What is the rate on your mortgage BTW?
Basically, points trade off against interest rate. Looks like from https://www.bankrate.com/finance/mortgages/mortgage-points.aspx and others that 1 point (1% of the loan amount paid up front) reduces the interest rate by around 0.25%. āNo closing costsā loans are negative point loans (lender pays points to cover the closing costs), so they would have higher interest rates than 0 point loans with typical closing costs.
The linked page gives an example where āIf you own the house for more than 64.5 months, you will have saved money by paying the points.ā However, this should be corrected to say that āif you have the loan for more than 64.5 months ā¦ā, since if you refinance the loan earlier, you lose the benefit of the lower interest rate that you bought with the points for the remainder of the loan term.
That was true in the days when mortgages were 7% or so, or higher, these days itās closer to 1/8 point or less IME. A quarter point is too much juice when itās 7+% of the interest rate.
My credit union, for example, only offers no-point mortgages now. A lot of banks will offer a 1/8% discount (equivalent to a point) if you pay via auto-debit.
If a point buys down the rate less than before, then it makes less sense to choose any but zero points (or negative point āno closing costā if available) loans, since the payback threshold gets longer (increasing the chance that you will not keep the loan past the payback threshold).
Thanks for all your replies so quickly, most of which confirm that these recommendations would benefit the financial firm more than me. The only reason I even started down this road with the advisors is that my organization, where Iām a fairly new employee, offers their services free of charge initially and they also come in periodically to give market updates and seminars on finances and retirement planning. They administer one of the two 403(b) plans offered by my organization, but not the one I have.
I have about 6 1/2 years left on my 15-year mortgage, which is at 3.75%. So I think itās going to be a thanks but no thanks for these advisors.
I think the low interest rate environment we are in has pushed payments low enough that the reduction in monthly payment from paying points is less of a big deal than it used to be.
For example, a $300K 30 yr mortgage at 7.5% has a payment of around $2100, at 3.5% itās around $1350. Your payment is already $750 lower than it used to be, so an even lower payment via points doesnāt seem as good as saving thousands up front, regardless of the payback period. So consumers are going for the no-point option so much that many places donāt advertise them.
I am constantly looking to refi various loans and this is what I see in my area. Could be different in other areas.
That advice to re-fi reminds me of the '80s advice to pull out your equity for maximum leverage. It can work, but if it goes array, that really stinks for you, but none of it stinks for them. Convenient, that.
Iād do Bogleheads and another site with great discussions in the White Coat Investor, yes, it is focused on doctors, but the discussions and info can apply to many investors.
Itās also about your comfort level, me, I like my home paid off, the property taxes are bad enough, I donāt want to have to think about a monthly payment in retirement. But I know a guy who have lived in his SoCal home for 35 years and has a pretty hefty mortgage, he keeps pulling out funds, he is 70! And no, itās not invested 
Yes, what allows folks to sleep well at night is the bottom line. That thing I could never get passed was that āadvisorsā always collected from the accounts, no matter whether they went up or down, diminishing any profits you might otherwise make. They NEVER shared in the losses at all.
It seemed a good thing for them but bad for investors.
The money we used to pay toward our mortgage is now available for us to help support our loved one who is unable to work. If we still had a mortgage, it would be much tougher to support anyone else and keep on top of our bills and do the things we wnat to do, including traveling to see loved ones. It really feels great to have the discretion to invest the hunk of funds that went monthly toward the mortgage or direct it toward where WE chose!
Sometimes, using an advisor IS what helps one sleep well at night. Many (most?) arenāt good at managing their own investments and make mistakes - too risky, not enough risk, selling at the wrong time, not diversifying enough, etc. etc.
The key is finding a good advisor and one you feel comfortable with. Like all professions, advisors need to get paid as well. I donāt begrudge them that if a) they are skilled and b) you are the type of investor who welcomes/needs assistance.
Weāve talked about mortgage debt here many times. Itās another financial item that depends on oneās comfort level. Some like having their mortgage paid off. Others are comfortable knowing they can invest that money in something that will, over time, produce a better return than their low interest rate mortgage. It canāt be said with a blanket statement that one path is right or the other is wrong without knowing more detail about each personās financial picture, investment acumen, and risk tolerance, just to name a few thingsā¦
Agree that a fee-only financial planner (whom I have met with, paid for by my employer), can be a useful service and provide ressurance that youāre going in the right direction or help you consider any adjustments taht may be useful.
They have less incentive to āsteerā you toward getting them juicy commissions, but even some of them may try to get you to buy products that may not be in your best interests.
Personally, I find bogleheads and books and materials associated with it to be the most helpful. Our S has found and read that on his own, as well as White Coat Investor (though heās not in the medical profession). It has served him well and he strikes a nice balance between saving and spending (including retirement savings).
Glad to have returned to reading this thread. Agree that everyone has their individual comfort zones. I like not having a mortgage, and perhaps, were we ever to move of consider buying another place near the kids (one will not leave the area, the other I am not so sure) I might prefer to pay cash and not have a mortgage. Donāt know if DH feels the same. I think heāll continue to work until he can COBRA the insurance. Even if its $$$, its worth it, if he wants to retire. Does anyone know if HSA money can be use to pay for COBRA?
Our financial planner is a fee only person.
However, we have three accounts that are IRAs with fairly sizable yearly fees. We made this decision because we did not want to manage them ourselves. Mine is a guarantee 6% rate per year. My husbands is 5%. These accounts have done quite well. If we donāt touch them for ten years, the principal doubles. We will start monthly draw, we think, when required minimum distributions are required anyway.
I agree with having less debt. Iād rather not have a mortgage, or even a car payment. It frees up our retirement income to do,the things we want to do!
Q-27/A-27 from this IRS document may have your answer: https://www.irs.gov/pub/irs-drop/n-04-2.pdf .
HSAsā tax advantages cause some people to think of them like IRAs, where the earnings are not taxed yearly, so moving the HSA money to a place where fees are low/none and investment options are good may be something to consider (see https://thehsareportcard.com/ for a comparison of HSAs for spenders, savers, and investors).
ask your financial planner to compare his/her recommendations (net of fees) against the 3-fund portfolio:
yes it can, as long as you are paying COBRA post tax; HSA can also be used to pay for Medicare premiums. As a result, let it ride if you can pay for COBRA out of pocket.
FYI for the new folks - there is difference between fee-only planners and fee-based (sounds similar, but fee-based planners might still be earning commissions)
https://finance.yahoo.com/news/fee-only-vs-fee-based-140034733.html
Quick question for the real estate investors. We sold one of our rental properties this year, and I realize that we will pay capital gains rate of 20% on our profit, plus additional net investment income tax of 3.8%, because we are both working and our salary forces it. But if we wait to sell the rest until after we retire, we have one year where there will be zero income (except for a little rental income), will we then be at a 0% capital gains rate, even though the profit from the remaining condo sales will be substantial?
I know someone will tell me to ask my tax advisor, but sheās busy and I donāt want to wait a month for an appointment.
Youāll be at zero % for the first $79k of LTCG, then 15% from $79k to almost $500k (married filing joint).
Youāll have to recapture depreciation if youāve taken it, which gets taxed at 25% IIRC.
https://www.fool.com/retirement/2018/12/09/long-term-capital-gains-tax-rates-in-2019.aspx
Okay, thanks, @notrichenough . The link that I read looked like it was considered separately, which didnāt really make sense.
You can also do a 1031 exchange into a REIT if you want a real estate investment without the hassles of being a landlord, if you do it right. That would defer all the taxes for now, then you could sell later when you are in a lower bracket.