Why We Refinanced

We knew when we bought our house a year ago that we’d be refinancing our mortgage at the first-possible opportunity. Fortunately, we were able to do just that at the beginning of December. Some of the reasons to refinance were immediately obvious to us; others took some time to manifest themselves:

  • Our original loan was an FHA 203k loan. The 203k is a rehab loan, which was a good way to get the funds we needed to turn our long-neglected house into something livable, but it also came with a stupid (in my opinion) clause that the borrower *must* have mortgage insurance for the first five years of the loan, even if the loan-to-value ratio is less than 80%. (Most lenders don’t require private mortgage insurance when the amount owed on the loan is 80% or less of the home’s appraised value.) So we’d continue to pay an extra $238 fee every month if we didn’t refinance.
  • Our original rate was good, but not as good as the new rate. Our FHA loan was a fixed 4% loan. While this is a good rate, we decided this time to go with a 5/1 ARM (adjustable-rate mortgage), which offers better initial rates than a fixed-rate mortgage. The new rate is a whopping 2.75% for the first five years and, although it can adjust after that initial fixed term, it can never go any higher than 7.75%. (There are also caps on how much it can adjust per year.) There’s also a fixed-rate conversion option if we decide to play it safe after five years. But since we don’t know how long we’ll be in the area (not sure if Maryland is our “forever home”), a super-low starting rate is a good way to have affordable housing for as long as we’re here.
  • Our monthly payments were too high. Well, they weren’t actually high, per se, but we’d like to leave the option for me to go part-time or stay at home once we start a family, and the payments were too high to manage on Jordan’s income alone. The low interest rate combined with the new, lower principal make either of these arrangements achievable.
  • Our original bank was a comedy of errors. Let me count the ways: They didn’t send us statements on time for us to make payments, and they didn’t allow online payments. They misapplied our payments in various ways, once even applying the entire payment to principal and then telling us our payment was late because interest hadn’t been paid. They kept telling us to send them our hazard insurance information, even after we’d sent it to them *three* times. They sold our loan and didn’t tell us to whom they’d sold it, instead sending us a letter that said they’d sold it to themselves. (We didn’t discover this last one until we were trying to get the payoff to refinance.) By contrast, our new bank (credit union, actually) has been a pleasure to work with. Communication has always been punctual, professional, and precise. They offer a variety of payment options. Their title officer fought with the bank our loan was sold to (I was party to a conference call when this was happening) when they didn’t want to release our payoff until the middle of January (at which point our interest rate and application would have expired). Their closing options were flexible–we closed on the loan at 6:30 PM in the comfort of our own home.

How has your experience been with mortgages (if you’ve owned a home)? Have you had positive or negative experiences with lenders? Would you consider an adjustable-rate mortgate?

In Which Our Heroine Returns From a Two-Month Absence and Has No Pictures to Show For It

I certainly didn’t intend to be away from here for over two months, but, well, the best-laid plans and all that. Church is cancelled tonight due to snow (!), so it seemed like a good time to get caught up. Here’s a quick rundown of what we’ve been up to, and I’ll plan to go into more detail on some of the items in subsequent posts:

  1. We finished renovating our kitchen! We started mid-August and had hoped to be done by the end of September, but due to various bumps in the road didn’t end up finishing until the end of October. More on this in a later post.
  2. We refinanced our mortgage. We were able to refinance a little over a year after our purchase due to the larger-than-expected bump in our home’s value after the kitchen and other renovations (new roof, windows, HVAC, bathrooms, flooring, siding, …) and our double loan payments (knock out that principal!). More on this later!
  3. We got pregnant. And lost the baby at 4 and 1/2 weeks. This was, by far, the most painful event of the last two months, but I’m happy to say that our faith and family and friends and love for each other pulled us through it, and we came out stronger for it. I may (or may not) talk more about this later.
  4. We hosted Thanksgiving. We had our parents over for Thanksgiving, and I was in charge of Thanksgiving dinner for the first time. Other than forgetting a couple ingredients in the stuffing (which still turned out delicious), there were no real disasters, and I think a lovely time was had by all. It was a much-needed time of relaxation and refreshment, especially coming the tail-end of our loss.

P.S. The title of this post is a bit misleading. I did take pictures of the kitchen renovation and will plan to share them in a future post (or posts). Stay tuned! 🙂