Refinance the mortgage or get rid of the nanny? FINAL DECISION POST #135 - Page 2

[lovemykeiki]

Originally Posted by mightymoo

So you can look at it this way - you can refinance into a 30 year mortgage now, while you are trying to grow your business and need extra cash flow, but when things get rocking, go back to paying it like it was a 15 year mortgage, you won't have lost that much ground.

This is exactly how I see it - but I can't get DH to wrap his head around the idea.

Originally Posted by mightymoo

Since the nanny is a temporary expense, you won't be paying her forever - eventually the kids will enter school right? You could go into it with the plan to go back to your higher payment once you are done with the nanny.

We have one DC in school now, and one who will start school in the Fall of 2010. So, yes, I am hoping that by then we won't need a nanny anymore. There will still be days when there is no school, summers, breaks, etc., but I'm hoping to find temporary childcare, or something.

Originally Posted by mightymoo

It's difficult to say what you should do, because I can't weigh the benefit of working on your business now - you have to decide whether the benefit of working now (and having the nanny) is worthwhile to the cost vs getting rid of the nanny and not working (and therefore not growing the business as much).

The benefit to me working now is that it saves my sanity of being a SAHM. I have a special needs child who is REALLY a challenge. Even though she is in school now, I still like having the after-school nanny helping us out. And quite honestly, so does DH.

[lovemykeiki]

Originally Posted by SleeplessMommy

Can you look into a "nanny sharing" situation? Have one more kid of the same age at your house, and the kid's parents pay half the cost.

I have looked into it - and the thing is I have a special needs child who really needs the attention of the adult in charge. It is hard enough juggling her and my other child. But putting her and her sister into a nanny share with 1-2 other children would be difficult.

My next suggestion - look into ways to cut living expenses - such as reducing electric usage, reducing eating out, etc.[/QUOTE]

Working on that.

[lovemykeiki]

Originally Posted by magpie1972

i think i'd be tempted to put my career on the back burner until my little ones were in school. You'd be up 5k right away, not to mention all the other added expense with working out of the home.

Thanks, I already work at home.

[lovemykeiki]

Originally Posted by D_McG

I would try to reduce the 75K. Do you have a lot of debt? I don't see how else you could have $75k expenses outside of your mortgage?

No debt.

I have to run - but later today I'll try and tally up the $75,000 so you all can see what I'm talking about.

[skueppers]

Refinancing sounds reasonable in this situation, since it sounds like:

1) It's important to you to continue working, because you don't like being a SAHM, and because your long-term financial security will be enhanced by building up your business.
2) You don't particularly want to put your kid in daycare/preschool.
3) Because you and your husband are both self-employed, you have more fluctuation in income than people with salaried jobs.
4) You don't feel that it's possible to reduce your other expenses.

I can certainly see your husband's point of view, though -- we have 9 years left on our mortgage, and are REALLY looking forward to it being paid off. Increasing the amount of time it will take to pay off our house would definitely feel like taking a financial step backward.

What does he want to do? Put the youngest child in daycare/preschool? Have you scale back your business for a while so no childcare would be needed?

[skueppers]

Originally Posted by D_McG

I would try to reduce the 75K. Do you have a lot of debt? I don't see how else you could have $75k expenses outside of your mortgage?

Oh, I can see it. She and her husband probably have expenses along the lines of:

Property Taxes - $600/month
Income Taxes - $2000/month
Self-Employment Taxes - $600/month
Private Health Insurance Premiums - $1000/month
Life Insurance - $200/month
Retirement Savings - $1000/month

Plus your usual utilities, food, clothing, homeowner's insurance, etc.

[Delicateflower]

Originally Posted by lovemykeiki

I was thinking of going to another 15 year - that is the only way I can get my DH to even *think* about this. He would never consider a 30 year.

We are halfway done with our current 15 year, so we can go another 7.5 years at $4500/month or refinance and go another 15 years at $3100/month.

What is his objection, specifically? Have you sat down with him and a spreadsheet and shown him how it works? I use this one http://www.wikihow.com/Create-a-Mort...icrosoft-Excel

Sit down and put in the obligatory payment on a 30 year and then see what happens when you make extra payments to principle so that you're paying every cent you can. You can pay the low amount for the next 12 months until your youngest is in school and your business is making more, then pay more than if you had a 15 year, and you'll have it paid off in less than 15 years. As a PP said, the term of the loan isn't set in stone. Maybe if you actually show him the numbers he'll understand that you're not actually signing up for 15 or 20 or 30 more years of debt, but only an extra 12 months (with low payments).

he needs to see that you can't afford your current mortgage.

[rebeccalynn]

My personal thoughts on business are a business should be cash flow positive. I have a problem with the business expenses being more than your income (and I consider the nanny a business expense since you would not be employing her otherwise). I know that you are thinking that things will be positive in a few years but it could go the other way and stay negative just as easy.

If you want to refi the house to save money for a few years to have a nest egg to start up the business, that is something that I would consider. Use the mean time to get some more input on your business plan and see where you can improve it. In the end, I would personally have to get that business cash flow positive before I spent through the nest egg or that would be time to close up shop b/c the business was not a "go".

[notneb]

You've probably already thought about this, but is your nanny willing to work part time if she can find another part time family? Could you consolidate your work hours to make that work? Or could you nanny share with another family in the neighborhood full time?

If you could decrease the cost of the nanny and cut back wherever else you can, perhaps you could keep the nanny without having to refinance.

[lovemykeiki]

Originally Posted by rebeccalynn

My personal thoughts on business are a business should be cash flow positive. I have a problem with the business expenses being more than your income (and I consider the nanny a business expense since you would not be employing her otherwise).

I'm not sure I agree that a business *has* to be a cash flow positive when starting.

Also, I don't necessarily feel that having a nanny is totally tied to *my* income potential. Yes, I said that we have a nanny so I can get my business up and running. But we also have a nanny so DH doesn't have to help with childcare as much. Having a nanny benefits him as well.

Originally Posted by rebeccalynn

If you want to refi the house to save money for a few years to have a nest egg to start up the business, that is something that I would consider.

I don't need any money to start up my business. I have all the equipment and my skills. I hung out my shingle and started making money right away. I've never been in the red, unless you count the nanny - which - as I said - I'm not completely convinced that she is totally MY business expense.

I see childcare as a shared expense.

[lovemykeiki]

Originally Posted by notneb

You've probably already thought about this, but is your nanny willing to work part time if she can find another part time family?

She already works PT for us. She has another PT job as well.

Originally Posted by notneb

Could you consolidate your work hours to make that work?

I'm already working my hours, plus some evenings and weekend.

Originally Posted by notneb

Or could you nanny share with another family in the neighborhood full time?

A nanny-share is not an option I want to pursue because of my special needs DD. She would not do well in a nanny-share with other children. She needs a lot of one-to-one attention at this time.

[lovemykeiki]

Originally Posted by Delicateflower

What is his objection, specifically? Have you sat down with him and a spreadsheet and shown him how it works?

Oh, he *understands* how this works!

[TiredX2]

I just want to clarify a few things.

You have a 30 hpw nanny right now. What do you expect to happen in Sept 2010?

You have been pulling from savings/EF for current living expenses. How many more months of savings do you have for that?

Is there any *monetary* point at which you will decide to close your business?

You expect DH to bring in $120K this year? Do you think this will be a one year downturn or longer?

If I could swing subsidizing my income for the next 18 months out of EF/savings, I would consider doing that and not changing anything. At that point, it sounds like your income will have gone up *AND* your nanny expense will go down. Additionally, having your mortgage paid off in 7.5 more years sounds really important to your DH. If your EF is runnning out, though, this obviously can't work.

[Maluhia]

I agree that 75K of living expenses per year is NOT always a sign of bad management - this is one of three very high COL areas I've lived in and I find that home ownership in this climate brings costs up to that amount.

I think if he'll agree to another 15 you have a chance of making it work financially, and maybe talk to him about keeping your family finances private from his family members who dominate him. It seems even if he wanted to from your description that doing this refi might be really hard on him emotionally because of his father/brother.

Good Luck

[Pinoikoi]

Originally Posted by lovebeingamomma

I just saw a Suzie Orman Show with a point about this. What are you expecting in refinancing? You already have a really low interest rate, with the cost of closing on a refinance, it's not going to save you any money! That's what she said lol. So I would look into it and crunch the numbers, it may not be worth it afterall.

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%..

[lovemykeiki]

Originally Posted by TiredX2

I just want to clarify a few things.

You have a 30 hpw nanny right now. What do you expect to happen in Sept 2010?

Our other child will start school.

Originally Posted by TiredX2

You have been pulling from savings/EF for current living expenses. How many more months of savings do you have for that?

1.5 months.

Originally Posted by TiredX2

Is there any *monetary* point at which you will decide to close your business?

Not sure. I would stop doing it if I were in the red, or if we had to invest in it to make it work. I'm not sure I consider having the nanny "investing" in my business. Because like I said I consider childcare a shared expense. Maybe you could elaborate on your line of thinking with this question??

Originally Posted by TiredX2

If I could swing subsidizing my income for the next 18 months out of EF/savings, I would consider doing that and not changing anything. At that point, it sounds like your income will have gone up *AND* your nanny expense will go down. Additionally, having your mortgage paid off in 7.5 more years sounds really important to your DH. If your EF is runnning out, though, this obviously can't work.

Like I said, we have only about 1.5 months of emergency fund left.

[Delicateflower]

I feel like I need to reiterate my support for the OP not having to despise work and only slog through for the money to be a good person. There is nothing wrong with enjoying work more than SAHM!

Originally Posted by lovemykeiki

Oh, he *understands* how this works! He is just resisting the idea.

I know that he sees the mortgage as a huge weight on HIM. He's been the primary breadwinner for our entire marriage. However, and this is very important, his work is changing and there is a strong possibility that his income will decrease over the next decade.

Wanted to add - I also think there is some family pressure on him (from Dad or brother) to pay down the mortgage fast. Dad has a PhD in Finance and is a very strong personality - very domineering. Brother is a strong personality, too. My DH is a mild sort of guy.

Have you discussed that there's no need for a mortgage of x many years in length to actually take that long to pay down? Because his POV sounds really illogical (not that paying down a mortgage early isn't illogical too, but it's illogic I agree with ).

[churndash]

Oh, he *understands* how this works! He is just resisting the idea.

Aren't you doing the same thing? You know how this works - when your expenses exceed your income you need to either increase income or decrease expenses and the most obvious way to do that is to get rid of the nanny, who makes more than you earn at your business.

But you are resisting the idea.

Yes, taking care of children is hard work and sometimes it sucks but millions and millions of women manage to do it AND work. Including me. Sometimes you have to do things you don't enjoy doing or don't want to do. Like take care of your children because you can't afford to pay someone else to do it for you.

[Magpie1972]

There is nothing wrong with enjoying it more. I do see some harm in disliking it to the point that you'd put your family in financial peril rather than take care of your own children as a joint unit. I say this as a mother of four, one set of twins who enjoys the heck out of her work. You do have to make sacrifices. Sacrifices are typically not or our first choice. I don't think anyone begrudges the OP for liking work. We just don't all have the luxury of doing what we like all the time as humans. I have never met one who does except my three year old. He's in for a rude awakening.

Working from home is a different beast altogether. You almost work MORE in my opinion than you would doing a straight 8 at a desk. There are lots of factors to weigh. A happy Mom is a better Mom.

[velochic]

Is the nanny really a nanny or just a babysitter? That is, does she just watch your kids or does she take the place of you (and I don't mean that in a negative sense). Does she take them to the doctor, do your laundry, clean your house, make your meals, etc.? If she is really a nanny, then she is worth the money, but if she is just a babysitter, I think she is being overpaid and you would be better off with a mother's helper for the times you are working.

Regarding refi - this is the time to do it.