Here’s How Refinancing Can Be a Great Idea!

I am doing a refinance for a family right now and here is their situation. They bought their home 9.5 years ago. They have paid 112 months of payments at $751 a month. So far, $11,202 has gone to principal and $72,910 has gone to the lender, in interest. They still owe 248 payments. The total of those payments is $186,248. This is how much they will pay if they stay in their current mortgage and make no additional payments.

So, I looked at their current amortization schedule and compared it with their proposed schedule, and here’s the new plan: We have converted them to a 15 year mortgage. Their new payment will be $735, which is only slightly less, but instead of making 248 more payments, they will only make 180 more payments. This refinance will save them $54,066. And they will skip their December payment – Merry Christmas Smith family!!

I don’t know about you, but $54,066 is a lot of money to me!
If you are curious to know if refinancing your home is a good idea, please give me a call and we’ll look at your situation!

Thanks for taking the time to read my blog!!
~Leslie


865.789.6229
Lsweet02@comcast.net

Why Refinancing Can Be A Bad Financial Decision

Let’s say you have a $150,000 mortgage on your home and your interested rate on it is 6%. When you bought your house, you put it on a 30 year term – this is by far the most common term, mostly because it gives you a lower payment. I pulled up an amortization schedule, and here’s what I found out:

If you have paid on your home for 5 years, you will have paid $53,959.80 in total payments to the bank in principal ($10,418.72) & interest ($43,541.04). Your principal balance at the end of 5 years is $139.581.24. Let’s say that in those 5 years you have accumulated $6,500 in credit card debt that you want to “convert it to a lower interest rate.”

If you refinance back into a 30 year mortgage at $150,000 - at this point, you have just THROWN AWAY $53,959. I don’t know about you, but that is a LOT of money to me! Even if I can save $150 a month, I still wouldn’t pay $53,959 to save $150 monthly. And like I said yesterday, if I haven’t paid extra on my mortgage for the last 5 years, it is very unlikely that I will start now.

Even if I did accelerate the mortgage by the amount I save every month for the remainder of the loan, I would only save $38,063 in interest at the end on the loan. I still didn’t save as much as it cost me to create the deal in the first place. It still cost me $15,896 more than I saved.

Here’s the other point I want to make… If you paid on that $6,500 credit card debt at 25% interest, at $190 a month – that would take you 5 years to pay it off. It would cost you a total of $11,400 ($6,500 balance and $4,900 in interest). Now, obviously you don’t want to pay $4,900 in interest on that debt, but isn’t that still a lot less than paying $53,959.80 ?!?!

So, yes, in theory, refinancing high interest debt into lower interest debt is a good idea. The problem is… a theory does not equate to real life! The other problem is that the math doesn’t makes sense… Would you rather pay $4,900 or pay $53,959?

In my next blog, I’ll tell you about one of the families that I am helping with a refinance on their home right now. After looking at their amortization schedules we were able to determine that we can lower their interest rate, save them thousands in interest and knock several years off of current mortgage loan. They are an example of a great way to take advantage of the current low rates.

Thanks for taking the time to read my blog!~Leslie

Radio Commercial - How to Get out of Debt

So, I hear this guy on a radio commercial, talking about these other commercials, where they advertise that credit card companies have to settle your debt, due to new laws. He goes on to say that this is bull – that there are no such laws. Ok, I’m interested! He’s right so far… there is no law that requires a credit card company to take less from you than what you owe them.

Then, he goes on to talk about how we all have credit card debt and the way to get rid of it, is to refinance it into your home mortgage... plus rates are at historic lows. This is obviously a guy who is trying to sell a mortgage, because this is a TERRIBLE idea for 99% of us!!! The logic says that if you convert your high interest debt into low interest debt, and then pay down the balance faster, you will save money in the long run. The problem is... logic or theology is NOT the same as reality.

There are several reasons why this is a bad idea, but I’m just going to camp out on one reason today. Here it is… Let’s say you currently have a mortgage and you pay your payments on time, but have accumulated credit card debt. Let’s also assume that you have not made any additional payments toward the principal balance of your mortgage. There is no reason to believe that you will pay down your balance any faster after you refinance. There is also no reason to believe that you will not re-accumulate the credit card debt that you just converted.

You canNOT refinance your way out of debt! Sometimes, repositioning assets can be a part of an overall plan to get out of debt, but one transaction will never change your life. Changing the behavior that caused the accumulation of the credit debt is what changes your life.

A typical refinance puts you back on a 30 year mortgage – tomorrow’s blog will be about how much money you waste refinancing a 30 year back to a 30 year. I’m also going to blog an example of the way the interest is calculated – which will show you how a lower interest rate on a mortgage actually has you paying more money than a higher interest rate on a credit card.

However, rates ARE at historic lows, and it can be a great time to knock a few years and tens of thousands of dollars off your mortgage. If you are interested in seeing if refinancing is a good idea for you, or about getting a REAL debt elimination plan, you can always contact me at:
865.789.6229
Lsweet02@comcast.net

4 of These?!?!

The other night, while looking for a calculator online, I stumbled upon a “How Much House Can I Afford” calculator. So, for fun, I put in the info – I’m always curious as to what these things tell the consumer.

The results were, that we could afford just over 4 times what we are currently paying for our mortgage. FOUR TIMES. Do you understand how much money this is ?!?! I know with certainty, that we cannot afford that house payment...But, we qualify for it. The bank would gladly lend us the money on it. Because the bank cares about us! They want to help us achieve our goals & dreams! They want us to be happy :)

No, they don’t – We’ve got to stop drinking the consumer juice!! The banks are enslaving us, one mortgage at a time. One credit card at a time. One car loan at a time. A house won’t make us happy. A car won’t make us happy. Monthly payments won’t make us happy. The banks aren’t making our dreams come true, they are making THEIR dreams come true… ever wonder why banks are so big and beautiful? – you paid for it!

God said that “the rich rule over the poor, and the borrower is servant to the lender” and He was NOT kidding. The bank has the money and they entice you to chase after it, and as soon as you do, you are enslaved to them… for the next 30 years if you bought a home. Every day, we get up and go to a job (which most of us hate) so that we can pay the lenders the money that we owe them. I wonder why we feel so much financial pressure… I mean, we qualified for it in the first place, how come we can’t afford it now? Here’s the problem… qualifying for a loan, in NO WAY means that you can afford it. This is true for a home, a car, a credit card, furniture, you fill in the blank.

The average US adult spends $1.22 for every $1.00 they earn. How does that happen? I'll tell you... we qualify for it!!!

This is why I’m a debt coach, first, and originating mortgage loans is secondary. I get to dig deep into my client’s financial world and determine if they can actually afford a home, and not just qualify for it. When we buy everything we qualify for, we stretch ourselves thin and set ourselves up for tremendous financial pressure, and ultimately failure. Pressure, fear and servitude are what the financial institutions want for your financial life, not what God wants!

A Credit Card Offer That Even Surprised Me

I got several financial offers in the mail yesterday, as I do most days. What I couldn’t believe, was that I got an offer for a Visa, endorsed by Liberty University, signed by Jerry Falwell Jr.

Wait a minute, Liberty… you are a Christian university. Are you really endorsing your alumni to go into debt? Really? Does God not say that the borrower is slave to the lender? …Slave!

Oh… it helps support the university… “Every time you buy groceries, get gas, or shop on-line, a portion of that purchase goes directly back to the organization. All at no cost to you.”

Where do I even start? Insinuating that it is okay to buy your gas and groceries with a credit card is LUDICROUS!!! … and “at no cost to you”? What about that 14.99% interest rate?

I mean, I know we all want to say that we can take advantage of the 0% introductory rate, and pay off the balance before the interest comes due, but let’s face it, if most of us did that, the creditors wouldn’t make those offers. … And I know, it’s “free money,” but the borrower is STILL slave to the lender. And the truth is, just like the majority of people receiving this offer, the majority of you reading this blog, don’t handle your credit cards responsibly.

We must get past this idea that we can have something for nothing, and stop enslaving ourselves to these lenders. We should also to be careful not to accept ideas because of who endorses them.
For my life to honor God, He must be my standard of measure, not Liberty University, or any other Christian organization.

Don’t just take my word for it, look it up yourself! The Biblical reference is found in Proverbs 22:7. Be sure when you do, you read the beginning of the verse too! (If you don’t have a Bible, you can look it up online at www.Bible.com)

Leslie Sweet – Financial Coach
865.789.6229
lsweet02@comcast.net

Why a Car Chase Is Like Your Finances

While I was at the gym this morning, I was sucked into the car chase, happening live, in LA. I watched as that white pick-up truck squeezed in and out of traffic, ran a couple of red lights, and then made it onto the open freeway. As I was almost done with my cardio, the truck got a flat tire, so naturally, I decided I could burn a few more calories… The truck slowed down due to the tire, and they were being followed by at least 15 cop cars, but they kept creeping along.

Finally the truck stopped. The driver got out, put his hands up, and walked backwards toward the cops… but then he stopped. He walked back to the truck, got in, and started driving again. WHAT?!?!? Seriously? You gave up, but then changed your mind? What were you going to do, try to outrun the cops again? And then it occurred to me…

This is exactly what so many people do with their money. They run from the consequences of their spending habits and lack of planning or saving. We squeeze in and out of monthly payments, dodging unexpected events. We even know that we are “surrounded” … by payments that we can’t or don’t want to get out of. Sometimes, we even stop and surrender… but then we decide that we want what we had before, so we get back in the truck with the flat tire – get back into the same habits that got us there in the first place. We trade stuff for our freedom.

There was no way that truck was getting away today… and there is no way you will escape the consequences of your financial behavior.



Leslie Sweet – Financial Coach
865.789.6229
lsweet02@comcast.net

Just one example of how we help people!

This is a very recent testimonial of a family that one of our debtbusters in Nashville helped! At Dano's Debtbusters, we are making a real difference in people's lives...

We had been trying to purchase a home for a year! We had some credit problems that kept us from qualifying. Our Realtor recommended that we contact William.
My wife had no score, I had a 424. William laid out a game plan and helped us each step of the way. He showed us how to clean up some old stuff on our credit and how to establish and build new credit. He helped us create a budget and we were able to payoff some of our old debt. He even showed us how to save 10,000 dollars for a down payment on our new home.
In a little over one year my credit score was 715 and my wife had a 623. We were able to purchase our DREAM HOME!
THANK YOU! William

Burial of a Child

As much as my kids (pictured) drive me bonkers some days, I cannot imagine what it would be like to lose on of them! One of my goals as a Financial Coach, is to help people achieve their goals and dreams financially. One of the most devastating events in life, is the loss of a family member. Not just the fact that you love them and they are gone, but what happens when you were dependent on that person’s income to feed, house, and clothe your family? This is usually what I talk with families about regarding life insurance. Not today.

A couple weeks ago, I got a letter from my kid’s Mother’s Day Out program. It stated that one of the children who attends with them, lost their infant sibling. I was sick to my stomach. How do you even deal with that? Then I finished the letter… they were taking donations to pay for the child’s funeral arrangements. As I wrote a small check to help out, I thought to myself: not only had this family lost their baby, but now they will have to deal with the financial burden of giving the child a respectable burial.

Death obviously brings an emotional burden, but it can also bring a financial one, especially if you are not prepared. While I know that no one likes to think about death, it is coming, and you can prepare for the financial burden that comes with it.

For information on the cost to protect your family from financial burden in the event of a death, you can always contact me:

Leslie Sweet
865.789.6229lsweet02@comcast.net