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?


A Pleasant Dilemma

An IKEA Store along Alexandra Road in Queensto...

An IKEA Store along Alexandra Road in Queenstown, Singapore. (Photo credit: Wikipedia)

When we first moved to the area a year and a half ago, we’d been married over a year and were still sleeping on a mattress on the floor. Since that wasn’t really our longterm plan, we decided it was probably time to buy some furniture. We love do-it-yourself options, so after doing some research and finding one close by, we settled on IKEA as a reasonable option for basic, just-getting-started furniture.

This decision meant that one fine Saturday morning, we drove down to our local IKEA, and, after admiring the cool displays and agonizing over what to buy… we left with nothing because we couldn’t bear to spend the money. (Seriously, this is our modus operandi–plan all the cool things we’re going to buy and then leave with nothing but the money in our wallets.)

But have no fear! After talking it over more at home and doing more research, we finally decided for sure what we wanted to buy and went back armed with a list, the secret to frugal shopping. And then, I kid you not, due to IKEA’s amazingly compact packaging and my willingness to drive home with the seat as far forward as it would go, we stuffed our queen-sized bed (which I love), a double loft bed for the guest room, and two nightstands (similar to this one) into the back of our Honda Civic (not a big car, folks), and actually made it home alive.

Fast forward to this February when IKEA hosted an event called BYOF (Bring Your Own Friend) Day. We had recently moved into our new house and were looking for a few items to flesh out our still-anemic furniture collection, and IKEA was giving away free items for visiting their store; all you had to do was print out the coupons and bring a friend with you. Now, Jordan will tell you, the word “free” and I have a special relationship. I mean, we are tight. So when I saw the promise of free breakfast, free lunch, and free big, blue IKEA tote bags, I was sold. I was willing to fight the madding crowds to get in on the deal. Besides, we needed the furniture anyway, and since we’re best friends, the “bring a friend” bit was easily solved, too. (Is that cheating? I’d like to think not.)

So we braved the crowds. And we braved the IKEA employees asking customers to answer a survey. I tried to avoid them, but we were finally flagged down, and being the non-confrontational person that I am, I sat down to answer their questions.

Turns out they were “trying to get to know customers better” and looking for some families who would let them do a home visit where they would look at the home, take some measurements, and get ideas for future store sets. I didn’t think much more about it after that, thinking they probably wouldn’t pick us, but then last month I got a phone call saying we’d been selected for an IKEA home visit. And in return for our hospitality, we’d get a free $100 IKEA gift card. (Did I mention how I feel about the word “free”?)

So this past Monday, three nice young people invaded our home, asked us lots of questions about our living arrangements, measured some rooms, took pictures of our house and yard, gave us $100, and left. The nicest young people I’ve ever met. 😉

And now I get to the dilemma: how to use our new-found wealth. Jordan has been eying this chair since the first time we visited IKEA, but we’ve also been in the market for a storage solution for our book habit. Decisions, decisions.

What would you do if you’d been given $100 to spend at IKEA? Spend it on something fun? Something practical? Let me know in the comments–who knows, you just might influence our decision!

To Infinity and Beyond! (Or, 20 Miles By Bike)

Last weekend Jordan and I picked up our new bikes (here and here). When we were in the market for our house, our biggest motivator was to find a place closer to our respective offices so that our daily commute would be more bearable. And one of my personal motivators was to find a place close enough to bike or walk to work. Of course, being the procrastinator that I am (the fact that we bought a fixer-upper that takes all our available time may also be a factor), I didn’t pursue the bike thing much after we moved, until I started reading Mr. Money Mustache, who is a huge proponent of replacing short automobile trips with bike rides. (It’s worth noting that Mr. Money Mustache is rather fond of profanity, but he has some fantastic things to say about unconventional yet highly effective financial practices. So if you can get past his language choice or it otherwise doesn’t bother you, he’s definitely worth reading.) Duly castigated about our own “clown-like” driving habits (and frustrated by the fact that the local bus, which I ride daily, is often unpredictable and can make me late to work), we decided to take the plunge and buy ourselves some new bikes. Continue reading