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tthomass
01-12-2009, 07:45 PM
So, anybody taking advantage of the current financial market? I haven't had the property for 2 months yet and about to refinance from 6% to hopefully 4.5%. At the same time taking out a bigger loan to pay off a few dollars I owe on the my truck and Blue + pay for a renovation in the house + pay for my pole barn etc...........I'll do all that and my mortgage payment will go down about $20 at a 4.8% rate.

So yes, my loan is bigger but I'm knocking out a bunch of expense I have while maintaining the same mortgage payment. With the rent I'm collecting + $ saving from not paying rent for myself and company.......all I am basically doing is paying on my mortgage vs trucks etc and my overhead is staying almost the same.

DVS Hardscaper
01-12-2009, 08:47 PM
Years ago I used my home's equity for paying business expenses. Little, peddly notes here and there. NEVER AGAIN. NEVER...EVER...AGAIN!

Now, using the equity for IMPROVEMENTS to the property - that's a whole different story. An addition, remodel the kitchen, the bath, finish the basement, build a detached garage - I'm all for it

I have an uncle that owns some new car dealerships in PA and NJ. About a month ago my dad was telling me that 30 years ago my uncle said "never include your home with your business finances", and my dad said "thats advice I have always respected".

treemover
01-12-2009, 09:40 PM
But you are paying on your truck and blue for 30 years instead of the short term you had in your oringinal loans. So when you go and get a loan for a new truck in a year or two you are still techincally paying for the first one. This is one of the main reasons our economy is like it is, people buying tins of stuff financed for ever and when they need to up grade the realize how up side down they are. I would not do it unless you really need to.

tthomass
01-12-2009, 09:51 PM
Correct, keep home and business separate. Even using the equity line gains lawyers access to my property that is in MY name.

The additional funds will be deposited into my personal checking account and are at my availability to use for whatever I please as cash.


Years ago I used my home's equity for paying business expenses. Little, peddly notes here and there. NEVER AGAIN. NEVER...EVER...AGAIN!

Now, using the equity for IMPROVEMENTS to the property - that's a whole different story. An addition, remodel the kitchen, the bath, finish the basement, build a detached garage - I'm all for it

I have an uncle that owns some new car dealerships in PA and NJ. About a month ago my dad was telling me that 30 years ago my uncle said "never include your home with your business finances", and my dad said "thats advice I have always respected".

tthomass
01-12-2009, 09:57 PM
I understand what you are saying. My property will be paid off long before 30yrs though that is my note.

I am consolidating my loans in one view. The International I pay $1,000 a month and my truck I pay $1,300 a month. Here's another way to look at it......in simple terms I'm consolidating them into one loan and dropping $2,300 that I responsible for each month. NOW, yes my principle on my mortgage is going to be higher. I am refinancing for a much lower interest rate which over time is a considerable amount of money. Take that $2,300 for example that I not technically responsible for anymore.......apply it to principle on my mortgage.


But you are paying on your truck and blue for 30 years instead of the short term you had in your oringinal loans. So when you go and get a loan for a new truck in a year or two you are still techincally paying for the first one. This is one of the main reasons our economy is like it is, people buying tins of stuff financed for ever and when they need to up grade the realize how up side down they are. I would not do it unless you really need to.

treemover
01-12-2009, 10:04 PM
Take that $2,300 for example that I not technically responsible for anymore.......apply it to principle on my mortgage.

that would be a great way to do it, lower interest rate on truck loans and gives you room in cash flow for sh..ty weather or economy. Just have to make sure you do that and not spend it on something else........like toys!!!!

EagleLandscape
01-12-2009, 10:34 PM
I disagree. Use the equity in house if you have it for loans for your business. But don't use it to subsidize a business that is losing money.

There is a big difference in wisely using what you have built up, versus overusing something to cover your butt on another mistake.

EagleLandscape
01-12-2009, 10:36 PM
I understand what you are saying. My property will be paid off long before 30yrs though that is my note.

I am consolidating my loans in one view. The International I pay $1,000 a month and my truck I pay $1,300 a month. Here's another way to look at it......in simple terms I'm consolidating them into one loan and dropping $2,300 that I responsible for each month. NOW, yes my principle on my mortgage is going to be higher. I am refinancing for a much lower interest rate which over time is a considerable amount of money. Take that $2,300 for example that I not technically responsible for anymore.......apply it to principle on my mortgage.

what was the term on your truck loans? 48 months, 72 months? now amortized over 30 years? its ideal to use the new amortization to get a lower payment, and then pay down the loan faster if there isnt a pre payment penalty. but if you drag that truck through 30 years of financing it would be a bad one.

www.bankrate.com is my friend. i even have it as a tab in my firefox.

tthomass
01-12-2009, 11:43 PM
My business is not failing.......I think of it as positioning myself in the best way for an unknown year. I could be booked till Jun already but that does not grant me anything after that in the construction business. Once I build a patio the customer most likely is not going to call me up an have me build it again out of something next year. Unlike yearly mowing contracts, I can only project what I want to make and to be honest its only a goal with anyone that does what I do and you have to try to reach it.



I disagree. Use the equity in house if you have it for loans for your business. But don't use it to subsidize a business that is losing money.

There is a big difference in wisely using what you have built up, versus overusing something to cover your butt on another mistake.

tthomass
01-12-2009, 11:48 PM
Yes, bankrate is good.

-My loan is a 30yr term, it WILL be paid off before then.

-Think of the extra $ I'm taking out separate from my mortgage. YES, it is part of my mortgage but think of it, as example, a $100,000 mortgage + $20,000 loan. Together it is $120,000 in debt. I have $120,000 debt regardless if it is ONE loan or TWO loans. YES, its a 30yr note. Here is where the additional $2,300 towards principle goes. I am basically paying, by choice, the same $ if you think of the $2,300 as payment on the $20,000 portion. No other way will I get a 4.5% interest rate on a regular loan.


what was the term on your truck loans? 48 months, 72 months? now amortized over 30 years? its ideal to use the new amortization to get a lower payment, and then pay down the loan faster if there isnt a pre payment penalty. but if you drag that truck through 30 years of financing it would be a bad one.

www.bankrate.com is my friend. i even have it as a tab in my firefox.

tthomass
01-12-2009, 11:53 PM
And should things get rough, I have the option of not having to pay the $2,300 as it is only by choice that I must pay it. I can skip if need be without penalty where if I did that say.....now.....I would have banks knocking on my door wanting $.

I'm simply lowering my responsibility........key word.......and saving interest.

stuvecorp
01-13-2009, 01:05 AM
If you are careful with this I don't see the downside, yes you are locked in long term at a low rate and if you are aggressive about paying it down it could give you some extra security. The guys have a good point about not mixing business and personal. Have you asked your accountant?

tthomass
01-13-2009, 01:13 AM
Between my Dad, Brother and me we are the "majority" accountant. The other guy helps us out with taxes.

Correct, do not mix business with personal.

stuvecorp
01-13-2009, 01:23 AM
I will say, I don't always keep things separated. I also understand you are trying to create a buffer in case things are really bad, right?

mattfromNY
01-13-2009, 07:54 AM
One thing to look at before you sign the papers: How much is the refinancing charges/ doc. fees/ closing cost? I ask this because banks, CC's, etc. usually charge a good amount for refinancing.
When I sold motorcycles at the dealership, we would have people all the time refinancing loans. When it came down to the nitty gritty, they would save a percent, or cut their payment and save (example $500-700 over the life of the loan), but the bank charges $500 in fees up front, tacked onto the loan, to do the refinance.
Another example, CC companies always offer 'Zero percent on balance transfers', but when you read the fine print, they charge 3% of balance to be transferred as a document fee, etc. ($5000 balance transfer would cost $150, usually charged as a purchase, and added to the balance)
I know you are a very smart person, and a lower rate on your home/ land has the potential to save you much more than $5-700, but just make sure you read the fine print before you sign.
For what its worth,
Matt.

EagleLandscape
01-13-2009, 08:00 AM
Todd,

I wasnt saying your business is failing. I just threw that out there for everyone that will read this thread that equity in your mom shouldnt be used to subsidize a failing business. It can be used to grow a business.

i have a TON of equity in my home. I'm talking a ton!! Right now rates are like 4.5 I believe, 25 term, amor over 30 yr fixed. so that means CHEAP CHEAP money.

I see if this way... two options on how to finance a business. through typical business loans through a financial institution, or through personal loans. currently, i can get better rates and terms using my own personal finances, (especially since my business has only been serious for 2 years, banks dont like that) and come out better at the end (versus using a financial institution.

example: I've built 4 spec houses in the past year. went to the bank id been with for since i was 13 when I just had a checking account. brought them a business plan and all, needed 250k to build two spec homes, and they said they'd give me 20k.

told them that wasnt enough, and called around to some adults i knew (i was 21 or 22 at the time) and presented them with the opputunity to invest.
since then this investor has been more source to build 4 houses, buy a sprinkler company, buy and resell a house in 15 days, and we're about to go at it again to purchase another sprinkler company within 30 days.

whatever works and fits your business plan, do it!

sprnggrn
01-13-2009, 08:18 AM
I was offered something similar but the closing costs alone were over $8000.00
shop around if you can

tthomass
01-13-2009, 08:22 AM
I will say, I don't always keep things separated. I also understand you are trying to create a buffer in case things are really bad, right?

yes...........

tthomass
01-13-2009, 08:26 AM
One thing to look at before you sign the papers: How much is the refinancing charges/ doc. fees/ closing cost? I ask this because banks, CC's, etc. usually charge a good amount for refinancing.
When I sold motorcycles at the dealership, we would have people all the time refinancing loans. When it came down to the nitty gritty, they would save a percent, or cut their payment and save (example $500-700 over the life of the loan), but the bank charges $500 in fees up front, tacked onto the loan, to do the refinance.
Another example, CC companies always offer 'Zero percent on balance transfers', but when you read the fine print, they charge 3% of balance to be transferred as a document fee, etc. ($5000 balance transfer would cost $150, usually charged as a purchase, and added to the balance)
I know you are a very smart person, and a lower rate on your home/ land has the potential to save you much more than $5-700, but just make sure you read the fine print before you sign.
For what its worth,
Matt.


Yes, you are correct. On interest they are telling me 4.75%-4.85% but the market is still dropping. About $3,100ishto refinance, which if I choose to I can even roll it into the loan. The $ will be recovered in 1.5yrs time.

Staying with the same bank I don't have to go the full route again with a loan as they can use the same "stamp" from the county and not have to go through taxes etc with the county.

tthomass
01-13-2009, 08:35 AM
Todd,

I wasnt saying your business is failing. I just threw that out there for everyone that will read this thread that equity in your mom shouldnt be used to subsidize a failing business. It can be used to grow a business.

i have a TON of equity in my home. I'm talking a ton!! Right now rates are like 4.5 I believe, 25 term, amor over 30 yr fixed. so that means CHEAP CHEAP money.

I see if this way... two options on how to finance a business. through typical business loans through a financial institution, or through personal loans. currently, i can get better rates and terms using my own personal finances, (especially since my business has only been serious for 2 years, banks dont like that) and come out better at the end (versus using a financial institution.

example: I've built 4 spec houses in the past year. went to the bank id been with for since i was 13 when I just had a checking account. brought them a business plan and all, needed 250k to build two spec homes, and they said they'd give me 20k.

told them that wasnt enough, and called around to some adults i knew (i was 21 or 22 at the time) and presented them with the opputunity to invest.
since then this investor has been more source to build 4 houses, buy a sprinkler company, buy and resell a house in 15 days, and we're about to go at it again to purchase another sprinkler company within 30 days.

whatever works and fits your business plan, do it!

I understand and also with the banks. My business has only been documented for 3yrs this month.........full time 3yr mark not until Mother's Day.

I was actually lied to by my banker and I'm seeing what I can do to him about it but none of my equity was available 3 days after closing as promised, even though he knew terms had changed 4 months prior to my closing. I only gave 60% of what the place was valued at 2yrs ago (peak) and my principle loan is only 53% of the current county assessment.

DVS Hardscaper
01-13-2009, 08:47 AM
Todd, Sounds like you have your mind made up :)

You're right, this is the construction biz. It's the 2nd riskiest industry in the world.

Years ago I refied my home with all good intents. It didn't quite work out as planned. Things in life can take place that can be out of your control.

It will be a long long time when we see values that peaked 2 years ago. Thats neither here nor there, today :) Home values are plummeting, thanks to foreclosed and short sale homes. There are so many foreclosed and short saled homes that when an appraiser pulls comps, all he/she has to work with is comps for homes that sold for 1/2 their value. (LOL - I have a buddy thats a real estate appraiser, about a month ago he and I had a hr long conversation on this, where he had to break the reality to me)

People always say a home is an investment. Well, no it's not a freakin investment, it's a HOME! We all WILL need a roof over our heads each and every day until we die. It's a HOME! Now, owning other property where you do not hang your hat at night.....that's an investment, thats something one can count on for when times get tight, or to fund retirement and the kids college tuitions.

I recently refinanced to take advantage of the current low rates. The settlement guy is also the owner of the settlement company with 2 offices. When signing papers he commented on the fact that I didn't take cash out. I responded "been there done that, I took cash out to pay some business bills, never again". Being the owner of a successful settlement company, he responded "I hear you, I have done that too, and I'll never do it again either, if I need money for the business - I'm gonna get rid of employees before I re-fi my home again".

There are guys that are very frugal with their money. But like you said, the construction industry is up and down, up and down. Because of that fact, when it comes to loans, I am overly conservative.

I have a lawn / landscape maintenance contractor buddy that is as successful as one can imagine. A very smart, young Guy. His house is on a 15 yr mortgage, with like 5 or 6 years remaining. He recently bought a commercial property for his business, put down a HUGE deposit....IN CASH.....without taking a penny from his home's equity. He said his friends and family were all amazed that he had saved up for the down payment, because he never told anyone.

This year, I think many of us have learned the value of the term "cash flow". All you need is a rich sugar mama to support you!!!

tthomass
01-13-2009, 09:07 AM
Let me know when you find my an attractive, smart, young and successful sugar mama for me!!! Girlfriends are almost like underbidding a job haha.

If you look at the additional $ being taken out as just that and my two trucks paid.......my business has no debt. It has overhead, no debt. Now, yes I am technically still taking out more $ but again the additional payment is now optional vs fixed.

I'm not talking about a large sum of money or doubling my principle but configuring things to my advantage if need be.

Sent you a PM.

Sunscaper
01-13-2009, 09:32 AM
It seems like it can be a good idea. Bernanke is going to print his way out of the mess. I think its a good idea as long as you put some of the cash into an inflation proof asset, i.e. commodities to hedge your newly incurred debt. This way you can borrow with cheap money now and pay off or service the debt in a few years with your hedge instead of hard work. Best of luck.

IndyChad
01-13-2009, 10:00 AM
Todd, Sounds like you have your mind made up :)

You're right, this is the construction biz. It's the 2nd riskiest industry in the world.

Years ago I refied my home with all good intents. It didn't quite work out as planned. Things in life can take place that can be out of your control.

It will be a long long time when we see values that peaked 2 years ago. Thats neither here nor there, today :) Home values are plummeting, thanks to foreclosed and short sale homes. There are so many foreclosed and short saled homes that when an appraiser pulls comps, all he/she has to work with is comps for homes that sold for 1/2 their value. (LOL - I have a buddy thats a real estate appraiser, about a month ago he and I had a hr long conversation on this, where he had to break the reality to me)

People always say a home is an investment. Well, no it's not a freakin investment, it's a HOME! We all WILL need a roof over our heads each and every day until we die. It's a HOME! Now, owning other property where you do not hang your hat at night.....that's an investment, thats something one can count on for when times get tight, or to fund retirement and the kids college tuitions.

I recently refinanced to take advantage of the current low rates. The settlement guy is also the owner of the settlement company with 2 offices. When signing papers he commented on the fact that I didn't take cash out. I responded "been there done that, I took cash out to pay some business bills, never again". Being the owner of a successful settlement company, he responded "I hear you, I have done that too, and I'll never do it again either, if I need money for the business - I'm gonna get rid of employees before I re-fi my home again".

There are guys that are very frugal with their money. But like you said, the construction industry is up and down, up and down. Because of that fact, when it comes to loans, I am overly conservative.

I have a lawn / landscape maintenance contractor buddy that is as successful as one can imagine. A very smart, young Guy. His house is on a 15 yr mortgage, with like 5 or 6 years remaining. He recently bought a commercial property for his business, put down a HUGE deposit....IN CASH.....without taking a penny from his home's equity. He said his friends and family were all amazed that he had saved up for the down payment, because he never told anyone.

This year, I think many of us have learned the value of the term "cash flow". All you need is a rich sugar mama to support you!!!


This is very true. Right out of college I worked for a mortgage company/bank for about 4 years and within a year of doing debt consolidation refi's about 90% of the individuals that we did loans for were in the exact same situation they were in when they came to us. And they still had the higher mortgage from the refi. If a payment is an optional payment, then more than likely you will not choose the option to pay it as time goes on. There is no problem getting a lower interest rate, but do check your origination points and additional closing cost because if you do the math a lot of times it is not worth it especially if you are pulling money out for other debts. Good luck to you!

neighborguy
01-13-2009, 03:26 PM
If you choose to do the refi:

I would ask the bank is they use simple or scheduled interest, if they reamortize with every payment (if they do it will greatly benefit you),

if they offer a biweekly payment (if yes, do they actually apply each payment or hold it until they get the full payment), is biweekly free,

and on the settlement disclosure page, look between lines 800 and 825 for something called YSP or additional brokers compensation ( it will be paid outside of closing; they will tell you that it is money paid to the broker don't worry about it, but it is really an extra compensation that you choose to pay the broker for putting you into a higher rate than you actually qualified for)

Couple things I have learned along the way.

Good luck

AztlanLC
01-15-2009, 05:22 PM
I just don't see why you guys think this is a bad idea the guy will refinance and his payments will be lower that what he currently pays.
Is not like he is going to pay more monthly for this is much the opposite that is being responsible.