Welcome to the 2nd newsletter for this year. In January we successfully held our first Sankranti celebration. Rishika a Junior in high school worte a small report on the event.
In this newsletter we have the following:
1. Sankranti Celebrations
2. Have your cake and eat it too - approach to refinance 3. Information meeting on Hindu University of America,
4. Volunteer at Second Harvest Food Bank,
5. Seminar on Investing for Retirement
6. Dharma Bee
7. Test your knowledge
1. Sankranti Celebrations -- by Rishika Vinnakota
Hi! My name is Rishika Vinnakota and I’m high school junior in the Bay Area. I am a competitive debater, a Girl Scout boardmember, and an entrepreneur. I love public speaking and volunteering to give back to my community!
This is my first time attending the VSF Sankranti celebrations , It was a mix of traditions showcasing our culture and a bunch of fun. The night started with kids reciting the Ganapathi stotram and doing Bhogi Pallu for kids, It was so nice seeing all the young little kids on the stage to start off the night in a true, traditional fashion. Next came the songs, dances, and the small games. We called up several moms to come and play a game, and then several dads as well. Everyone was cheering them all on. In between the games we had the kids dance, and a cricket dance skit from some great VSF dads in a unique way. The night ended with what we like to call an “assisted dance floor.” We had two teens on the stage teaching dance moves to everybody! Finally, we opened up the dance floor and everyone danced the rest of the party away.
Throughout the event we had some amazing traditional food in the back, a beautiful sky backdrop photo booth made by VSF volunteers, and a Bommalu Koluvu. All in all, it was a cultural and entertaining night thanks to all the volunteers who put up this event and carry forwarding the culture to our generations!
VSF Reader Contribution:
2. Have your cake and eat it too - approach to refinance By Ranjith Kagathi
Summary
Refinancing just after a few years into the mortgage can hurt in the long-term due to excessive interest paid
Avoid this trap by keeping the end date of the loan after refinancing same as the end date of the original mortgage
This approach allows you to enjoy the lower monthly payments in the short-term (eating the cake) and the total interest savings in the long-term (having the cake) when the rates drop, even as little as 0.125%.
Mortgage rates have fallen again and the discussion on whether “to refi or not to” is trending again. If you have been offered a lower interest rate, but if the rate is not much lower than your current mortgage, it's quite likely that you have been advised not to refinance. Typical advice one might receive is that most of the payments during initial years of the loan goes towards interest and if you refinance, the repayment schedule resets and you end up paying higher overall interest. Well, you received good advice but not the best advice. Let me explain how you can do better than most borrowers out there.
Number one reason among the borrowers to refinance is to reduce the monthly payments. The monthly payment reduces because of two factors:
Lower interest rate
Total repayment schedule is longer than the original mortgage.
Many borrowers are attracted towards refinancing due to the first factor but end up paying a higher total interest due to the second factor.
Let us look at some examples to understand this. In this example, one has a mortgage with the following terms and refinances after 2.5 years. This example intentionally uses a refinance rate that is only 0.125% lower than the original loan to demonstrate how refinancing is justified even at such a small rate reductions.
Original loan
Loan amount: $300,000
Interest rate: 4%
Term: 30 years
Start date: Jan 2016
End date: Jan 2046
Monthly payment: $1,432
Total interest paid by end date: $215,608
After 2.5 years, in Jul 2018:
Interest paid: $30,307
Loan outstanding: $285,908
Refinancing (conventional approach)
Loan amount: $285,908
Interest rate: 3.875%
Term: 30 years
Start date: Jul 2018
End date: Jul 2048
Monthly payment: $1,344
Total interest paid by end date: $198,092
After 30 years, in July 2048:
Total interest paid before and after refi: $228,399
Excess interest paid due to refinancing: $12,791
Even though the new monthly payment is lower than the original monthly payment, the total interest paid before and after refinancing together is higher. You are trading off long term benefit of interest savings to get short term benefit of lower monthly payment! So, how do we take advantage of the lower interest rate without overpaying the interest, benefiting in both short-term and long-term? The trick is to keep the end date after refinancing the same as the original end date of Jan 2046.
Recommended refinance approach:
Loan amount: $285,908
Interest rate: 3.875%
Term: 27.5 years
Start date: Jul 2018
End date: Jan 2046
Monthly payment: $1,409
Total interest paid by end date: $179,312
Total interest paid before and after refi: $209,619
Interest saved due to refinance: $5989
There we are, a lower monthly payment and lower total interest. Have your cake and eat it too! With this approach, you can refinance as often as you want to your heart’s content and still come out ahead.
Note that lenders offer home loans for standard tenures such as 10, 15, 20, 30 years. In the example above, one needs a non-standard tenure of 27.5 years to retain the original end date. In such cases, pick a refinance tenure closest to the standard tenures i.e. 30 years in this case. Refinancing lender calculates the payment as $1,344/mo. But you calculate how much extra payment you need to make to pay off the loan by the original end date of Jan 2046 using mortgage calculators. For this example, pay an extra $65/mo to total your payment to $1,409/mo. This is still lower than the original $1,432/mo!
Few other points to note:
Above approach is applicable for Adjustable-rate mortgage (ARM) loans as well. All lenders calculate the monthly payment by assuming the same rate will prevail during the entire tenure of the loan.
Refinance might involve closing costs that have been excluded from the calculations above. To get an accurate analysis, just add the closing costs to the outstanding loan and recalculate refinance terms. Again, just keep the end date the same as the original end date. If closing costs are high, then the savings due to refinancing will be lower or you might even end up paying higher overall interest.
If you are deducting the interest paid on a loan balance higher than $750,000 during tax returns, you might lose that benefit due to refinancing. Please consult a tax professional before making the decision.
3. Information meeting on Hindu University of America
Find it odd, that we follow a culture that is centuries old, yet we know very little and many have no passion to know.
When you ask Google for directions, it wants to know where you are first, so does in life, you need to know who/where you are before your journey.
Thirupathiah as one of the organizers, has arranged a meeting in Fremont Hindu Temple on Hindu University of America
Its on March 1st, Sunday 6:30 pm to 8:30pm at Fremont Hindu Temple, Dinner served after.
You can skip, if you are an atheist or future of Hinduism don't matter and still come for Dinner
4. Volunteer at Second Harvest Food Bank
March 7 is food sorting at Second Harvest Food Bank . We are looking for 10 people between 9am - noon.
5. Seminar on Investing for Retirement
There have been a number of discussions on investing, financial planning, retirement in the group. We have a number of experienced folks here to learn from. With that in mind, a series on these will be beneficial for all.
First in the series is planned for March 8th - Investing for retirement. Please indicate your interest for 8th. Also, suggest any topics of interest for you for future sessions
6. Dharma Bee
Discover your Hindu Heritage a unique quiz contest on Hindu Dharma for Kindergarten to 8th graders. Register for a 8 week course starting 23rd February to 12th April 2020.
To educate the kids on how to call using relationships, here are some questions for kids.
Kids should answer in their native language only ( ex: Telugu,Kannada, Tamil names )
And Parents can help them answer. Please send responses to info@vsfbayarea.org.
1) What do you call your dad's elder brother's wife ?
2) What do you call your mom's younger sister's husband ?
3) What do you call your dad's younger sister and elder sister ?
4) What is a Gothra and what is its significance ?
THIS IS YOUR NEWSLETTER, YOUR OPINION IS VALUABLE
We would also like to solicit your opinion on some of the activities that you would like us to incorporate or consider on an ongoing basis. Please provide your opinion in this google form. https://forms.gle/ZCNMAk88bxEV7Rq39
