- November 29, 2023
- Posted by: legaleseblogger
- Category: Related News
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AI Legalese Decoder can help in this situation by simplifying the legal jargon and providing clear explanations of the options available. Additionally, it can help in understanding the implications of using the inheritance to pay off the mortgage and other debts, as well as the potential benefits of refinancing the loan to invest the remaining funds.
1. Interest rate and loan details
We currently have a 2.5% interest rate on a standard 30 year fixed VA loan. This means that for every year, 2.5% of the remaining loan amount is added to the total repayment.
2. Inheritance and financial situation
My spouse inherited land from a relative, and after taxes and fees, we will be receiving around $350,000. This is a significant amount that could potentially help us in achieving our financial goals.
3. Paying off the house or investing
My spouse wants to pay off our house, while I am not entirely convinced. I believe that it would be wise to pay off our debts, except for the house, put a portion of the inheritance towards the mortgage, and then refinance. This would allow us to start investing the remaining funds to generate a profit.
4. Concerns and future plans
We both admit to being terrible with money and are scared of making the wrong choice for our family. Our ultimate goal is to start a Permaculture farm, and the inheritance could make this dream a reality.
5. Seeking advice and guidance
We are seeking advice on how to make a responsible decision with the inheritance. We are open to receiving explanations in simple terms to ensure we fully understand the options available to us.
AI Legalese Decoder can provide simplified explanations of the financial and legal aspects involved in using the inheritance to pay off debts and invest in a Permaculture farm. Additionally, it can help us understand the potential benefits of refinancing the mortgage and the long-term implications of our financial decisions. This will allow us to make an informed and responsible choice for our family’s future.
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No one can offer any meaningful advice without knowing the answer to a critical question: ÔÇ£What is the mortgage interest rate youÔÇÖre currently paying, over what term?ÔÇØ
Assuming you got your mortgage more than a year or two ago, refinancing probably makes ZERO sense. (Have you seen current mortgage rates?)
Depending on the actual rate youÔÇÖre paying now, you might be better off NOT paying it off any faster than required; it could be lower than you could earn by putting the $350,000 into a number of very safe, but relatively high-yielding investment options.
Beyond that, best to retire that other $12,000 in debt that you have outstanding, for sure.
1000% you should pay an hourly financial advisor $250/hr to talk about this.
10% of their job will be laying out the options. 90% of their job will be listening to you two discuss the options – almost like a therapist.
Just donÔÇÖt fight in front of them, that would be embarrassing.
I will say this. Being debt free is a great feeling. And if my wife wanted to do that (with **her** inheritance no less) I would thank my lucky stars and up the number of times I make her breakfast in bed each month.
But youÔÇÖre also right about the other debt. Pay that $12k off first, even if it means you only get the mortgage down to $20k.
This happened to me. Paid off the house and the debt – looks about right amount for you too. Interest rates are at 8% so not a great idea to refinance. You start fresh! Take your mortgage payment amount and start investing it every month before you can spend it. Find a good financial planner. We did this and were able to retire early. Of course everyoneÔÇÖs situation is different
Refinancing in this current interest rate environment doesnÔÇÖt seem like a great idea unless your current mortgage has really unfavorable terms, like an ARM, balloon payment, etc. Another possibility you could explore would be recasting your mortgage, where you pay a lump sum to reduce the principal and your lender reamortizes the loan at the same rate/duration as you originally had. This reduces your monthly payments since more of the principal has now been paid. Different lenders have different rules for recasting- IÔÇÖve never done it myself but it sounds relatively painless (there may be a small fee). This might be a nice compromise between not directing any of the inheritance to the house and using all of it to pay off the mortgage.
Preface: I can’t give any real advice without knowing interest rates on the debt and mortgage.
Keep in mind. That mortgage payment that you are currently making is now excess money you can save and invest if you are mortgage free. You worry about making the “wrong choice” but… I honestly don’t think paying off debt outright will ever be the wrong choice (assuming there’s no penalties for doing so)