Refinance the mortgage or get rid of the nanny? FINAL DECISION POST #135 - Page 6

[PJJ]

Suggestion

HI,

After reading more about your situation, yes, Refi at a lower rate for 15 years. If you are able to get something for 10%--which I cannot find either, do that.
Keep the nanny.
For a few months, just pay the required mortgage amount on the new refi and see how that goes. If you are able, pay extra to get down the term/cost.

It sounds like the nanny really helps your family a lot, both personally and professionally. Also, things seem to maybe change in a year with the ages of your children.

Good luck Mama!

[ItsBasilThyme]

First, I just wanted to note that the difference between your income and the nanny expense is only $5k. That's what - $400/month? Even if we say that childcare expenses all fall to you, that's still not much. My point being that as a sahm, I would try Everything I could before giving up my happiness and quality of my care, rather than go to work if I only netted 400/month after daycare, etc. Right now, you have happiness and quality childcare. I would exhaust all other options before losing that.

Secondly, I think it's really unfair for people to imply that your business is in the red because of a nanny. Your household is in the red, your business is successful. Maybe it seems like a minor difference, since it words don't affect cashflow, but you're going through a rough time, and I thought it might help to hear. it's unfair to wipe out your accomplishments by claiming one major family expense falls entirely on your shoulders. Your business is doing great - congratulations!

All that being said, I'd refi. It's only for a year or two. Closing a growing business doesn't make sense to me. You'd have to start all over most likely. If you really think you can double your income, and that your husband's work is on a long term decline, the only sensble strategy, IMHO, is to build your business NOW. N

[Kyamo]

Originally Posted by Pinoikoi

This is SOMETIMES true, but not always. My mother has refinanced twice in about 4 years. Refinancing costs a fee, yes, but it usually also delays the next mortgage payment for 30 days. So, to get a true look at the cost of refinancing, one has to take the total refinance cost, and subtract one month's mortgage payment.. in my mother's case refi cost about $3k. Her mortgage is $1500. So refinancing only cost her $1500 really, and it dropped her another 2%..

I disagree. You don't really save that $1500 at all, you will still have to pay it later on in the mortgage, plus interest. To find out how much it is really costing/saving, you'd have to add up the total of all the payments you'll have to make over the life of the loan, do the same for the post-refi loan and add the refi cost to that, and compare them.

Now, there are some situations where you might have to sacrifice the long term loss for a short term gain to get through a tough patch, but I just don't think its realistic to consider a skipped mortgage payment a savings.

[skueppers]

Sort of an aside:

For those of you who are giving the OP a hard time, remember that she's facing a reduction in income of at least 25%.

Yes, she has expenses that many people don't have. She has a lifestyle that many people don't have. But that's what she's used to. Remember that she and her husband have probably ALREADY given up everything that was relatively easy for them to give up.

How easy would it be for you to figure out how to reduce your expenses if you faced a 25% reduction in income? For most of us, it would require giving up things that are important to us, and it's always hard to wrap our minds around that.

I know that if we had a 25% reduction in our income, we'd be able to get part of the way to where we needed to be by eliminating saving, which would be difficult for us to stomach. But after that, we'd have to make some choices that would be even hard for us, like having me go back to work or refinancing our mortgage.

[Carson]

Originally Posted by ItsBasilThyme

Secondly, I think it's really unfair for people to imply that your business is in the red because of a nanny. Your household is in the red, your business is successful.

I agree but I think you need to work with your accountant to get your household bills neatly separated from your business bills. You need to cleanly identify how each entity is operating to determine where you can make changes. I know it can be muddy with sole proprietorships, but it's worth doing.

I think that OP and her DH have reached a reasonable solution in looking for other areas to cut costs besides the nanny or the mortgage. The nanny aspect doesn't resonate with me, so I can't comment, but I would love to be in that mortgage position. That's a huge, huge financial benefit I would be hesitant to give up.

Since you have the nanny primarily to take care of your special needs DD, after she is in school, when your youngest goes to school, you are still going to need that care, aren't you?

[Magpie1972]

Re: your electric bill, I was watching HGTV and something came to me: can you "zone" your house since it is over 3K sq feet so you cut the electricity bill down? By that there was a lady who only used xx sq feet actually during the day and turned off the other cooling/heating elements. It was one of their "tips" on a show I had recorded. Limit yourselves to one floor, etc. I think it was over 30% drop for them, which is pretty substantial.

And, I want to apologize if it was me that made you feel unsupported. Like I said for *me* it'd be a no brainer, but after thinking about it, you're a valued part of the family not a sacrificial lamb. Women put themselves on the back burner too often. I would probably have moments where I resented having to give up everything so DH would have no interruption in his life. And I know for a fact my DH would not like it if I didn't get his help when all I had to do was ask. He knows it is a partnership. More than me most times. Good for you.

[D_McG]

I agree with other people's suggestions as to where to cut your expenses.

I think $5k/year for a happy life is just fine.

[SleeplessMommy]

Electric - $4800

You are in a warm sunny area, right? And this is an all electric house, it looks like. It may be very cost effective to upgrade the heat pump or AC (with 30% federal tax credit for energy efficiency) and at the same time increase attic insulation levels and check for duct leakage... you probably have forced air ductwork going through the attic, which is notorious for wasting nicely cooled air. If there is a lot of hot water used, solar hot water could be helpful. An energy audit will be very useful for you - you may be able to reduce electric usage by 25% or more, even for a house of this size.

best wishes

[mtm]

If you love your business and want it to succeed I'd keep the nanny. I personally would drop the housecleaner to every two weeks though if you feel its a necessity, if not I'd cut it out completely. I worry about your lack of savings unless you've got a good emergency fund. Check out the fabulous no spend threads in the sticky for inspiration for your no spend plan, I never post but read for inspiration.

[newbymom05]

I don't see this as a gender equality or personal fulfillment issue but rather as a financial issue. If you have a lifestyle that is exceeding your income, you need to adjust it.

[Delicateflower]

Originally Posted by wifeandmom

And I can totally understand why her DH wouldn't want to re-finance into another 15 year mortgage. They're already half way to paying off their house. That would mean a HUGE monthly obligation is just gone. Finished. Done.

Refinancing into a mortgage of any length does not tie you in to being in debt for that long. You take a 12 month break from the higher payment, then resume paying at that level, your house is done in 8.5 years instead of 7.5. Is that a debt tragedy?

[polyhymnia]

Just a thought that I don't know if is it possible - would your DH be willing to refi into a 10 year mortgage? It is only lengthening your payments by 2.5 years (less if you go back up to your current payments when you can afford it), but with the reduced rate you can get (I'm seeing rates of about 4.5% right now) it might not mean that much of a difference in the end!

[stacim]

Originally Posted by lovemykeiki

That is a possibility that we have discussed. We have a completely separate apartment downstairs that has a full kitchen, etc. Right now DH uses part of it as his workspace. The other part is our guest room. The guest room is empty most of the year. We could rent it out as a short-term vacation rental if needed.

I have read some, but not all of the thread, so forgive me if someone has already suggested this...

I know you said you really like your nanny, but what about finding a live-in nanny/housekeeper? Room and board, plus reduced salary, in exchange for childcare and housekeeping. You still get the care you need, reduce your childcare and housekeeping expenses and no need to refi. Our you could do the above and refi to give yourself a bigger cushion and rebuild your emergency fund. Then, when $$$ allows, put extra into your mortgage.

~Staci

[lovemykeiki]

Originally Posted by stacim

I know you said you really like your nanny, but what about finding a live-in nanny/housekeeper? Room and board, plus reduced salary, in exchange for childcare and housekeeping. You still get the care you need, reduce your childcare and housekeeping expenses and no need to refi.

We have had a live-in nanny before. We really don't save that much on a live-in nanny because the hourly rate is not that much different from a live-out nanny. Hard to believe, I know. But COL is so high here, and I just won't pay an employee a really low wage.

Also, to get the level of care we need for our SN child, we had to open up our options to nannies who don't want to live-in. It seems that most women who want to be live-in nannies are younger, single and more inexperienced, especially with SN children. We needed someone older, experienced, and that meant that most likely the person would already have a partner and/or family of her own. And that was the case with our current nanny. She has her own family.

But good idea! Thanks!

[ItsBasilThyme]

Originally Posted by newbymom05

I don't see this as a gender equality or personal fulfillment issue but rather as a financial issue. If you have a lifestyle that is exceeding your income, you need to adjust it.

I'm not sure if this was directed at me, but I see it the same way you do. It's a financial issue, but one that can be solved while keeping personal fulfillment and gender issues in balance. Why not go for the win-win resolution? They keep the nanny, refi the house, her business doubles in income, they can maybe pay it off before the original 7.5 years then! It seems to me that killing a growing business for such a short term gain (they keep their current payment for the next two years, rather than slowing it down now and hitting it harder than ever when the DC are in school) makes no sense even without all the other issues.

[lovemykeiki]

So, yesterday DH called his Dad to get his take on the idea of refinancing.

FIL agreed it was a reasonable possibility. So DH feels better about the idea and will research it further.

He clarified with me that my idea was to refi, make lower monthly payments and re-build the EFund. Then double up on mortgage payments again. I said, yes, that was my idea.

[Maluhia]

I'm glad the refi is going to work for you two!

On the Ohana unit - Even if you do it only one month out of a year (make it a short term vacation rental) you can get quite a bit from it if you do the one-month-at-a-time price. My parents live in their 5000 sf house in Kailua and rent it out for one month per year as a longer-term vacation rental and get around 10K per month - it pays a bunch of bills for the rest of the year and they spend that time traveling to see family. Win-win.

[snapper mamma]

He said all this like I had never thought of the idea before.

LOL! This reminds me of how big decisions are made around my house! My DH needs to simmer on things for a really long time and then he comes around to it and sometimes I let him think it was his idea all along.

I have been following this thread and am glad you came to a mutually agreeable solution. A lot of your situations resonates with me.

[lovemykeiki]

Originally Posted by KailuaMamatoMaya

I'm glad the refi is going to work for you two!

On the Ohana unit - Even if you do it only one month out of a year (make it a short term vacation rental) you can get quite a bit from it if you do the one-month-at-a-time price. My parents live in their 5000 sf house in Kailua and rent it out for one month per year as a longer-term vacation rental and get around 10K per month - it pays a bunch of bills for the rest of the year and they spend that time traveling to see family. Win-win.

Very cool idea. Thanks.

[Emmama]

Originally Posted by lovemykeiki

So, yesterday DH called his Dad (the one with the PhD in Finance) to get his take on the idea of refinancing.

DH talked to me this morning and said very confidently, "Well, here is what we can do. We can refinance to another 15 year mortgage with a 4.5% rate, and get our payments to about $2900/month. Then we take the extra money that we would have paid on the mortgage and put it towards our emergency fund. Then once the fund is back up, we can double our payments on the mortgage again."



He said all this like I had never thought of the idea before.

I nearly dropped over, and then recovered, and pointed out to him that this was EXACTLY what I had been trying to say to him.

:

I was slightly insulted that he had to call his Dad to confirm what I had been trying to say to him. :

But then we talked more about it, because we always do talk... and hugs were in order...

He said that he didn't realize that I meant that after we built up the EF again, that we could double up on our payments. I said, YES, that was my POINT, and what I was trying to say to him. I said, "Did you think that I meant we should take the extra money and blow it on useless stuff?"

No, No, he said - he didn't think I meant that.

*sigh*

Misunderstandings... What can you do? But at least we talked it out. I do love him very much...

So, he is going to research the idea. It takes him a while to get used to change. We jokingly say he is like a cat, and never wants to have changes in his life. He also doesn't like to do anything money-wise unless he has researched the idea to death. And yes, his Dad is a huge source of information. Although, the funny thing was his Dad didn't tell him anything he already knew...

Awesome, glad you guys came up with an idea together! Sorry if I was harsh sounding, didn't mean to be, I just wanted to share what I would do.