Matt & Liz refinanced their home and put themselves in a position of financial safety.
- Two incomes
- One 18-month-old
- Two ROTH IRAs
- One growing liquid account for emergencies
- Two mortgages
- Home increased in value $80k
- Refinanced from a 100% Interest-Only to a 90% Option ARM and pulled out $34k
- Invested cash out:
- $8k went into EACH of their ROTH IRAs to max out 2006 and 2007 (refinance was completed before April 15)
- $15k went into another investment account, $8000 of which is earmakred for daugher’s collage
- Remaining went into a liquid emergency fund earning ~7%
- Lowered monthly mortgage payment by ~$200
- ONE WEEK after refinance was completed Matt lost his job.
- Bright side:
- Lower monthly payment
- No mortgage payment first month after a refi
- Full emergency funds
- Investments “taken care of” for the year
- Without tightening the budget, Matt & Liz could survive off of their emergency funds for at least six-months.