Hi there, two quick (but important) things for you this week.
Today’s tips are about Health Savings Accounts and whether you should refinance your home mortgage.
First, check out my guest post which was recently published on Top Finance Blog about Health Savings Accounts (click on the underlined link).
These accounts offer people with high deductible health insurance coverage the opportunity to pay for medical expenses with pre-tax dollars AND earn tax-free compound investment returns. You own the account, not your employer, and unused balances at the end of the year carry forward, unlike other types of accounts like FSA’s (seriously, a pretty great deal).
Second, I was recently asked by a client if he should refinance. I don’t recommend you refinance and extend the life of your loan simply to lower your monthly payment, especially if you have been paying on your principal for several years.
However, when I did the math and calculated the total cost of financing savings over the life of the loan, I was shocked! Even though this person had been paying on their mortgage for nearly five years (at a 5.875% interest rate), the total cost of the refinanced loan was significantly lower (to the tune of nearly $100,000).
In order to calculate whether you should refinance or not, comparing the total remaining payments won’t do the trick. You’ll need a financial calculator to determine where you are in your amortization period to figure out total remaining interest obligation owed.
Clients, if you’d like me to run these numbers for you, let me know. I can also recommend a good mortgage lender that we trust if you’d like a referral.
A few years ago we were saying that rates were low, and now they’re even lower–I don’t know how long they’ll stay in the 3′s, but they’re probably not getting much lower than this! So act now or forever hold your principal and interest.