I think I'll kind of just like have a little bit of this debt. I'll put some at retirement here. Kids college, maybe. Okay. There's just zero plan. And what this does is this gives you focus to say, hey, this is exactly what you need to do. And you just walk the steps. And like you said, most people don't get to baby step seven. They're like, man, I wish I still had a mortgage or man, I miss credit card debt. Like you get to the end and it's like, wow, it worked.

And that's proof over a period of time, like what you're saying. Yeah, millions of tens of millions of people now have actually used that clear path. This is the Dave Ramsey Show. folks i love telling you about well-made well-thought-out products today i'm talking about grip six belts i don't know about you but I'm not a fan of traditional belts. They never fit right and they're uncomfortable. Grip6 belts are unique. Owner BJ designed a truly modern minimalist belt made of high quality materials with no holes, no flap, and no bulk. And the buckles come in really cool designs and are interchangeable. I personally own these belts in different styles, and talk about affordability, Grip 6 belts come with a lifetime guarantee.

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Open phones at 888-825-5225. Well, it has been a weird year for investing. We start off the year and everything's booming. Pandemic hits. The stock market takes a dive. Now the stock market is fully recovered. And some of you didn't notice that because you didn't have the news yelling at you that you're going to die. You're going to lose all your money.

And they don't say, you made all your money back. They don say that so you missed that part a lot of you uh but the stock market is fully back where it was back in february and uh setting records again and so what you've got to have when you're investing is an investing professional in your corner to talk you off the ledge when that stuff's going on and to help you understand investing and to help you understand the different kinds of IRAs or kids college funds or rollovers that you can do the things you can do if you have a small business and all these kinds of things so get with a smart investor pro we're not in the investing business here at Ramsey but we have a network of people that we recommend. They're called SmartVestor Pros.

You are the SmartVestor. They are the pro that helps you, the SmartVestor. And they have the heart of a teacher. We'll sit down with you. If you're ready to do some investing or you have some questions, just click on DaveRamsey.com, and it'll drop down. And then click SmartVestor. It'll drop down a list of the ones in your area after you fill in a little form,

and then you decide which SmartVestor Pro is best for you within our network. But they're all people that are going to know our plans, our systems, the things you're hearing me teach. So you're not getting, like, weird advice. It's different. And they're going to have the heart of a teacher. Lindsay is in Portland, Oregon. Hi, Lindsay. How are you? Good. How are you guys? Better than we deserve. What's up? Great. So

my husband and I are 25 and we make about $130,000 a year. So my questions regarding our retirement savings, we're on baby steps four and six. We don't have any kids yet. So we are currently, um, maxing out to Roth IRAs. And then I have like 5% or so going towards my work retirement. So my husband's company does like a profit sharing and they contribute about 15% of his annual income a year to his work 401k or retirement savings. So currently we are ourselves, we're putting away about 12% of our income and we are not factoring in that 15% that my husband's company is saving. So we were kind of curious. So including that, like 15 percent that they do, there's like 21 to 22 percent of our income going away towards retirement. So we're curious. That's not right. Your math's wrong. If you're putting in 12 percent

of your income now and they're putting in 15 percent, That does not equal 21. What does it equal? Well, it's 15% of your income. You don't add them together. Because it's 15% of his income, not the household income. Yeah, we didn't add the percent. Regardless, it's a lot more than 15% of our total annual income that is being saved. Yeah, because you're putting in 12 of the household income,

and then they're putting in 15 of his income, right? Yeah. Okay. Yeah. Yeah, they don't add together. We were curious. No, we didn't add them together, but we were curious if we could let up a little bit on what we're saving monthly, like to our Roth IRAs, because there is so much that's being, I mean, because that's such a big portion of my husband's income that's being saved monthly. But they're not taking it out of his check. No, and we don't have to put anything away for that. So they're just taking it out of his check no and we don't have we don't have to put

anything away for that so they're just doing that all independently so we kind of want to free up a little bit of the money that we're putting towards these like broad fire rates well you're you're welcome to whatever you want to do what we teach is that you put in 15 of your household income regardless of match regardless of pension, regardless of pension benefits, regardless of what the company does, that you take your household income times 0.15 and somehow get that amount of money going into Roths, into matching 401s or non-matching 401s, Roth 401s, whatever's available to you until you get it all the way up to 15%. It sounds like you're putting in 12% now,

and so it sounds like you're underfunding it, not overfunding it. Are you going to be okay? Yeah, you're going to be okay. But, you know, the point is it shouldn't be putting that big a strain on you. And no, I'm not going to base my retirement future based on the behavior of some company. I'm going to base it based on my behavior and what I'm doing. Yeah. So basically what the company is doing is just gravy on top when you, you know, when retirement happens. So looking at you guys and your household income, taking that, you guys make $130,000, 15% of that. It's a good retirement. Yep. That's what I would do. Exactly. Exactly. So good question.

Thank you for joining us. Will is with us. Will's in Dallas, Texas. How are you, Will? I'm doing great, Dave. I'd ask how you are, but I've been listening for 15 years, so I already know. How can we help? Hi, Rachel. Hey, Will. Well, I was on Baby Step 3B, so I was planning to buy a house here in the DFW area, Dallas-Fort Worth area. But my company got in contact with me and offered me a dream relocation to the Denver, Colorado area. I love Denver. I could see myself there a long time, but the housing prices make me cry. I'm a single guy, no dual incomes or anything like that. Because housing is so much more expensive, I don't necessarily mind renting. Would it be so horrible if I just rented indefinitely and just went to baby step four?

If I could aggressively fund my retirement, I can pay for a house in cash at 55 and a half, right? Could, but, you know, Denver house prices are probably not going to get better by 55. Well, that's true, but my retirement account would, wouldn't it? Yeah, but I don't know if it will outstrip Denver prices or not. I mean, I think renting when you first get there for a few years is totally fine. Totally fine. Don't feel the pressure to go in and have to buy something immediately. Or even in the next two, three years, you can totally rent, be fine, do your retirement,

all that. But I think long term, we always suggest investing in real estate. Owning a primary home is just a great investment because the market naturally is always going to go up. Again, it may dip, but overall, it's going to go up. And so being able to own a home long term is a great idea. Absolutely. I was going with you, too. You's going to go up. And so being able to own a home long-term is a great idea. Absolutely. I was going with you, too.

You said indefinitely. Yeah. And when you dropped that word in that sentence, it ended the sentence for me. How old are you, Will? I'm 30. Really, my main concern is, you know, were I to kind of keep my payment, you know, within the parameters that you teach, I would need, like, 80% down or something like that in order to save that up. Now you're exaggerating. Wait a minute, this is a dream job. What are they paying you for this dream job? Well, not dream job, it's a dream location. It's my current job, which I like a lot,

but... What do you make? I make $65,000 a bonus. Okay, yeah. I don't know if you have... I think you probably have looked in one certain neighborhood, and Denver's got is expensive real estate, and it is measurably more expensive than DFW. I do agree with that, but 80% down is not necessary. Well, and you're 30, Will. You said indefinitely. What if you meet Mrs. Wright in the next year?

She's going to want a home eventually. So don't say indefinitely. You never know. Yeah, that's the problem. So, yeah, move up. Go ahead and take your move, and go ahead and rent for now. And I would just pile up my baby step 3B really high. And sometimes baby step 3B is done while you're doing baby step 4 for some people.

And so if you want to go and start baby step 4 and have a three-year or a five-year plan, the problem is with indefinitely is that real estate is going to go up. And guess what? Rents go up. And guess what? Rents go up because rents are a factor of the, you know, are reflected in the values. The values reflect the rents. And so as you know, when Sharon and I got married, I mean, you could buy a house for nothing and rent was nothing compared to now, 40 years later. And so you don't want to be the other side of that

because your rent's going to go up every year if you don't become an owner. And becoming an owner fixes one of the larger items in your budget and keeps it from increasing. With the exception of taxes and insurance, you're going to lock in that expense. This is The Dave Ramsey Show. We'll be right back. Rachel Cruz, Ramsey Personality, is my co-host today here on the air. Open phones at 888-825-5225. Ashley is in Salem, Oregon. Hey, Ashley, welcome to the show.

How can we help? Hey, Dave. Well, my husband and I are at a standoff. My husband started a paint and remodel business last year, How can we help? Hey, Dave. Well, my husband and I are at a standoff. My husband started a paint and remodel business last year, and in his first six months produced 300K in production. This is our first full year owning a business. He's nearly at 600 for the year.

Wow. And we haven't even started booking for November or December. Is he making a profit? He is, yes. We're doing very well. And I'm actually a stay-at-home mom we have a one three and five year old and due to the state of the world i'm looking to homeschool next year and at the moment we're living in a two bed two bath 1100 square foot home with no yard for all these kids um that wise we've cleared all the 59K in student loans and our mortgage, which is only 170 remaining.

Our house is a little bit of a unique situation, and this may be the best opportunity we have to sell and make money with little to no modifications on the home. The housing market out here is really hot right now, so I think we should sell, pay off the loans, get a house that suits our family and the business, which would put us on track for baby step three to pay that mortgage off. But my husband isn't budging on it. He wants to wait a year, see how the business goes, and says he won't move until we've got $100,000 savings to put down, which sounds crazy. And my anniversary is tomorrow. I told him the gift I would like

is for him to allow me to list the house, and I will assume all responsibilities so he can continue running the business. Should we sell, or should we sit here and suffer for a year and risk the market taking a crash, even though I know my husband isn't going to let us fail. So I think either way we go, we're going to be fine. Ashley, how, you guys don't have baby step three, correct? No, they have $59,000 in debt.

You still have $59,000 left in debt? No. We're on Baby Step 2, so we're paying off that debt. But if we sold this house, we would be able to pay off the mortgage and our student loans and then turn around and buy a house that will suit us for maybe 20 years. Okay. Well, that part's not true, but now you're exaggerating. Yeah, so Ashley, if I were you,

sorry, I'd love, I would love to be on your team on this call, but I'm not going to be. I'm going to be with your husband because I want you guys completely out of debt with a fully funded emergency fund before you make another move. We have an emergency fund. We've got,

I don't even know how much, but we have a lot of money in got um i don't even know how much but we have a lot of money in savings you don't know how much okay he has all the numbers i mean i feel like we've got at least 10 in savings that's not we have a tax account for the business that last year we had thousands and thousands of dollars extra in that because he's really on top of that i think we've got 10 000 in personal savings that he just isn't touching and then we have no credit card debt no car debt nothing like that we just have the 59 in the student loans and then our mortgage which is 170 the main issue here is that we live in an 11 20 square foot house with three kids under five yeah totally And then they have two bedrooms.

I'm sleeping on the floor. Yeah, wah. I would sell the house and rent. But I would not buy a house. I would not buy a house. I'm open to that as well. I just want to get rid of I'm open to that as well. A rent is fine. I just want to get rid of this one while the market is hot because I think it's a smart thing to do.

Well, you're not wanting to get rid of it because the market's hot. You want to get rid of it, though, because you're exhausted and you have no room with five people in your family. That's the most, right? Because you wouldn't sell it. That's what's really going on. Yeah, that's why you want to sell. This is completely emotional, but I don't mind if you want to rent. Sell the house, pay off the student loans, and build your three to six months.

And if he wants $100,000 in, that's fine. You can sit there and rent for two years. Sharon and I actually did that. We did it for a different reason. We didn't move school systems and pull the kids out of private schools. Rachel was in kindergarten. Denise was in first grade. Second. Second grade in first grade.

Second. And second grade. Thank you. And, you know, we were paying private school tuition because the schools in Nashville suck. And so we moved out of Nashville into the adjoining county where we've got great schools and rented for two years, which is really difficult for me because I have been in real estate my whole life, and emotionally to sit there and rent was ridiculously hard. Sharon hated that rental house. To this day. It was ugly, though. It was really ugly. But to this day, she gets an Elvis-lip sneer going every time she mentions that house, every time we bring it up.

So it's not a positive subject. But we got the kids into a great school system. We cut that expense out, and we made that move. But we still were cleaning up. So there you go, Ashley. I didn't even think about renting for you guys because you just own a home. So I immediately went right to the baby steps. But for you guys, you can. But you can. Just go rent. sell it and rent if that's what you guys want to do for sure because i'm with you as a mom i've got three

littles basically the same ages and yeah i mean that's that's hard i get it i totally get it but you got to make decisions again not based on emotion but based on fact and you guys need to do what's best for your family financially and in the long run while keeping your sanity but um and you guys be on the same team too actually i feel like the way you were wording everything was like well he's this i'm that you guys need to find that common ground and work together because you're going to just get so you're going to go so much faster in this process working closely together and being on the same team. Yeah. It's almost as if, you know, you're slamming your fist down and saying, I've got to do this, and he's trying to hold you back and be responsible. And, you know, you both have to, what Rachel's saying is you both have to identify

what responsible looks like. So responsible would be you clear your debts and you have an emergency fund before you buy a house. Okay, what Rachel said at the beginning of this. Now, you can do that one of two ways. You can sit there and endure the 1,100 square foot with three littles for one more year, and it sounds like with the numbers you've got, you will be able to do that in one more year. And you can do a lot of stuff for a year. There's a lot of people who got it worse than you. I, I grew up in 1100 square foot house for 17 years. Uh, so somehow my

mother, my mother pulled that off. I don't know. I don't, I don't have scars that I'm aware of from it. So, um, you know, uh, and we never moved, uh, until I was 17 years old. So, you know, lots of people have suffered less and more, rather. So, you know, you could do that for one year. It won't kill you. But if you want to move and have a little better lifestyle, a little better situation, and go rent for a year or two and do this in the right order, that's fine. I would not sell and immediately buy with no emergency fund. Absolutely would not do that. If that's your only option between the two of you, you need to sit tight. And, uh, uh, but if you're willing to move and rent and move again in two years, after you get everything straightened around, you got some reserves in the business, you got the down payment for the house, or maybe even,

I mean, you may even be able to pay cash for a house almost the way you're going because he's making bank. And he's doing a really good job managing these numbers and holding you off from running the thing in the ditch. So, you know, give this guy credit. He's a stud. So well done, kiddo. You're going to be all right. You'll get through it either way here. Open phones at 888-825-5225.

You guys jump in. Rachel, talk about that again for the listeners, this getting on the same page thing. And, you know, like I remember your mom and I had an argument not dissimilar to hers. She was driving that old blue Astro van, and she wanted a better car, and we had a block of money, and I needed to do some stuff that I wanted to do some stuff at the office that would take that block of money and make it back five times over. And I'm trying to go do that, and she's like, I've had it with this old car.

Kind of a similar conversation, right, to what Ashley's doing. And what we finally figured out was that we were not head-to-head, that we got to do both. It's just which order we did it. Yeah, which one first, yeah. Which one's first. And getting on the same page is everything. It's that. And Les Parrott always says that he wishes he could give a little box of empathy to everyone.

And that's it. You need to empathize and put yourself in your spouse's shoes you said we're only looking at our own thing and he could he needs to do that for her because she is at home with three little that's what i'm saying i would be dying to get a girl she's in a cracker box with three doubles i get that this is the dave ramsey show Thank you. rachel cruz ramsey personality is my co-host today here on the air this is the dave ramsey show open phones at triple eight eight two five five two two five james is in dallas hi james how are you good afternoon mr dave and Miss Rachel. How are y'all? Great, man. How you doing?

I'm doing dandy, pink cotton candy. Trying to think of something different that better not deserve, but that applies also. There you go. I got it. Yeah. Cool. Hey, when I was on hold, I got to thinking about how I wanted to phrase my question and keep it as short as possible. And I came up with this. I'm not a man of few words, but I'm like, Lord, help me, because I know I tend to ramble. But my question is this. Is it still – I don't get to listen as often as I'd like to, and I know I can get on the

podcast and stuff, but when it comes to retirement income, just a safe, conservative percentage of return, you know, I know you said growth stock mutual funds, you know, average around 8%, you know, some years more, some years less. But if I'm figuring on, we're debt-free, praise the Lord for that, and, you know, sitting at about just under a million, you know, 900 and something in total assets between, you know, what I'm going to get as a pension and a traditional 401K, a couple of Roths, me and my wife, and some other investments that we

have with TD Ameritrade and those kinds of things. And I'm really considering, since I work outside for a living, if I had an office job, I don't think I would be thinking about retiring at 55. I'll be 55 in October. And my wife wants to keep working. She loves her job, and I love how you say, don't retire from something, retire to something. So, you know, I'm involved in my church, and I want to be more involved in a prison ministry and stay busy with those types of things, but I guess I'm just wanting a little extra peace of mind on, you know, retiring at 55, because it seems too young. What's your household income now?

Household income now with my wife and I is about $120,000 to $140,000 a year depending on overtime. Are you saving $60,000 a year? Golly, you know, I hadn't really put the numbers to that. Because here's the thing. I mean, if you make 8% on a million dollars, you've got $80,000. Right. What's your wife make? She only makes about $30,000.

Okay, so that puts you at $110,000 income. So you're taking a pretty substantial pay cut if you pull 8% off your mutual funds, which is what you were talking about doing. And, you know, that's assuming they're growing at a greater rate than 8 so that you don't destroy the nest egg by constantly pulling off the principal. Because you're trying to live off of the income that it creates or less. We'd like to have it grow beyond what you pull off. So you can do that, but you've just got to set your household up in such a way that you're living on 100 or so, and then you're ready to do that.

You'll be fine doing that. So the other thing is that if you were to work five more years or so, as an example, you know, you would have, you know, that thing is probably going to be a million and a half, a million seven if you just keep at it a little while longer. It won't take, because it's going to be growing, you know, continually as you've got it invested. So the thing to remember when you're looking at these kinds of things is if you're invested at 10% to 12%, somewhere around every seven years, what you've already got in there will double.

So if you're 55 at 62, you'd have $2 million, roughly. And so if I'm off a little, it's me at $7.5 million. It's still going to give you a lot better income than the million we'll give you today. But congratulations. You've done an incredible job. They're millionaires. Yeah, absolutely. And I think James too, I think just looking at the math, sometimes just seeing numbers black and white on paper helps making that decision. So just map out

and say, Hey, if I worked for two more years, here's what it would be. If I worked for three more years, four, and there's like, just kind of go out a few more years. And that may give you more peace of mind to say, you know what? I am comfortable just going now. Or maybe if I just work two more years, we can get this. And so I think just go ahead and mapping it out and making your decision based on that is going to help you. Yeah. Or when you retire from what you're doing, if you went into a career that created an income as an encore career, then that changes the entire formula as well, which is something you may want to consider. Charlie is on the line. Charlie's in Orlando.

Hi, Charlie. Welcome to the Dave Ramsey Show. Good afternoon, Dave and Rachel. How are you doing? Great. How can we help? I'm looking at refinancing, hopefully refinance our home, our mortgage. We currently have a 15-year mortgage.

The balance is $268,000 at a 4.5%. Our monthly payment, P&I, is about $2,000. We do have an escrow fund, so our total monthly mortgage payment is $2,888. We can refinance down to around a $2.7, but we'd have to increase our balance up to about $284,000 for the closing costs and extra escrow money that they collect. You're going to stay in the house? Yeah, we're looking to stay in it. We just bought it. It's kind of our dream home. They're saying the closing costs are

$14,000? Well, the closing costs are about $67,000, but they're wanting to collect an extra $7,000 for escrow. Oh, well, that's not lost money, though. That's not cost. And you'll get your escrow back. You've got an escrow account now that you'll get back that will offset that.

Yes. So basically you're talking about from 4.5 to 2.7. So if you round that, say 2% savings a year, right? Yes. 1% on 268 is $2,680. 2% will be $5,000 plus, right? Okay. Per year in interest saved.

And so if your closing costs are $7,000, after a year and a half, you've made your money back. Are you going to pay this off or sell it within two years? No. Okay. Then you're going to make your money back and you'll be in the black on it, right? You see what I'm doing? Yes, I believe so. The payment change doesn't matter.

The escrow doesn't matter because you don't lose that money. That money retains your position. It's the cost of the refinance versus the interest saved on the loan. And your interest saved on the loan is approximately two percent per year so around five thousand dollars a year on 268 000 you're going to save in interest and right okay and if it's costing you seven thousand dollars to do that that means after year one you've recouped almost all of the seven thousand with a five thousand dollar savings now the payment may or the cash flow in the payment may or may not reflect that because sometimes people move from a $30,000 to a $15,000 and they take a higher payment too.

But the payment, all of that payment difference is all going to principal. So that doesn't matter either. So the analysis, the break-even analysis on it is interest saved divided into cost, closing costs. And do you recoup it fast enough that it looks like fun? And I can tell you this looks like fun. Yeah, because you're going to be saving five grand each year as it goes on, yeah. And, of course, the faster you pay it off, if you were going to pay off the mortgage in three years for some reason or another,

you wouldn't fool with it. Yeah, yeah. Because, you know, you might save $4, thousand dollars net out of all out of all this stuff flying around everywhere and all this trouble. And I wouldn't screw with it if that was the case. But or if you're thinking about moving in the next two years, I wouldn't do it. But where you can recoup it all in less than two years and you probably have a seven to a 10 year window to pay this off, you're going to be saving five grand all of those years after that recoup. Then, yeah, you do this to be saving five grand all of those years after that

recoup, then yeah, you do this refinance. It makes a lot of sense. Good question, man. We appreciate you joining us. Refinances are really hot right now. I was about to say, I feel like we get questions like that all the time. Yep. They're there. It's a real estate market's booming in the middle of this pandemic. It's booming. You can't, I mean, I know four people put houses on the market last week, and all of them sold in two days. Yeah. And that's in the Nashville area, but I mean, there's areas where it's not. There's more draconian shutdown stuff going on in some of these areas that some of you were in,

but areas like Tennessee that are open, it is booming. It's a freaking boom town. Part of it is a bunch It's a freaking boom town. And part of it is a bunch of you are leaving those states where they're not letting you do anything, and you're coming here, which we love having you. That's great. Thank you for joining us here. You can leave your vote back there, though.

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