5 Questions: Refinancing, HSA’s, and First Home Mortgages

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You ask, and we answer! Today we answer five listener questions about refinancing a loan, cashing out a retirement account early, how often to pay student loans, HSAs, and getting a first mortgage.

This format has become so popular that it’s now a regular feature on LMM.  We answer questions sent in by listeners.

1.  Why is refinancing a loan so important? 

If you can refinance, it will lower your interest rate, thereby lowering your monthly payment and interest payments.  Refinancing works the same no matter the type of loan, student, mortgage, car, etc.

One bank charges an arm and a leg so go to one that charges an arm.

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2.  If I invest in the Retirement Target fund 2055 will I invite penalties if I need to cash out early?  Can I pocket dividends or so I have to reinvest them?  

You won’t get a penalty for cashing out early on that fund. It’s okay pocket the dividends; you just have to set your account to send them to you rather than to reinvest them.

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3.  Is there a benefit to paying 25% of my student loan payment a week rather than 100% once a month?  

Check the terms with your lender.  Some will hold the payments until the full balance is reached thereby removing any benefit you might have accrued.  If your lender isn’t a super dick, there is a benefit.  You are cutting down on the interest you will owe.

It’s really a matter of flexibility.  If you have the money in your account and plan to save it for retirement, you could pull it out to pay for an emergency if you had one.

5.  Should you pay cash for a house if you can or are you losing out on some tax benefits if you do?

If parting with that much cash at once isn’t a burden, do it.  The interest you save vastly outweighs any tax benefit.

Thanks, everyone, keep sending them in!

 Show Notes

Ommegang Valar Morghulis:  A Game of Thrones inspired beer.

LMM Financial Rant Hotline:  Call 856-818-3737 and let fly with your money rant.

LMM Episode 171:  Our HSA deep dive.

Candice Elliott - Senior Editor
Candice Elliott is a substantial contributor to Listen Money Matters. She has been a personal finance writer since 2013 and has written extensively on student loan debt, investing, and credit. She has successfully navigated these areas in her own life and knows how to help others do the same. Candice has answered thousands of questions from the LMM community and spent countless hours doing research for hundreds of personal finance articles. She happily calls New Orleans, Louisiana home-the most fun city in the world.

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