Posts filed under ‘housing’
If you were about to pay off your mortgage would you throw a party to celebrate? It’s an interesting question for me. Although my last post may have been viewed as bragging, (at least I received one email letting me know it was perceived that way), I am not usually one to toot my own horn in real life.
When I purchased my beach house I didn’t tell my close friends or family. While my husband and I have worked hard to secure our finances I also know that we have been quite fortunate in life. I certainly didn’t want my success to make anyone else feel bad, so I kept my home a secret for nearly a year.
When I finally leaked the news to my close friends they were thrilled for me. If they were envious of my success they certainly didn’t show it, nothing in their body language gave any sign of animosity or jealousy.
When I make new friends and meet new people I almost never tell them my husband and I own a home in North Carolina. I feel like people would view me differently and not in a good way. When it does come up in conversation I always downplay the details. I tell them our house is only one story and a bit farther back from the beach than most. I try to be modest and fear that a mere mention of my beach home will be perceived as bragging.
While I would absolutely love to throw a party to celebrate the end of a mortgage I’m not sure that other’s would be so quick to celebrate alongside me. If you were invited to a mortgage free party would you be happy to celebrate with the homeowners or bitter that you weren’t in a similar predicament? Given my current situation I would be happy for my friends and family, but if my finances were in a not-so-fortunate state I’m not sure how I would feel about it.
I am extremely open about my finances on this blog, but only a few of my close friends know about it. I hate the idea that people would perceive me differently if they knew how much I owed and how much I was worth. In fact that’s the primary reason I blog anonymously.
What about you? As you write the last check to your mortgage company would you consider throwing a party to celebrate?
Last week I asked my readers if they would accept a gift from their parents. I wrote the post after learning of a friend who is about to receive a beach home from his folks. I appreciate the honest comments and emails that were sent to me. I wonder if I shouldn’t have also asked the opposite question, which is would you buy a large gift for your children?
I stumbled across an interesting article this weekend about Mick Jagger who, despite his wealth, does not believe he should buy homes for his three adult children. According to a recent CNN article, “Those who know Jagger well — including his oldest daughter, Jade, say that he strongly believes that children ought not think themselves entitled to their parents’ money and that they have to make their own way in life.”
His daughter Jade went on to say, “I was never a trust-fund child. Dad’s got a healthy attitude toward work. You have to look after yourself.”
So what do you think? If you had a lot of money, like Mick Jagger, would you buy properties for your children?
I imagine my husband and I will amass quite a bit of wealth throughout our lifetime and I want my son to understand that a lot of hard work and planning went into our bank accounts. At this point in time I can’t imagine buying him a home. I want him to experience the joy and pride of making it on his own. I also don’t want him to think that life is a cake walk.
I’d like to say I don’t have any debt, but for now my desire and reality are not one and the same. $600,000 is an enormous amount of money and it’s roughly how much I currently owe. In fact, it’s such a large sum that it’s difficult to wrap my head around.
How on earth do I owe so much money and did I ever think I would be this indebted? Well the debt is made up of two mortgages. No credit card debt, student loans or debt of any other kind. Just two simple, fixed rate mortgages.
The first mortgage is on our primary home. The second is on a rental home near the shore of North Carolina. The first house was purchased when housing costs were relatively low. The second was purchased at the height of the housing boom. Despite buying when prices were high I don’t regret that decision in the least. In fact, I’d do it all over again if I had to.
People often ask me about owning a second home. I tell them to buy a place you’ll love and want to visit often. My beach home is a place of physical and spiritual healing. Despite it’s hefty price tag I can say without a doubt that it’s brought my husband and I closer together and made for a healthier marriage. After all, you have to communicate when you spend six hours driving to the beach next to one another.
When we had two high paying jobs paying the mortgages was never an issue. Now that I’m considering staying home with my son things will get a bit trickier. I know we could sell our beach home to help me stay home, but that would be a last resort. In fact, I’d be more inclined to sell my primary home then to cut ties with North Carolina.
I’m happy that we don’t owe any other money, but I would be happier if our overall debt weren’t so high. It’s interesting how my ideas change as I age. When I was working I thought nothing about paying those mortgages, but as my goals and desires change to focus on my son I look at those numbers and wonder what on earth I was thinking.
This post is part of Women’s Money Week 2012. For more posts about debt see the Debt Roundup.
If anyone out there has applied for a mortgage with ING Direct would you mind posting your thoughts here. A very kind reader named Evy left me a comment, so I took a look this evening. Their mortgage rates are rock bottom but they are not fixed for the life of the loan. I’d love to hear from any of you that might have gone through the ING process and actually acquired a mortgage.
I’ve spent the last two days looking over every nickel and dime in our bank accounts, determining exactly how much income we bring in on a monthly basis, (my husband is a contractor so income fluctuates), and figuring out how to cash out investments in an effort to collect a down payment.
After making sure that all of the pennies and cents added up my husband and I had a long conversation and decided to move forward with the purchase of a vacant lot in North Carolina. I called the real estate agent this morning with the full intention of submitting a bid. Unfortunately, less than thirty seconds into the call I was told the lot had already been sold. Apparently the property was foreclosed and the vacant lot went up for auction sometime earlier this month. I was shocked that the lot had already been sold, because the realty sign is still on the property and address is still listed in the MLS.
My husband and I have been thinking about this lot for over a year. When it was originally listed it was completely out of our price range. Not only was the purchase price overly inflated but our brokerage accounts had been slashed by the recession, so it would have been impossible for us to splurge on the purchase.
Buying a new property is always unbelievably exciting and a bit frightening all at the same time. There is an incredible amount of excitement in making the purchase and yet unbelievable fear that we haven’t double checked all the numbers and that something or other would make us default on the property. I spent a lot of time over the past two days running the numbers to make certain we could afford the property and I am hugely disappointed that the lot has already been sold.
This time it seems we missed a golden opportunity. The lot was sold at auction for $100,000 less than the listing price. If we had known about the auction my husband and I would have been there in a heartbeat. It’s one of those once in a lifetime bargains that we may never see again.
We are both very disappointed, but we can’t change the course of events so we have to learn from our mistakes and move on from them. In the future if we are interested in a property we will contact the real estate agents and make certain that they are aware of our interests even if we don’t immediately make a bid.
In the mean time we will continue to save money in the hopes that other opportunities will present themselves. They may not be as good as this one, but hopefully my husband’s dream of owning waterfront property will eventually come true.
Mortgage fraud will continue to reign in the mortgage industry as long as mortgage originators, (a.k.a: mortgage brokers), continue to work on a commission based pay structure. The commission based system is a breeding ground for dishonesty and fraud. After all, if a loan is successfully originated the broker will take home a commission check. If the loan is denied, (because the borrower’s credit or financials are unsuitable to attain a mortgage), the broker will go home empty handed. In my opinion, the commission check provides a temptation for fraud that is too great for many mortgage brokers to pass up.
A video on CNN Money highlights this very issue. The video reported that fraudulent loans are skyrocketing because ‘the problematic structure of the industry hasn’t changed. Real estate brokers and mortgage brokers are still getting paid on commission and loan originators are still getting paid according to the volume of loans they do, not the quality. That’s got the same kind of incentives and pressures that got us into the housing crisis in the first place.”
When asked about the specifics of fraud the video reported that “people are lying about their income and also misrepresenting their job descriptions and there’s also a lot more deception about outstanding debts, how much they owe and leaving them out altogether.”
In truth there is very little reason other than human decency for participants in the loan origination process to remain honest. The borrower may forge employment or debt information in an effort to qualify for a mortgage or receive more favorable mortgage terms. The mortgage broker may turn a blind eye to the borrower’s half-truths in an effort to earn a commission. By the time the loan is accepted and processed the lender is holding onto a risky mortgage, without understanding it’s true risk. Without major reform to the pay structure of the mortgage process I believe fraud will continue to plague the mortgage industry. In my opinion the first step in mortgage reform is to alter the pay structure of mortgage brokers and loan originators.
As I mentioned yesterday my husband and I decided to refinance our home. We considered waiting to see if rates would continue falling, but ultimately decided this was the right time for us. Of course it never hurts to find financial experts who agree with our decision. So I poked around the Internet and found the Rate Trend Index on bankrate.com. If you are considering refinancing your home anytime in the near future you may want to subscribe to the Rate Trend Index alerts.
For the week of January 24 – 30 the majority of polled experts believe mortgage rates will rise over the next 35 to 45 days. About one quarter think rates will fall and the rest believe rates will remain relatively unchanged.
Here are a few of the expert’s comments:
- Rates have had an unbelievable run as of late. Anytime we have approached these levels in the past four years, we have been jerked higher in coming weeks, and I expect nothing different. If you haven’t applied for a loan and/or locked your rate, do so now.
Jim Sahnger, mortgage consultant, Palm Beach Financial Network, Stuart, Fla.
- With the intent of stimulating the economy, the Fed has cut rates, and will most likely do it again. This will entice more international investors, boost consumer confidence, leading to higher rates.
Steven M. Levitt, vice president of mortgage lending, Guaranteed Rate, Chicago
- Mortgage rates have been in free fall. But how much longer can it continue? Bonds are overbought and mortgage rates could bounce back quickly.
Greg McBride, CFA, senior financial analyst, Bankrate.com
Of course there are a few that think rates will continue to fall:
- The more the public hears about recession, the more likely it is to happen. The absence of inflation pushes mortgage rates down.
Dan Green, mortgage planner, Mobium Mortgage, Chicago
Since we have no idea what rates the future will bring my husband and I decided to go ahead and lock in our loan. I think it’s wise to search for cheap mortgage deals right away. After all, 30 and 15 year fixed mortgage rates are close to reaching historical lows.
Torn over the idea of refinancing your home? My husband and I have been debating the issue for days. Should we wait for rates to drop even further or lock in on a low interest rate right now? Today my husband and I turned to the trusty Internet to find our answer.
First, using online mortgage calculators I ran the numbers on a 15 year $417,000 mortgage, (the maximum conventional loan amount), at various interest rates. As you can see below the total interest paid on a 4.75% mortgage is roughly $19,000 more than the interest on a loan at 4.25%. $19,000 isn’t chump change but in terms of mortgage interest on a $417,000 home it’s a relatively small number.
- 15 years at 4.75% = $166,840
- 15 years at 4.50% = $157,204
- 15 years at 4.25% = $147,660
Also we are currently paying roughly $2300 in mortgage interest each month on our current loan. In 8 months $2300 in mortgage interest is close to the $19,000 we’d save by waiting.
We’ve been putting aside money to help us shorten the life span of our mortgage for years. We originally signed on for a 30 year mortgage to make certain that we could afford our monthly payments. We purchased the house right after my medical problems began and my husband started a new job, but a few months after purchasing we became comfortable with the payments and began putting extra money aside to pay down the principal.
Since the day we signed the loan papers we’ve been counting down the years until it’s fully paid. Today we started to see the light at the end of the tunnel. We locked in on a 15 year mortgage at 4.75%.
As I was painting the kitchen walls a few weekends ago I realized that my husband and I rarely pay people for jobs that we can otherwise do ourselves. I will admit, particularly since my medical problems occurred, that my husband tends to do the majority of the physical labor around our house. He mows the lawn, trims the hedges, rakes the leaves, chops wood for winter fires, changes the oil in our cars, and fixes most minor electrical problems. He even makes minor home repairs like installing recessed lighting under the cabinets in our kitchen.
Thankfully my husband is quite handy but he’s also interested in learning how all of the components of our house fit together. Whenever we have a problem with the house he investigates the issue. Now I know that some people aren’t handy and others would rather spend time doing other things, but I have to say that my husband’s tinkerings have saved us hundreds of thousands of dollars on home and car repairs over the years. We call plumbers and electricians to the house for big jobs, and of course from time to time you have to hire specialists, but otherwise my husband has convinced me it’s usually not too bad to try to do it yourself.
There are so many jobs you can pay other people to do, clean your house (maid), walk your dog (dog walker), force you to exercise (personal trainer), paint your walls (house painter), not to mention actually repair your house (plumbers, electricians, general contractors). Honestly, if my husband weren’t around I would certainly be more apt to hire plumbers, electricians, and landscapers, but I’d still clean my own house and paint my own walls. I’ve never tried to estimate how much money we save by doing things ourselves, but I bet in the five years since we’ve owned our own home, it’s easily been thousands of dollars.
Lately I have become quite fascinated by the real estate articles I find in the paper and online. I can’t count how many articles I’ve read where people need to sell their homes but refuse to lower their asking price. I hear a lot of people talking about how high home prices used to be, just like I heard people saying how much Microsoft and Cisco stock used to be. It seems we live in the past just a little too long sometimes. It doesn’t matter what the housing market looked like yesterday if you’re unable to sell your home today.
In 2004, my husband and I offered 10% less than the asking price on a second home. The buyers told our real estate agent they were insulted and wouldn’t even consider the offer. My husband loved that home and at the time we had quite a few arguments as to whether or not we should purchase it. Honestly, paying the full price was simply too far out of our price range so we had no choice but to walk away.
One year later my husband and I offered 4% less than the asking price on a home that was in the same community as the home we’d bid on the year before. The sellers countered by offering a deduction equal to less than 1% of the price of the home. At the time I wanted to stick to my guns and refuse their offer even though I loved the home. I was ready to walk away from the deal when our real estate agent offered some keen advice. He said, think carefully before walking away from home you love because of a 3% difference in price. In our case, after working through some mortgage calculations, we determined that the difference in price amounted to just over $100 more a month. In the end we purchased the home for 99.2% of the price the sellers originally listed.
These days buyers are more in control of the housing market, but I still think sellers can offload their homes without feeling disappointed. When pricing your home realize that knocking a few thousand dollars off your asking price might get a few more people in the door. Some buyers have a set price in mind when they bid on a home and might not even consider a home outside of that range. A few thousand dollars might be the key to getting an offer.