Posts filed under ‘mortgage’
Two years after graduating from college I bought a house. For once in my life I didn’t struggle to make a decision. I acquired financing with my boyfriend and signed my name on the dotted line five days after turning twenty-two.
The down payment came in part from money I’d saved in college. The rest came from a principal free loan offered by my employer. The company provided me with $12,600 and every two weeks I paid $18.89 in interest on that loan. I couldn’t pass up free money; $12,000 was more than a third of my starting salary in 1999.
There was only one caveat to that loan. I had to remain employed for five years. If I left at any point before that time I would be responsible for paying back the principal. There were many times I considered leaving in those first few years but that loan always convinced me to stay.
I’ve never been in debt. My parents paid my tuition bills while I was in college and my grandmother always told me to pay off of my credit card bills each month. Despite the free money I didn’t like feeling shackled to my employer.
I created a giant spreadsheet that included sixty cells and taped it to my office wall. As each month passed I pulled out a red pen and crossed off one date. In the beginning there was more black ink visible then red, but eventually the red marks began to outpace the black.
I remember pulling that paper off the wall and feeling elated when that loan was finally forgiven.
This month my husband and I reached the five year mark on our mortgage. If all goes according to plan we will pay off our mortgage sixty months from now.
I know it sounds rather silly, but I’d like to create a giant paper chain to commemorate the occasion. I could hang it around the ceiling in our sun room and pull off a link every thirty days.
When I told my husband he laughed at the idea. It’s not the first time I’ve talked about celebrating a life free from mortgages. Of course, I told him no one else has to know what it symbolizes. They’ll just think it’s a colorful decoration I made with my son on a quiet, summer afternoon. Only the two of us will know that it symbolizes financial freedom. The flexibility to work if we want to, not because we have to pay the mortgage!
Over the past twelve years my husband and I have applied for home loans nine separate times. Does that seem slightly insane to anyone other than me?
Our primary home was purchased in 2001 for $260,000. Here are the details for the original loan and each refinance that followed.
|2001||$247,000||30 Years||6.875%||Original Loan (included crappy PMI)|
|2002||$243,000||30 Years||6.000%||Removed PMI|
|2003||$237,700||15 Years||4.875%||Lower Rate & Term|
|2009||$400,000||15 Years||4.500%||Cash Out to Buy Additional Property|
|2012||$335,000||10 Years||3.125%||Lower Rate & Term|
Our second home was purchased in 2005 for $620,000. Here are the details for that loan and each refinance that followed.
|2005||$496,000||30 Years||6.000%||Original Loan|
|2008||$243,000||30 Years||5.000%||Lower Rate|
|2009||$376,000||15 Years||4.500%||Lower Rate & Term|
|2012||$325,000||10 Years||3.500%||Lower Rate & Term|
As you can see each and every one of our loans seemed to make sense at the time. We refinanced as interest rates fell and tried as often as possible to lower the term of the mortgage.
The exception to that rule came in 2009 when we applied for and accepted a cash out refinance in order to purchase a third property free and clear. We actually planned to take out a mortgage on the third property, but were low balled by a low appraisal. Without any other means to fund the purchase we decided to cash out our primary residence. In the end it was actually a better alternative as rates on primary homes are typically at least 50 basis points lower then they are on second homes and investment properties.
I will admit that it was quite difficult to watch the loan amount jump up to $400,000. Although it was worth it to buy the investment property the principal on our home was less than $180,000 at that time.
As you can see if we had been a bit more patience with interest rates we may have been able to hold out on refinancing our second property in 2008. Interest rates continued to fall and we refinanced again just over one year later.
Crazy enough interest rates have fallen even further since we refinanced last year. I remember shaking my head in disbelief as I signed a mortgage for 3.125%. These days I could get the same mortgage for 2.875%.
Believe it or not I considered refinancing again, but the numbers just don’t add up. With a 10 year term and such a small drop in rates we’d only save a few thousand dollars over the life of the loan. By the time you stack on closing costs it’s certainly not worth it. Still I would love to say I had an interest rate of less than 3%.
I can’t believe how many times we refinanced these two properties. Refinancing is not easy work and it’s crazy to think about how many times we applied for loans, gathered up all of the required documents and met with notaries to sign documents.
I like to think that we would never refinance these properties again. Even if these two homes are paid off in the next nine years I’m not certain that we are finished with mortgages. My husband wants to build a vacation property, which means another home loan will exist for us in the not so distant future.
We considered refinancing our home loans quite a few times over the last few years. We refinanced both of our properties in 2009, but rates continued to fall to historical lows between now and then. We went back and forth about paying extra principal or refinancing a couple of times. Finally as the rates continued to fall I couldn’t sit still any longer. The following details convinced me to apply for two brand new 10 year mortgages.
Interest Saved: $86,857
Interest Saved: $64,252
Total interest savings just over 150,000.
I think this will be the last time we refinance. So far we transitioned from a 30 year mortgage to a 15 and now from a 15 to a 10. Each time we refinance we trim years off the life of our loan. Now that we’re at 10 years I can’t imagine us refinancing again, because I do NOT want to extend the life of my loan ever again. The interest savings is HUGE, but more importantly I LOVE the idea of paying off my debts in the next 10 years!
10 years and 2 months from now my husband and I should be mortgage free. We recently refinanced our beach home from a 15 year fixed mortgage at 4.5% to a 10 year fixed at 3.5% (Note: interest rates on second homes are typically higher than on primary residences.) In the next month or so we also hope to refinance our primary home. That mortgage will shrink from a 15 year 4.5% mortgage to a 10 year mortgage at only 3.0%!
My birthday is in August, so if all goes according to plan I will be mortgage free one month after turning 45!
Now I realize that nothing in life is guaranteed, that anything can happen and that we certainly should NOT count our chickens before they hatch, but I can’t help but smile at the thought of being mortgage free in just 10 years.
Has anyone ever shopped around for title insurance? My husband and I decided to proceed with refinancing both of our properties, but I hate the thought of paying for two more title insurance policies. I believe the title insurance on our rental home can be reissued, but I think we will need to purchase a new policy for our primary home. Our lender provided the name and quote of a title insurance company, but I’d like to shop around first to see it’s the best deal. Has anyone ever shopped around for title insurance? If so how did you go about finding and choosing the title insurance company?
A few days ago my husband and I were shocked by an unbelievably low appraisal on a small piece of property in North Carolina. After inquiring about the property and submitting a bid we contacted a lender to apply for a loan. The lender immediately hired an appraisal company to value the property. While I thought the seller’s price might be a bit higher than the appraisal I was shocked to find out that the vacant lot appraised for $100,000 less than our offer.
It is my understanding that appraisers search for real estate sales that follow specific guidelines. I thought appraisals were typically based on sales within a one mile radius that are less than 12 months old. This was not the case with our appraisal. The appraiser compared our lot with sales on properties that are ten miles away and over a year old.
We’re looking to purchase a waterfront property in an area with very little vacant land. Over the years the majority of lots in communities in and around our area have been built upon. Rather than looking at all land sales within a one mile radius of our home, the appraiser looked only for sales of waterfront properties. He had to go 10 miles away to find sales on vacant waterfront lots and found only three within the last year and half. He used those three properties as the comparables in his appraisal.
Of course, as anyone knows, you cannot compare lots that are over ten miles away from one another. Heck, in our neighborhood in Maryland the price of houses in our immediate community ranges between $400,000 to $850,000. If you walk down the street and into the next community, (less than half a mile away), you won’t find a home worth more than $300,000. If a few blocks can cause that much variation in price you know that it is impossible to compare properties that are over ten miles away.
So what can you do about a low appraisal? Well, in our case very little. Our lender will not accept independent appraisals, so our only option was to refute the valuation the original appraiser provided.
We provided detailed documentation to the appraiser, including a number of properties in the area that sold for $100,000 to $150,000 more than the valuation he provided. We explained that sales that are more than ten miles away and over a year old are not a reflection of the current real estate market in our community.
Of course, just as I expected the appraiser refuted each of our points and explained that the lot had to be compared to waterfront property and that none of the recent sales in our community were waterfront. Hmmm, that’s funny, because usually waterfront views increase the value of a property, yet this waterfront property is valued at nearly half of some of those lots.
Honestly, I didn’t expect the appraiser to change his valuation. His number is so off the mark that he would look like a complete goon if he went back and revised his original estimation. It turns out that the appraiser is a trainee that is from a community far away from the lot in question. Odds are that he is both unfamiliar with the appraisal process and our community.
So where does that leave us. Well, the lender certainly won’t provide us a with a loan large enough to fulfill our needs. They will provide us with only a 66% loan on the property valuation, which is quite a bit less than we require.
At this point it is fair to say that the lender will not further decrease his price. He dropped $35,000 off his asking price already, so if we wish to proceed we need to explore other financing options.
I wonder how many times an appraiser revises his valuation. Based on this experience I would imagine that it happens very infrequently.
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.
After much debate it looks like my husband and I will refinance both of our properties. For the time being cash flow is the most important factor in our decision. I plan to call our lender tomorrow to refinance both of our homes to 15 year mortgages. This means extending our current mortgage by an additional six years, but interest rates are so ridiculously low that we think it makes more sense to stash the cash or invest it. Our decision isn’t set in stone just yet, but I’m pretty certain we’ll pull the trigger on this one.
My husband and I are considering refinancing our 15 year mortgage and I’m unbelievably torn over the decision. I’m searching for the best mortgage deals and think we can save at least half a percentage point. The change in interest rates, (from 5 to 4.5%), will decrease our monthly payment by roughly $375 a month. While the boost in monthly cash flow will certainly help us meet our savings goals, I’m not fond of shelling out money for closing costs or extending the life of our loan.
Up until now we’ve been paying our mortgage bi-weekly, which means we are a few months ahead of our initial payoff schedule. In fact, if we continued to pay bi-weekly our mortgage would be paid in full in 13.7 years rather than 15. We’ve held the mortgage for roughly a year and half, so refinancing to another 15 year mortgage will push the payoff of our mortgage by at least two years. If we leave the mortgage alone it will be paid in full by the time I reach 45. If we refinance I’ll be at least 47.
I’ve run a bunch of different calculations and can’t seem to find a conclusive answer on whether or not to refinance the loan. Some calculations seem to think we’ll break even over the life of the loan, because the decreased mortgage rate will make up for the extended time period, while others seem to think we’ll lose a few thousand dollars because the change in interest rate isn’t significant enough to make up for the closing costs and other mortgage related expenses.
This will be the second time we’ve refinanced this particular mortgage. The first time around we paid off a big chunk of the principal and shrunk both the interest rate and term. It felt great moving from a 30 year jumbo to a 15 year conforming loan. This time, while the mortgage rate will decrease ever so slightly, I’m not certain that I’m willing to sign up for another 15 year mortgage. I hate the idea of extending the clock on something I want to pay off so badly.
Yesterday we received our mortgage papers in the mail and drove over to Fed-Ex to have them notarized. As we flipped through the pages in search of signature flags and notary signs I came across a document called the occupancy affidavit. In essence, it stated that we would need to claim the property as our primary residence within 60 days of closing.
Since the property is our second home the document was clearly false. My husband and I could have signed the papers and closed on our mortgage, but we didn’t. Instead we called the credit union to let them know the loan application was incorrect. The loan officer informed us that loans for second homes cost .25% more than loans for primary residences.
A .25% increase on a $417,000 mortgage will cost us $9729 over the life of the loan.