Personal Finance 101 for Young Lawyers Forum

[nealric]

My goal is to pay as much as possible without owing a penalty. Present value of keeping the money for me is only a couple hundred bucks (depending on assumed discount rate), but money is money.

I think you mean as little as possible without owing a penalty. that's my stance too, but for a different reason. No fucking way am I giving the IRS an interest-free loan

No, I mean I write a big a check as possible when I file my taxes on tax day. It means as little as possible was withheld during the year (before the tax was due). It's not a question of my total tax liability, but when I pay it.

[LaLiLuLeLo]

People with mortgages who bought while in biglaw -

I haven’t shopped a ton, but it seems like the private bank mortgage that we have available as associates is as good as it gets. Low down payment, no PMI, low rates, etc. no closing costs back but for the rate I wouldn’t expect any. Am I off base?

[bokampers]

People with mortgages who bought while in biglaw -

I haven’t shopped a ton, but it seems like the private bank mortgage that we have available as associates is as good as it gets. Low down payment, no PMI, low rates, etc. no closing costs back but for the rate I wouldn’t expect any. Am I off base?

Can't speak to private bank mortgages, but in the event you haven't heard of it, some lenders offer "JD mortgages" (modeled after physician mortgages) ... 0% down and no PMI.

Rates are a bit more of a black box but everything I've seen implies that they are usually competitive. Even if slightly higher, it is generally no more than 0.25%+ of the market rate.

Here is a primer: https://www.biglawinvestor.com/jd-mortg ... r-lawyers/

[LaLiLuLeLo]

People with mortgages who bought while in biglaw -

I haven’t shopped a ton, but it seems like the private bank mortgage that we have available as associates is as good as it gets. Low down payment, no PMI, low rates, etc. no closing costs back but for the rate I wouldn’t expect any. Am I off base?

Can't speak to private bank mortgages, but in the event you haven't heard of it, some lenders offer "JD mortgages" (modeled after physician mortgages) ... 0% down and no PMI.

Rates are a bit more of a black box but everything I've seen implies that they are usually competitive. Even if slightly higher, it is generally no more than 0.25%+ of the market rate.

Here is a primer: https://www.biglawinvestor.com/jd-mortg ... r-lawyers/

Thanks, will shop JD mortgages too. No down payment with no PMI is sweet, cash is king after all. Will have to run the numbers because earlier in the week a 30 year fixed through the private bank was 2.875% which is nuts.

[EzraFitz]

People with mortgages who bought while in biglaw -

I haven’t shopped a ton, but it seems like the private bank mortgage that we have available as associates is as good as it gets. Low down payment, no PMI, low rates, etc. no closing costs back but for the rate I wouldn’t expect any. Am I off base?

Did some shopping around and the PBM was definitely the best I personally was able to find. It was definitely a great choice.

[nealric]

People with mortgages who bought while in biglaw -

I haven’t shopped a ton, but it seems like the private bank mortgage that we have available as associates is as good as it gets. Low down payment, no PMI, low rates, etc. no closing costs back but for the rate I wouldn’t expect any. Am I off base?

Can't speak to private bank mortgages, but in the event you haven't heard of it, some lenders offer "JD mortgages" (modeled after physician mortgages) ... 0% down and no PMI.

Rates are a bit more of a black box but everything I've seen implies that they are usually competitive. Even if slightly higher, it is generally no more than 0.25%+ of the market rate.

Here is a primer: https://www.biglawinvestor.com/jd-mortg ... r-lawyers/

Thanks, will shop JD mortgages too. No down payment with no PMI is sweet, cash is king after all. Will have to run the numbers because earlier in the week a 30 year fixed through the private bank was 2.875% which is nuts.

I'm afraid mortgages shot up over the last week due to the turmoil in the markets. A zero fed rate doesn't drive down mortgages if people are afraid of buying MBS.

If you are looking to buy a house, I'd consider waiting a month or two to see how the COVID-19 thing shakes out. Housing prices are likely to nosedive as people get laid off and uncertainty rises. The best deals on mortgages may take a while- record low mortgage rates happened a couple of years after the start of the financial crisis. It was a situation where appetite for risk was starting to come back but there weren't a lot of qualified buyers.

[kaiser]

My guess is housing prices will crater this summer, and there will probably be a solid year plus of rock-bottom prices to take advantage of it, if you are looking to buy a home. No need to rush into it.

[LaLiLuLeLo]

People with mortgages who bought while in biglaw -

I haven’t shopped a ton, but it seems like the private bank mortgage that we have available as associates is as good as it gets. Low down payment, no PMI, low rates, etc. no closing costs back but for the rate I wouldn’t expect any. Am I off base?

Can't speak to private bank mortgages, but in the event you haven't heard of it, some lenders offer "JD mortgages" (modeled after physician mortgages) ... 0% down and no PMI.

Rates are a bit more of a black box but everything I've seen implies that they are usually competitive. Even if slightly higher, it is generally no more than 0.25%+ of the market rate.

Here is a primer: https://www.biglawinvestor.com/jd-mortg ... r-lawyers/

Thanks, will shop JD mortgages too. No down payment with no PMI is sweet, cash is king after all. Will have to run the numbers because earlier in the week a 30 year fixed through the private bank was 2.875% which is nuts.

I'm afraid mortgages shot up over the last week due to the turmoil in the markets. A zero fed rate doesn't drive down mortgages if people are afraid of buying MBS.

If you are looking to buy a house, I'd consider waiting a month or two to see how the COVID-19 thing shakes out. Housing prices are likely to nosedive as people get laid off and uncertainty rises. The best deals on mortgages may take a while- record low mortgage rates happened a couple of years after the start of the financial crisis. It was a situation where appetite for risk was starting to come back but there weren't a lot of qualified buyers.

I am absolutely on pause right now. Way too uncertain and it seems likely house prices will fall, at least a bit. Plus, would rather have that down payment money right now.

[masterherm]

I refinanced my loans with Sofi to a variable rate loan and it’s now at 0.45%, which is a full point (at least) below the rate of inflation. I think there’s no question that I pay off my loans as slowly as possible with that rate, right? So the question then is where to put the money instead. Is the risk of putting it into stocks/mutual funds correlated with the risk of the interest rate going back up? In other words if the stocks fall more, would we expect a corresponding increase or decrease in interest rate? Trying to figure out potential exposure because I don’t want to max out on mutual funds then get hit right as interest rates go back up.

[nealric]

I refinanced my loans with Sofi to a variable rate loan and it’s now at 0.45%, which is a full point (at least) below the rate of inflation. I think there’s no question that I pay off my loans as slowly as possible with that rate, right? So the question then is where to put the money instead. Is the risk of putting it into stocks/mutual funds correlated with the risk of the interest rate going back up? In other words if the stocks fall more, would we expect a corresponding increase or decrease in interest rate? Trying to figure out potential exposure because I don’t want to max out on mutual funds then get hit right as interest rates go back up.

If your interest rate is already at .45%, you aren't paying much interest, so you aren't going to get much relief if your stocks fall. Whether a worsening market might make interest rates fall even further may depend on central bank policy, but it can't go all that much lower.

If you want a guaranteed win, high yield savings accounts are still paying ~1.3% (Ally, Marcus, etc.). If you have a bit more risk tolerance, but it in an index fund and let it ride for a while.

[Whatislaw]

Any recommendations on which banks/lenders to approach for a refinance? Trying to get in on the good rates out there.

[Chrstgtr]

Any recommendations on which banks/lenders to approach for a refinance? Trying to get in on the good rates out there.

What market are you in? First Republic used to have unbeatable rates (2% fix on five-year loan or a little higher than that on a longer term loan). They also give you the opportunity to recoup up to 2% of paid interest if you repay the loan within 2 years, so you can effectively get a 0% 2 year loan. I am not sure if they are still the best with all the upheaval in the last 2 months, but their rates were still way better than any fixed rate my friend could get when they looked to refi a few weeks ago. The only two catches here are that they will refi your loans into personal loans and that you have to live in their banking footprint, which covers most major markets (NY, California, Boston, South Florida, and maybe more).

If you're interesting in refinancing through them send me a PM and I will give you a referral code that gets us both $300.

[Whatislaw]

Any recommendations on which banks/lenders to approach for a refinance? Trying to get in on the good rates out there.

What market are you in? First Republic used to have unbeatable rates (2% fix on five-year loan or a little higher than that on a longer term loan). They also give you the opportunity to recoup up to 2% of paid interest if you repay the loan within 2 years, so you can effectively get a 0% 2 year loan. I am not sure if they are still the best with all the upheaval in the last 2 months, but their rates were still way better than any fixed rate my friend could get when they looked to refi a few weeks ago. The only two catches here are that they will refi your loans into personal loans and that you have to live in their banking footprint, which covers most major markets (NY, California, Boston, South Florida, and maybe more).

If you're interesting in refinancing through them send me a PM and I will give you a referral code that gets us both $300.

Sorry, I should have clarified I meant home refinance. I have an investment property I want to refinance. Solid point on the student loan refinance though, but those lucky ducks who are with federal loans are getting six months of no payment right now!

[Anonymous User]

Looking for some advice re: how to use ~50k in my useless savings account.

Some stats:
Salary: 190k (first year biglaw)
Savings account: 50k (maybe 0.02% interest) (quickly growing)
Debt: 180k at 4.75% (refinanced with Sofi/Laurel/1st Republic at 7 year fixed rate)
Monthly debt payments: 3k
Expenses: almost none (living with parents, though will likely get my own place once office opens back up)
No other assets / emergency fund / etc.

For my own sanity, even though it's less profitable in the long-term, I'd generally prefer to prepay my student loan balance -- or, at least know that I could easily use funds to prepay my student loan balance -- as opposed to being "locked in" long-term by investing in the market/fully maxing out a backdoor Roth, etc. Thus, in a normal economy, I'd perhaps keep ~20k as an emergency fund and put the remainder towards the loans. However, I'd like to protect against losing my job (which doesn't seem imminent or likely, though does seem plausible), and if I actually pay down my debt with the remaining ~30k (+ going forward) then I will be SOL if I lose my job and don't get a new one within 5 months.

Should I put the ~50k in a high-yield savings account (say, a 1.3% rate with Marcus)? Is there a way that I could put it into a tax-advantaged retirement account but pull it out without "penalties" (?) if I do get fired? Thoughts on perhaps a bonds index fund -- i.e., something that targets higher than 1.3%, but expects less volatility and thus less alarming that I'm "at the risk of the market" if I were to have to pull from it in the unlikely event that I lose my job and can't find a new one that pays as well?

Thanks for your thoughts.

[The Lsat Airbender]

Calculate your current monthly burn rate, and then add like $2000 to that so that you're not way off of your actual monthly expenses when you move out of your parents' place. Based on that number, an extremely conservative financial profile might look like this:

- 2 months' expenses in a checking account (maximum liquidity and security; you can get to this anytime using an ATM or debit card.)
- 2 more months' expenses in a HYSA (excellent liquidity, maximum security; you can get to this in a few business days)
- 2 more months' expenses in a fixed-income ETF (the ETF angle is important because it means high liquidity; you can get to this in a few days. But you're no longer at maximum security because this asset could, in theory, depreciate somewhat).

That's the most cash any sane person should be holding, especially since you don't have any obligations to children or a mortgage or anything. The $50k you have is enough to do all of this and then some. Remember that an unemployment scenario doesn't just mean burning savings: you'll have unemployment insurance, you can move back in with your parents, etc. I'm pretty sure you can temporarily defer student loans in the event of unemployment as well.

Next steps, in order of likely expected return:

- Max out your 401(k)
- Backdoor Roth
- Pay down principal on your student loans
- Taxable brokerage account (it sounds like you don't have enough income to make it this far down the list, and that's totally fine at your age).

[Anonymous User]

Calculate your current monthly burn rate, and then add like $2000 to that so that you're not way off of your actual monthly expenses when you move out of your parents' place. Based on that number, an extremely conservative financial profile might look like this:

- 2 months' expenses in a checking account (maximum liquidity and security; you can get to this anytime using an ATM or debit card.)
- 2 more months' expenses in a HYSA (excellent liquidity, maximum security; you can get to this in a few business days)
- 2 more months' expenses in a fixed-income ETF (the ETF angle is important because it means high liquidity; you can get to this in a few days. But you're no longer at maximum security because this asset could, in theory, depreciate somewhat).

That's the most cash any sane person should be holding, especially since you don't have any obligations to children or a mortgage or anything. The $50k you have is enough to do all of this and then some. Remember that an unemployment scenario doesn't just mean burning savings: you'll have unemployment insurance, you can move back in with your parents, etc. I'm pretty sure you can temporarily defer student loans in the event of unemployment as well.

Next steps, in order of likely expected return:

- Max out your 401(k)
- Backdoor Roth
- Pay down principal on your student loans
- Taxable brokerage account (it sounds like you don't have enough income to make it this far down the list, and that's totally fine at your age).

I’d also include a maxed out HSA...which is basically a stealth 401(k) account.

[The Lsat Airbender]

I’d also include a maxed out HSA...which is basically a stealth 401(k) account.

Forgot this but yeah, that's a no-brainer. It also satisfies OP's desire to have access to the money in certain worst-case scenarios.

[AlexFergusonLS]

What's the lowest refinance rate people have been able to get recently, and any tips on getting them? My credit score is 750-775, I will make 190 in biglaw, and I have around 200K in loans. My quoted rate from a few was like 4% for 10 year fixed. Is that the best I can expect?

[sparty99]

What's the lowest refinance rate people have been able to get recently, and any tips on getting them? My credit score is 750-775, I will make 190 in biglaw, and I have around 200K in loans. My quoted rate from a few was like 4% for 10 year fixed. Is that the best I can expect?

who quoted 4 percent

[Anonymous User]

What's the lowest refinance rate people have been able to get recently, and any tips on getting them? My credit score is 750-775, I will make 190 in biglaw, and I have around 200K in loans. My quoted rate from a few was like 4% for 10 year fixed. Is that the best I can expect?

What market are you in? If you are eligible, First Republic is almost always going to have the best rates. I just checked and see they are currently offering 2.25% on 7 years, 2.75% on 10 years, and 3.5% on 15 years. If you are eligible DM me and I will send you a referral code so we both get a ~$300 referral bonus.

Edit for accidental anon: username is Chrstgtr

[AlexFergusonLS]

What's the lowest refinance rate people have been able to get recently, and any tips on getting them? My credit score is 750-775, I will make 190 in biglaw, and I have around 200K in loans. My quoted rate from a few was like 4% for 10 year fixed. Is that the best I can expect?

who quoted 4 percent

I think ELFI/Pennfed was one at about 4 (maybe like 3.8 for them), Credible listed a few others at 4, SOFI was at about 4. (maybe as low as 3.7%, I don't remember exactly).

I'm currently considering doing First Republic. Does anyone know if the odd way they structure their program as a "personal line of credit" instead of a loan refinancing has any big downsides?

[Chrstgtr]

What's the lowest refinance rate people have been able to get recently, and any tips on getting them? My credit score is 750-775, I will make 190 in biglaw, and I have around 200K in loans. My quoted rate from a few was like 4% for 10 year fixed. Is that the best I can expect?

who quoted 4 percent

I think ELFI/Pennfed was one at about 4 (maybe like 3.8 for them), Credible listed a few others at 4, SOFI was at about 4. (maybe as low as 3.7%, I don't remember exactly).

I'm currently considering doing First Republic. Does anyone know if the odd way they structure their program as a "personal line of credit" instead of a loan refinancing has any big downsides?

The only two things I can think of are tax implications of not being able to get some deductions and not being able to loan forgiveness. But if you are in biglaw neither one of these are an option anyways.

[broadstreet11]

What's the lowest refinance rate people have been able to get recently, and any tips on getting them? My credit score is 750-775, I will make 190 in biglaw, and I have around 200K in loans. My quoted rate from a few was like 4% for 10 year fixed. Is that the best I can expect?

Earnest has been the lowest for me recently. I just got quoted for $139k at 3.38% for 10 and 3.76% for 15. I have a 780 credit score and am a 4th year, fwiw.

Related question: I'm currently at an obscenely low variable rate: .36%, with 4.5 years remaining. I got pretty lucky and refinanced just before COVID. Would it be better to keep this rate (paying approximately $2,450 a month until COVID ends) or refinance to one of the lower fixed rates? I figure I could outperform the fixed rate in an ETF over 15 years. Would welcome anyone's thoughts.

[newbienew]

I’d also include a maxed out HSA...which is basically a stealth 401(k) account.

Forgot this but yeah, that's a no-brainer. It also satisfies OP's desire to have access to the money in certain worst-case scenarios.

I don't get this one. Don't you lose money you've put in an HSA if you don't end up having enough health expenses? Seems like there's some risk there to go along with the reward -- it all depends on how much you end up with in terms of healthcare expenses, right?

[Anonymous User]

FSA expires at the end the year, HSA does not. My firm sadly does not offer an HSA -- I was not aware it was common.