should I refinance or start a business?

Discussion in 'Archived Threads 2001-2004' started by Jeffrey Chin, Aug 27, 2002.

  1. Jeffrey Chin

    Jeffrey Chin Second Unit

    Joined:
    May 22, 2001
    Messages:
    483
    Likes Received:
    0
    STATUS
    Independent Consultant, Fortune 500 firm
    (no job security)
    Condo: 30yr fixed mortgage at 7.25% (locked in July '01)
    Expenses: 4k/mo (mortgage + maintenance + taxes)

    OPTION 1 - REFINANCE
    Goal: Lower monthly overhead
    How? Save 50k, lock in at lower interest rate, lowers monthly payments by $500
    (safe route, takes more time, no backup plan if I lose job)

    OPTION 2 - START A BUSINESS
    Goal: Financial Freedom
    How? Save 70k, start a franchise, have my gf manage it from 9-5 while I still consult (just in case)
    (riskier route, faster, backup plan if I lose job)

    OPTION 3 - DO BOTH
    Goal: Lower monthly overhead + Financial Freedom
    How? Save 3k, lock in at lower interest rate, lowers monthly payments by $200. After, Save 70k to start franchise

    Which option would you choose and why?
     
  2. Steve Zatkoff

    Steve Zatkoff Stunt Coordinator

    Joined:
    Jan 1, 1999
    Messages:
    77
    Likes Received:
    0
    For me it would be a no brainer.....Do the refi now and save the money to invest in your business. Once the economy turns around, you will have a better chance with a successful startup.

    JMHO,

    Steve
     
  3. SteveA

    SteveA Supporting Actor

    Joined:
    May 25, 2000
    Messages:
    700
    Likes Received:
    0
    Exactly why do you need to save 50k to refinance your home? Closing costs should be no more than a few thousand - at most. If you want to take advantage of today's low rates, the time to act is now. Rates have already risen a little been from their absolute lowest point, but are still great (low 6 percent for 30-year fixed).

    Why not do BOTH option 1 AND 2? Refinance and save at least a little money each month, and also save some cash for your business?
     
  4. Jeffrey Chin

    Jeffrey Chin Second Unit

    Joined:
    May 22, 2001
    Messages:
    483
    Likes Received:
    0
    my target for either option is 1yr.

    when u say save a little each month, i don't have job security to ensure that.

    also, when u say it's a no-brainer (to refinance), timing is everything. I am in Jersey City. They are building like mad across the Hudson waterfront here and ppl have no place to eat.

    one more thing..did i mention i don't plan on keeping this place for more than 5yrs before selling it?

    with that being said, addt'l comments?
     
  5. paul_v

    paul_v Second Unit

    Joined:
    Apr 18, 2000
    Messages:
    320
    Likes Received:
    0
    I wouldn't start my own business now if I were you. The economy is too unstable. I would do the refinancing option.
     
  6. Jeffrey Chin

    Jeffrey Chin Second Unit

    Joined:
    May 22, 2001
    Messages:
    483
    Likes Received:
    0
    oh yea i just did some calculations

    just refinance: -$200/mo
    refinance + dump 50k: -$500/mo

    added OPTION 3: DO BOTH
     
  7. Todd Hochard

    Todd Hochard Cinematographer

    Joined:
    Jan 24, 1999
    Messages:
    2,312
    Likes Received:
    0
    Option 3. Refinance NOW, and I mean NOW, to lock in the low, low rate. No money down, roll the closing costs into the loan (assuming you have some equity, of course), and save all your pennies for the business. The home note is likely the cheapest money you'll ever borrow (considering current low rates, and the tax deduction), so why "invest" a such a low return (in your principal, I mean)? Wouldn't that money better serve your business?
    Don't assume that you'll be out of there in five years. I always said that about my house, but I've been here eight years, and probably going to stay five more.

    I can't really say about the business, but I know I lack the balls to start one right now! If you don't have the $70K now, then it's not really an issue to be thought about now. Next year, perhaps the economy will look better (although I'm beginning to think marginal growth for the next decade- the last boom was deficit spending).

    BTW, what franchise? A restaurant?

    Todd
     

Share This Page