Category Archives: Mortgages

My Mortgage Countdown #2, Then There Was 1…

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We just paid the 2nd to the last payment on our mortgage!     

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It’s an odd feeling.  Now that I’m so close I’m actually feeling a bit anxious about what comes next after we do pay off the mortgage.  At this point, we’ll be totally debt-free.  We don’t have any car loans (I paid off my car loan last year), nor do we have any credit cards with balances on them.   I’m excited but intimidated by the fact that I will be starting at ground zero with my next financial path which is financial asset accumulation. 

So what does my house look like?    

Our house is similar to this one.

Well, it’s a colonial-style house that is a 4 bedroom house, it measures about 2,100 square feet and is about 10 years old.  We only have about 1/4 of an acre, so our lawn is pretty small.  Luckily we live relatively close to a park (it’s only a few houses down the street).  We have a kitchen, recreation room, media room (computer/library), 4 bedrooms, kitchen, laundry room.  We didn’t finish your basement yet, but if we did, it would add at least another 600+ square feet.    

To me, our house is just a house, but to my kids and wife, it’s the perfect house.  I often throughout a “let’s looks for a new house” speel, but both my kids and wife are content where we are.  Financially, it makes sense for us to stay too, but I get antsy sometimes.  

It will have taken us a little over 10 years to pay off our mortgage.  Initially, we started with a 30-year mortgage.  But through extra payment and few refinances (we switched to a 15-year mortgage), we whittled it down.

My next payment will be a little more expensive for me, it will be $1,581.  But then that’s it!

Are You Thinking About Refinancing Your Mortgage? You Should Be…

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Have you been thinking about refinancing?

The mortgage rates are still very low right now, but starting to rise again.  Check out bankrate.com and other online mortgage rate services for the most recent rates!  In November, inflation started to increase, and that means that the Feds will be looking hard at whether to raise rates again!  Unemployment is still high, so they might hold off for a little longer.  But do you want to take that gamble?  If I didn’t have my mortgage load practically paid off, I would be looking “high and low” for a good deal on refinancing my loan!

If I were to refinance today, who would I want to refinance with?

Wells Fargo!  They are the only company that I refinanced with for the duration of my mortgage!  Actually they shipped me a document in the mail that offered to refinance my mortgage.  I asked people I work with about Wells, and they said that Wells Fargo is an excellent company based in California.  Uneasily, I bite on the bait left by Wells, and was pleasantly surprised with them!  I got a competitive rate, 4.875% for 15 years and no closing cost!  I couldn’t believe it!  I had excellent credit, and I’m sure that was a big part of it, but still… NO CLOSING COST!

 

I don’t know if Wells Fargo still offers that offer today (actually I don’t know how the proposal got to me in the first place), but I’ve been extremely happy with it.  Wells Fargo has an excellent reputation!  It’s one of the few banks (other than Goldman Sachs), that Warren Buffett owns (and he doesn’t hold poorly managed companies).

Before you consider refinancing, make sure the following are true:

  • You’re going to stay in your home for at least 5 years
  • If you refinance, you don’t have to pay PMI (since the value of many homes has decreased, the amount of equity you have in your home might be less that 20%).  This happen to a buddy of mine, he went in to refinance has mortgage, but the reappraised value of his home had than 20% equity in it.  They said they would have to charge him PMI, so he ended up passing on getting his house refinanced.
  • You’ll need to make sure it makes sense financially.  I’m a number cruncher, so I use excel or Openoffice Calc.  If you search online, you can probably find an online app that will do the hard part for you: like the one at www.dinkytown.com click here for a good refinance calculator

Below are additional things I would consider:

  • Which type do you want a Fixed or ARM mortgage?  I prefer a Fixed Mortgage!
  • Look at other term mortgage, such as 20, 15 and 10 year mortgages.  You can also go the other way 35 and 40 year la
  • Make sure you can make extra payment against the principle, and how to do that (ask!)

If you do decide to refinance, I wish you the best of luck!  It worked out really well for me.  I went from a 30 year mortgage down to a 15 year mortgage.  I then made extra payments, so that I’ll have the mortgage paid off in 11 years since I initially took the first loan out.

My Mortgage Countdown #3, Year End Financial Crunch

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It already feels like I’ve crossed the debt-free threshold!

Mortgage Countdown #3

December is always tight for us!  Especially this year since we took our first trip to Disney.  It also gets tight because I claim zero exemptions (I know this is a bad idea).

Once my house is paid off, I’m going to change my exemptions to 2.  That will even increase my cash flow even more during 2010.  I’m still mulling around ideas about what to do with that extra income.  I got a few more months though.  I’m hoping the ideas just start jump out at me, and soon!

Last month I blogged about Mortgage Milestones, and this technique served me well (my wife wasn’t so crazy about my idea of paying the house off early) since it softened my wife’s concerns…

The amount that I now owe is down to $3,755!

It’s funny, I had planned on making a $5,000 payment early in my payment schedule (in my spreadsheet), so I would have had my balance paid off by now.  But, I decided not to take the chance when the economy started to tailspin into the recession.

Now that I almost have that extra expense gone, I have all these great ideas for funds that keep popping in my head.  Unfortunately, there are too many and now I feel like I’m behind the eightball again.

My next post about this, “Mortgage Countdown #2” will have some real ideas for what to do with the extra money I’ll be saving!

 

Fixed versus ARM Mortgages

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Okay, let’s review the choices!

First, what is a “Fixed rate mortgage loan”?

These are loans where the interest rate is a non-changing rate, so the interest and principal payment portion of the loan will always stay the same throughout the life of the loan.   This type of loan is the best type in my option, because of the predictability of the monthly payments.

Now for the ARM (Adjustable Rate Mortgage) loan (provided by BankRate):

When you get an ARM, two main factors determine the rate you pay: the index and the margin. The index is a rate set by market forces and published by a neutral third party. The margin is an agreed-upon number of percentage points that is added to the index to determine your rate.

So, like everything in life, which mortgage to choose depends on the current financial environment.

The concerning problem with ARMs, is that the home buyer can afford a larger loan when the rates are low, but when the rate rise, the homeowner might find that it’s harder to afford the loan now that the interest rate and total payment has increased!

With both types of mortgages, over time the cost will go up.  But this is because of the property tax (where this is applicable) and house insurance increases.

Before taking out the load, I saved up 20% of the house price and made a down-payment on it so I wouldn’t have to pay PMI (Private Mortgage Insurance), both fixed and variable mortgage loans typically have the 20% down requirement.

So, which did I pick…  the fixed mortgage loan of course.  Would I do the same today?  You betcha!

We all seen how an ARM can go bad with this past year!  I believe that the fed are going to start raising rates gain (then will have to eventually to curtain inflation).  And when that happens, I don’t think an ARM would be the best vehicle to use for buying a house.

For a list of the current mortgage rates, click here.  I’m actually a big fan of the bankrate site.  They provide more that just rates, some of their calculators are great, and they also have some good information on a broad range of financial topics.

The ARM loans are actually pretty complete, with product varying quite a bit, not to mention the hybrid loans.

Mortgages

Another mortgage loan that I will never get, is an “Interest Only” loan.  I don’t see the merit in that type of loan at all.  Way too risky for me.

So, here is where I ask any viewer that has or had an ARM… what do you think of it?  and would you do it again?