Right now, we are spending too much money on an interest only home loan so I spent all of this past week doggedly persistent in my search for a lender who will refinance this horrible mortgage. Refinancing really is my main financial goal for 2013 and the sooner the better.
I believe success to be ours! We do not qualify for a conventional loan because of our BK and foreclosures from over 3 years ago but we do quality for FHA. Ergo, we applied for a 15 year FHA mortgage and were accepted by a lender in town. Escrow was opened on Thursday and the first round of signed paperwork has already been returned yesterday to the escrow officer. Our monthly savings will come to $300, and would've been closer to $600 had we gone the 30 year route, but we just didn't see the logic in signing up for another 30 year term. We want to get this thing paid off or at least paid down.
Our $300 monthly savings with the new 15 year term will now cover the homeowners insurance and the property tax bills too so, basically, we will still be paying $900 each month, as with the horrible mortgage we already have, but that $900 under the new mortgage will now cover the principal, interest, taxes and insurance AND will only be over 15 years as opposed to 30. We are presently paying $900 a month on an interest only mortgage with the property taxes and insurance tacking on an additional $300 for a total monthly payment of $1200. Not a wise use of our money so ... we are definitely happier with the new deal.
Looking at the amortization schedule, the 15 year loan pays down quite quickly with a significant amount of the monthly payment going towards the principal. This is a huge change from the 30 year amortization, in which the bulk of the earliest payments on the mortgage go towards the interest. We calculated that just $100 extra towards the new mortgage each month will result in the mortgage being paid off in 12.5 years and a prepayment of $200 will earn us a paid off mortgage in just over 10 years. Amazing. Why the heck didn't we pay attention to this before now?? Well, I already know the answer to that. We were too busy spending, vacationing and consuming crap.
One thing that I paid careful attention to were the fees for acquiring this new mortgage. Our loan officer may be a friendly helpful type but let's just say that she is not above trying to stiff me on bogus junk fees. I have already caught her out three times in trying to shaft me with BS junk fees .... and I called her on it too. I was able to get some of the lender fees cancelled and one of my friends from the past, who works at an escrow company, allowed me to negotiate a flat fee escrow charge which saved me a big chunk of change. I still have to pay fees to the lender that I know full well to be junk fees (grrr) but I guess I have to allow them to make a bit of money from this deal. I already know that the lender is making money off us on the front end (interest rate mark up .75%) so it galls me to know that the lender is making money off the back end too ... 'processing fees', 'document fees', 'underwriting fees' and so on ...... but, hey, there's no such thing as a free lunch, eh? I'm not my own mortgage broker at this point and so I have to play the sketch game. I've talked the fees down as much as I am able to without pissing someone off and losing the loan.
I'm really looking forward to watching our mortgage balance go down with every payment each month as opposed to staying the same month after month. Our present interest-only mortgage is a loan which must be banished and, bar any unforeseen glitch, that is the intention, hopefully within the next 3 weeks.
Next up: Appraisal. We paid the $500 fee for that and are awaiting the call from the appraiser dude to set up an appointment. Once that's done and in at the expected valuation, it's a hop, skip and a jump to paying off our old lender and taking up with the new.
One thing I will say. We are writing our costs into the loan in order to keep our cash liquid. We were going to bring $10k to escrow to pay all costs and pay the balance down a little but now we have decided to refinance at $90k and to make extra payments each month. In no time, we should be past the current $85k mark while leaving our savings untouched. I personally don't think it would be a good idea at this stage to put thousands of dollars into paying down a mortgage for the simple reason that we have too much going on with regards to college expenses and I want to make sure that we have plenty of financial cushion to get the kids through the final 2 years in college, which will begin in September 2013.
10 comments:
What a wonderful thing for you. I am so happy you kept trying and were able to get it done. Now I pray everything goes smoothly from here(and it will I know it). When I had a morg I had a chart showing all my payments so I could cross them off as I paid them and if I paid any extra.
Congratulations. You truly deserve it
That is great news!! So happy for you. I really need to check into refinancing FHA on our home, if that's even possible. I would do a 15 yr too. With our BK, that's probably our only route too, but I don't know if they even do re-fi's on mfg homes on private property. I know many many years ago we tried to sell our place. Got a buyer the first week who wanted to go FHA. It was all a go until the very last minute. FHA wanted the road maintenance agreement on our private road (used by all the homes back in my neighborhood) to include all the homes PAST where all the homeowner's who were part of the agreement lived. There was no way to do that and the deal fell through, so I've always been scared of looking into FHA again.
That is good news indeed. But I hate it that your loan officer keeps trying to tackle on fees. Sure, they are making money on the deal without all the fees, so don't feel like you have to pay for any of them if you don't have to. It's aggravating you can't just walk away from this (compared to walking away from a car dealership), but I hope the fees stop sneaking in and the costs remain reasonable. You're doing great. Best of luck with the appraisal.
That’s good news to start your year! You may have had a bad beginning, but you eventually stood up and got over it. Refinancing mortgage is a wise decision; the shorter terms are, the better, as it saves money on interest. I hope everything goes well now for you and your family to have a happy and bountiful life.
Erick Bush
oh thats great news!! I know how much relief I felt when our refinance was approved and I could start making a dent in the balance instead of everything going to interest.
Now you will feel like your making progress much quicker. well done!!
@judy ~ I already have the amortization schedule printed out and ready to go :) I'm really looking forward to at least paying this mortgage down somewhat. I just want a 'normal' mortgage LOL rather than this interest only deal.
@One Family ~ FHA does make one jump through some hoops .... IMO the private mortgage insurance is the worst. With a 30 year mortgage, one not only pays the PITI but also a monthly mortgage premium which really adds a chunk to the monthly payment. In addition, there is an annual premium of 1.75% of the loan amount that must be paid up front at escrow. As we are able to qualify for the 15 year term, we do not have to pay that monthly PMI thank goodness because that is a deal killer for me. However, we still have to pay an upfront PMI premium of $1500 (one time only) but, given all the costs of this loan, we will break even in about a year. FHA is the only loan we can get due to our past credit history. The banks are still really tight on granting credit ..... too bad they couldn't have acted this way back in 2003-2005 when we built a custom home and bought an apartment building we never should've been given loans for!!!!
@Tanner ~ I am aware of the extra junk fees that lenders tack on because I worked in the business and it really galls me to see what they get away with. Many people think that these junk fees are legitimate fees set in stone but I know that not to be true. However, I have to step carefully because my loan officer is a testy type and if I push too hard I'm sure 'reasons' will come up as to why we can't get the loan. I don't want to blow it because the loan we have now is costing us too much money with little to no financial benefit. Fingers crossed on the appraisal .... I think we'll be fine but this region is still not out of the woods when it comes to real estate. The market seems to be holding but it wouldn't take much to send it into freefall given the socioeconomic environment.
@Erick ~ Thank you! Every day is a conscious effort to remain on track and plan for the future.
@Louise ~ I think it's going to be a great feeling to see such a large chunk of the monthly payment going towards principal rather than interest only. Looking at the amortization schedule, this thing gets paid down fast! The spouse is working a lot of long hours to build savings and begin to pay down this mortgage in readiness for retirement and all of these adjustments to our financial picture are eventually going to come together in a positive way.
That is good news indeed
Regarding the amortization schedule, the shorter the term of amortization payment is, the less interest is added to the principal of the loanable amount. I am glad that you are able to settle your mortgage loan one day at a time, while you’re handling other pressing priorities. =)
Avril Copperfield
The recently take on association and restrictions by the organization will influence the to a massive amount. We are really looking onward to timepiece what's departure to move toward about if this limit has come into take out.home purchase
Post a Comment