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Mortgage refinancing decision tree

mortgage Scrabble tiles

Increasing your monthly payment could save you more money

I’m feeling like some kind of dad genius this morning. Elder came in my bedroom earlier and told me she did her bathroom and bedroom chores. “Good,” I said, and rolled back over, not ready to get out of bed. She walked off and a minute later I heard her unloading the dishwasher. This kid really wants her extra screen time, man. I told her if she does all her daily chores I would give her an extra hour. And she’s currently two-thirds of the way to her DadPoints goal, so I guess we’re getting a cat next week.

I was really happy with yesterday’s post about my trading performance and figured that a more accurate assessment was needed. I hate to say it, but I think I need to do some more work in Excel, to figure out how to group transactions and join several sheets together. I don’t know if it’ll work or if I’ll need to get more complicated and throw it up in Python (or Google Collab) but at the minimum I want to see what things look like when I remove long term positions like Amazon and NVidia.

Today I want to talk about something that I wanted to mention yesterday, but took out cause of time constraints: refinancing our mortgage. Missus and I were discussing it as part of our FIRE plan, so I reached out to our mortgage agent to see if it was worth it. The short answer is no, and it’s likely that, for most people who are looking to pay off their mortgage and pay less interest, simply paying more on the collateral is a better play.

We’ve been in our house for five years, put ten percent down and have a twenty five year fixed rate mortgage on the house. Our payment includes escrow for taxes, as well as mortgage, flood and property insurance. After the first year, the escrow estimate went down, and we’ve been paying the difference into the principal each month. The city assessment on our home has gone up more than ten percent as well.

You can take a look at the this refinance calculator to see your own options, but our results weren’t very encouraging, only about $35 a month, or $420 a year. Considering that we would pay 1-2% on closing costs, we’d have to stay in the house for another seven years just to start recouping the money. And the total savings would only be about $8400 over the life of the loan. No sir. Instead, have a look at the savings we’ve gotten from throwing that extra $60 capital in each month. First, here’s a payoff calculator with a five year old mortgage with an original value of $200,000:

And here’s the result with an extra $60/month thrown on top of it.

Almost thirteen thousand in savings. That’s the value of compound interest, right there, folks.

Since we’re now under the 80% loan to value (LTV) on our home and are no longer required to carry mortgage insurance, I emailed our loan adviser and had him run the numbers for me, just to make sure I knew what I was talking about. They gave me several options, including a 20 year fixed with almost a whole percentage point lower rate. The savings? Sixty dollars a month. Now, while that does change the original estimate, we’re still talking about thousands in closing costs, which would take at least five years to recoup. And we can save three-quarters of what we would with a refi just by doing what we’re doing now.

So for now, we’ll just take the PMI payment and roll it back in to our principal every month, shaving over four years off of our original maturity date.

Before we bought this house, I had no idea how much I would hate the payment summary on my mortgage statement every month. The interest portion of the bill alone was enough more than I paid for my first apartment! It’s crazy. Thankfully Missus and I are on the same page, and focused on getting debt free and FIRE as quickly as we can.

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Six Figure FIRE Update: Day 6

Job search, investing performance, and BTC reFIREment plan

So here I am writing at night again today, as getting up early just hasn’t been my thing lately. The girls are enjoying the quarantine bubble that we’ve formed with the family down the street, and they spent most of the day outside playing today. It was the most productive day I’ve had in a long while.

I applied to two jobs the past two nights, one, a fast-growing firm that provides AI-enabled insights for customer data, Outlier.AI, and a startup trying to “cancel the endless cycles of extractive capitalism,” Good Money.

Outlier is a rather large firm that has an office nearby and meets my salary requirements; Good Money is an unknown, but it’s a startup and the culture looks so awesome. I’ll keep applying to my dream list over the next few days: Square, GitLab, Stripe, Twilio. I’m also continuing my consulting gigs, but I don’t know that I can grow that fast enough to reach my goal. We shall see.

Other good news today is that the retirement account hit a new all time high. I was finally able to figure out my actual account performance by looking at my cost basis gains.

SecurityOpen dateClose dateGain(%)
APPLE INC (AAPL)12/26/201310/5/2018170.64
AMBARELLA, INC. (AMBA)12/26/20139/19/201819.05
AMBARELLA, INC. (AMBA)9/3/20159/19/2018(55.98)
AMBARELLA, INC. (AMBA)11/4/20159/19/2018(40.97)
AMAZON COM INC (AMZN)12/26/20139/6/2018383.27
AMAZON COM INC (AMZN)2/20/20149/6/2018457.70
ACTIVISION BLIZZARD INC (ATVI)12/1/201410/10/2018248.63
BAUSCH HEALTH COMPANIES INC (BHC)12/26/20139/13/2018(80.58)
8POINT3 ENERGY PARTNERS LP (CAFD)8/5/20156/21/2018(20.48)
8POINT3 ENERGY PARTNERS LP (CAFD)8/3/20166/21/2018(25.19)
3D SYSTEMS CORP (DDD)2/20/20149/5/2018(75.12)
3D SYSTEMS CORP (DDD)2/18/20159/5/2018(38.07)
FORTINET INC (FTNT)5/4/20179/5/2018112.83
NVIDIA CORPORATION (NVDA)2/10/201610/8/2018917.65
OCEANEERING INTL INC (OII)12/26/20139/18/2018(68.84)
Total:93.58
2018 Realized Gain/Loss

Obviously Amazon and NVidia were the big dogs here. My portfolio was imbalanced with the sheer amount that I was holding there, and I had a bad feeling about the economy. I wanted cash in hand, so I sold about half my position via a trailing stop. It looks like genius in hindsight.

2019 wasn’t too great from a gains perspective. On paper it’s only about 4%, but realistically it should be more since I was covering positions, covering my initial capital investment while retaining the rest of the position, risk free. I was able to take profits on GBTC, Paypal, RestoreBio, and Yext, but lost most of it in Aurora Cannabis and Cronos Group when weed stocks collapsed. I also got stopped out trying to play a very volatile penny stock involved in Bitcoin mining operations.

2020 hasn’t seen any major sells, my trading is automated now via my value averaging protocols. Very low volume, so to speak, and a modest 4.7 percent realized gains. My unrealized gains, however, are sitting at a whopping 38.54 percent! Most of that is Amazon (2014), NVidia (2016-17), GBTC, (2019-20; about one-third of my total portfolio,) and Netflix (2013). Major losers include Sierra Wireless, Hive Blockchain Technologies, FireEye, Overstock, and 3D Systems Corp. I’m currently holding thirty-one positions in all, seven of which I’m currently value averaging into.

Before I go tooting my own horn too much, though, I’ve got to acknowledge a bit of cherry picking here in the results. Due to my original brokerage being acquired, I don’t have access to my full trade history prior to the last four years. I’m sure it’s ugly. It’s not really fair to cout gains on positions I’ve held since 2013 while tossing out the ones I lost on during that time frame. I also closed out my traditional brokerage account, about one-fifth of my IRA at the time, and put it into bitcoin in 2017, before it broke 10K.

I am obviously putting my money where my mouth is with Bitcoin. Between my hardwallet and GBTC holdings, I have well more than half of my liquid net worth in the big orange coin, and a smaller bit more in Ethereum and other tokens. I’ve done the calculations and am looking at a BTC price target of $67K, at which point I will have more than enough to pay off all mortgage and student loan debt and establish my financial independence. My target date is sometime before the next halving, which I based off of the stock to flow model, which predicts BTC ranging above $100K before then.

There are lot of details to be worked out before we get there though. Obviously taxes is going to be the big one. I assume we’ll be looking at long term capital gains in the case of Bitcoin. GBTC gains in my IRA are untaxed, but withdrawing anything will be subject to income tax plus 10% early withdrawal penalty. So the best strategy right now is to continue to accumulate and hodl. Since I think BTC is going to accumulate price much faster than my four percent loans, it makes more sense for me to continue to accumulate BTC while making the regular payments.

One change I will be making moving forward is that I am going to resume contributions to my IRA, which I suspended in favor of buying bitcoin directly the past few years. I am missing out on the tax savings from my contributions, which is going to be a big factor next April given my expected increase in income. Once we’ve topped that bucket off, I can make a final decision on where my additional savings will go.

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Mother’s Day: Halvening Edition

Today is Mother’s day. Everyone is up and in a good mood — it seems. After I finish this I’m going to make mimosas and cook breakfast. We don’t have anything planned today, but I imagine it’s going to involve a lot of movies and sweets. I’m going to keep the kids productive, though, there are a couple rooms of the house that are in dire need of tidying.

It’s also been over six months since I did the house accounts. I use GNUCash, to keep tabs on the house expenses, mainly the mortgage and utilities, but it also let’s me stay on top of contributions between my wife and myself. She’s put up large lump sums in the past, for the roof and the HVAC, and I have to balance that against my monthly deposits until we’re more or less even. Things are even more complicated because she pays the health, car and home insurance and has also made the daycare payments. We split those payments and I credit her on the house account, but we’re not very disciplined about keeping up with adjustments.

We don’t track groceries or clothes for the kids or anything like that. We tried once using an app, but she just spent more than me, and it became too much of a conflict when it came to buying groceries, or eating out, or buying things for the kids. So we just try to take turns with the groceries and call it a day. We also make our own contributions to the girls. Missus prefers our state’s 529 plan, and I have bitcoin wallets for the two of them on my hardware wallet. Like driver’s licenses, I don’t think the kids will have a need for either by the time their old enough to use them.

I’ve managed the other bills through the joint account, but we’d never been able to keep much of a buffer in our savings. My individual account usually hovered just above water, maintaining tenous balances on my credit cards that I would struggle to pay off each month. She’s since started building it up through her side job, and with the addition of our stimulus payment and a hefty tax return, we’re sitting on close to six months expenses in that account.

I told Missus about my Sixty Days to Six Figures goal, and we wrote up all our debt on the board, which is about two hundred and seventy grand for the mortgage, my student loans, and my car. We wrote it up on the fridge. I also wrote up the current price of Bitcoin, and where we needed the price to be in order to pay all that off. Without disclosing how much I’m holding, I’ll just say it’s between a new all time high and six figures.

One of the responses above reminded me that mortgage interest on a $250,000 house is more than the house itself. It seems absurd now that we would have done such a thing, but given where we were coming from when we bought this place five years ago, I don’t think we could have fathomed any other alternatives. We know better now, so we’re going to do what we can to get out of this trap. And more importantly, teach our kids how not to get caught up in it either. There’s so much that could be written about this aspect of the American Dream, how the banks get rich off of servicing this loan debt, both mortgages and credit cards. The banking economy is driven by this extraction. It remains to be seen whether Bitcoin will fulfill the promise of P2P currency; it looks like it’s getting swallowed up by traditional finance. I am, however, more confident than ever of it’s worth, and am looking forward to the upcoming halving, now in about one day and eleven hours, early Tuesday morning.

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Sixty Days to Six Figures: Day 1

I am chomping at the bit waiting for some sort of notification from the University that I am no longer an undergraduate! Last night I checked my online degree plan and there it is:

* Not an official record, heh.

So I am done! I’m not sure what the logistics are for the conferral of the degree, and I’ve received nothing in my email about what to expect. I just fired off a quick email to see if there was something else I should expect before I go announcing it on LinkedIn or whatever.

I originally wasn’t planning on walking. I’m too cool, I suppose. Commencement was moved to December anyways. I know some of my classmates are disappointed, as they had family members who had already reserved hotel rooms and the like. So the University is trying to make up for it with some efforts on social media. Oh well, I’ll suppose a still of my name on a video posted by the official school account will have to suffice until I get some sort of certification notification and my diploma comes in six weeks.

I’ll admit I’m slightly anxious that I didn’t see anything from Financial Aid after they added my one hour of independent study. I had anticipated paying three or four hundred for the cancelled boot camp, and I haven’t seen a bill yet. I can’t imagine that they’d just gift it. I imagine that I’m going to see an email in like two weeks with an “oh, by the way….”

One thing I did realize after checking all my requirements is that I actually have sixteen credit hours more than I needed for graduation. That means I could have graduated more than a year ago and saved close to ten grand if I hadn’t gone for my minor. I don’t even care about cybersecurity anymore. I think I got caught up in the Governor telling everyone there were some thirty or eighty thousand cyber jobs in the state that were going unfilled. Que sera.

I think it’s better to be graduating now though. There would have been no way for me to do that while I was running for office anyways. I would have needed to stop classes. Plus I think it’s fitting to be starting out on the next act of my life when the world is falling apart. They say a recession is one of the best times to start a new business, so this must be the best time in living memory. Plus I think think the significance of the upcoming Bitcoin halvening cannot be underestimated.

To reiterate the current plan: after announcing my graduation on my normie social accounts and updating my resume, I’m going to make some revisions to my resume and start applying to all the low-hanging fruit out there. There’s a lot of details to work out, how much time I spend per week, how much time I spend on customizing each resume and/or cover letter for each company. I may want to pay for a LinkedIn pro account so I can figure out how to game that. I want recruiters to call me. I have a shortlist of clients and projects I want to complete, to which I will block off at least two hours a week. I’ll track time in Harvest to keep myself disciplined an honest.

I was going to call it Ninety Days To Eighty K, but that seems too weak. Let’s up the game and call it Sixty Days to Six Figures. (It’ll make a better post title on Medium and get ton’s of income.) Anyways, that’s forty grand more than what I’m making now. If keeping taking on retainer clients at two-fifty a month, that means I need thirteen of them, and twenty six hours of project work a week.

I’m probably listening to the fear that’s telling me I’m not going to be able to secure a full-time, six figure job while working from home in the midst of a pandemic, or maybe it’s guilt or laziness. Either way, there’s a cacophony of voices that are telling me why it can’t be done or why I wouldn’t want it. But I do. I want financial independence and to be debt free. I want the car to be paid off, I want the student loans to be gone, I want the mortgage gone. I want to be able to walk away from everything with my family for a month and go anywhere without having to worry about responsibilities.

Is Bitcoin to deliver that freedom? Probably. What if I’m wrong? How quickly can we pay off two hundred and seventy thousand dollars in debt? Can Bitcoin hit six figures in the next four years? Can it hit half of that? Would I even want to sell my holdings if it did?

Anyways, today starts the next act. Let’s begin.