Sure we financed our house 100%, but ya know what? It works
In fact, we actually paid $0.00 at closing! Looking back a year or so ago it didn't seem all that crazy, but with everything going on NOW it's like, "woahhh...did we actually DO that?"Welp, we sure did, but we're def. happy with the results. At least as far as financing goes ;) I wish we would've waited another year to actually buy the place, but whatcha gonna do - that's life.
So why bring this all up now? Well, a) i haven't blogged about the whole story yet, and b) Chicky from Chicky Finance started asking me questions ;) And who am i to deny anyone such answers?
Here are some quick facts about the place:
- Townhouse w/ lake view, 3 finished levels, 2 bedrooms (the master is HUGE and could really be 2 bedrooms), 3 1/2 baths, 1700 sq. feet.
The crazy thing here is that we were initially looking to RENT! And a 1 bedroom apt. at that. It just so happened that we got lost on the way to check one of them out, and BAM - 4 days later we had a contract on the table and were on our way to being new home owners! Needless to say it was all pretty spur of the moment, but that's life right? You see something you want, and you go and get it....kinda like your wife or husband ;)
And here are some quick facts about our financing:
- Paid $360k ("bargained" down from $365k)
- Sellers gave us $10k to cover all closing costs & 6 mos of condo fees.
- 1st Mortgage (80%): $288k - 30 year fixed rate (6.875%), interest only.
- 2nd Mortgage (20%): $72k - 10 year variable rate (9% initially, but now "Prime - 0.45%" currently making it 3.55%), interest only HELOC (Home Equity Line of Credit) to avoid paying PMI.
And the best way to do this? Pick up interest-only mortgages where we only pay the interest every month, *but have the option* to pay off principal anytime we wish w/ no fees or penalties (we're pretty good at that). As with everything else i talk about, this DEFINITELY isn't for everyone...
We then chose a 30 year fix for our first mortgage so that we didn't have to worry about crazy fluctuations out there. And then went the variable route w/ the HELOC hoping that it wouldn't get outta control - and lucky for us it's been dropping like crazy!!! Every time the Fed cuts the prime rate, our interest % goes down. It was initially set at 9% (Soooo high back then), but we refinanced to get Prime - 0.45%, now setting us at a measly 3.55%.
So that's the story about our residence and the financing behind it. I gotta say it was pretty fun putting this all together :) It still scares the $hit out of me owing so much, but i'm slowly getting used to it...
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- Here are some more mortgage posts.
- And here are some home ownership ones.
Labels: home ownership, interest, mortgages
posted by J. Money at
11:40 AM
14 Comments:
Is it worth checking on refinancing that 6.875% to try to get that one lowered too? That seems really high, I guess I am not certain how they would handle the interest only so maybe that makes 'em higher but if you could drop that, then put more to the variable to get build a little bit of equity in your house.
I can't say that I did much different, just a full 30 year note and I pay PMI, but no interest only or variable parts.
hey boss! yeah i know, it IS kinda high now :( Unfortunately our place has been losing value w/ everything going on, so i'm afraid it may cost us too much up front to refi (if they even allow it since we now owe MORE than it's worth), but hopefully i'm wrong ;) It's def. on my list to review every now and then though.
How much do you have to pay for the PMI each month? We ended up taking out that HELOC in order to avoid it, but sometimes i wonder which way is best...
When I purchased my home several years ago I was initially going with an interest only loan with the 80/20 split to avoid PMI, witha company that's been swallowed up in the subprime vacuum. Honestly, I couldn't put my fingers on it but something just didn't sit well with me. I began looking around and ended up with a conventional, 30 yr fixed, 5.875% interest, no pmi loan. There were two banks that I knew of in my area that offered similar loans with only down payments of 3 - 5%(BOA and SunTrust). I'm not sure if it was coincidence or not but I got much better terms dealing directly with the lender versus a broker. I purchased my home 5 years ago so perhaps my comments aren't relevant;-).
Glad I'm not the only one - we locked in at 6.75% last year, and now we can't refinance because of my income. Oh well, at least we got the house of our dreams, right?
As our broker said, the most important thing is that YOU know you can afford the mortgage. He gave us a no-income, no-assets loan (aka liar loan) because I primarily freelance... and I'm glad we got our mortgage before income requirements tightened.
As I've heard time and time again, personal finance is personal! You've got to understand the products being offered, and make the decision that is right for your family. Thanks for sharing your story with us.
"I know people are gonna call us retarded for some of this stuff"
You are not retarded by any means. If some products didn't work for ANYONE they wouldn't exist...it is that simple!
You would only be "retarded" if you signed your financing deal and didn't understand what the hell you were signing, a la, most of America
Interest only loans scare the crap out of me. I can't believe you have one. As far as the PMI thing goes, the cost depends on how much you put down, so yours probably would have been a lot. I would imagine it would have been more than the interest you are paying on the second. AND they are a total pain to get rid of. We paid PMI for three years (put 15% down, paid $50 a month for the PMI) and then still had to pay another $150 for an appraisal on the house before they would get rid of it. It was very frustrating. We would have been better off doing the second mortgage thing.
@Ms. MoneyChat - that's interesting! maybe you're right, dealing w/ them directly gets you a better deal? we researched 2 other loans on our own, and 1 with my all-time FAVORITE place - USAA, but both came up much higher, so we went w/ the brokered one. GOOD FOR YOU though! Each % point makes all the difference in the world :)
@Stacey - Yeah, you're so right. At least we both got our dream homes before this mess struck!!! Although, now my "dream home" is to be closer to the city, but we'll save that for the next move...
@My Journey - Appreciate the kind words my friend :) You're right, the options are out there for all different people! The loans we have wouldn't come close to being right for some others i know.
@Ashley @ Wide Open Wallet - I hear ya, it was a big scary at first but now we're so used to it that it seems "normal". That sucks about your PMI issue though, i wonder why that is? For some reason PMI is the thing that scares ME! haha...i just remember people saying "whatever you do, don't pay PMI!"...i bet it's totally cheaper than going other routes though - like if our 2nd was back up to 9% or higher again.
Wow.... Well, we bought our first house this last June/July and we paid A LOT more than you J! It was def a pre-meditated and long thought out purchase though, and considering we live in one of the most expensive cities in the country.... oh well. We were lucky enough to have stock that we cashed out last Jan when the markets began to tank, and that provided us with a large down payment (think 25%). We thought about interest only since right now we can afford to pay a lot of extra towards principal and it made us a little worried to ALWAYS owe (3k monthly) on a 30 year fixed. For sure we would have been able to save a lot more cash if we went interest only. But the markets and the jobs, etc scared us away from Interest only and here we are with a 650k house on a veeeery traditional 30 yr fixed at 6.125%. We love our home despite the fact that a much bigger, much more valuable house 3 doors down is now for sale at about the same price range. :( But hey, if you don't sell you haven't lost anything, right! And we love having our own home! Sorry for such a long comment!
You aren't alone at all. I did the 80/20 thing to avoid PMI... twice. I too had a No Income No Asset verification Loan (the old NINA Liar's loan.) At the time it made sense, my husband had some shaky things on his credit due to a past marriage, but with that kind of loan we could get everything in my name - no problem. With two incomes our payments were very reasonable, so it all worked out... right up until I got divorced! Would I do things differently, you bet! But not the financing part - that was a good decision then and it would be now, it was the husband that was the bad one.
I refinanced my two interest only loans awhile back and now all four loans are 30 yr. fixed. All but one (the second from the smallest) have very good rates on them, which is a mighty good thing because refinancing at this point is out of the question.
I can't call you crazy because I don't know what terms like HELOC and "interest-only" mean. If it works well for you, why not?
Jeez, J. Money, what were you thinking? Don't you know that money should be spent only in the most efficient, conservative way possible? Why did you buy a house when a sturdy tent would have sufficed? (I'm being EXTREMELY sacrastic here!) :)
You found an arrangement that worked well for you, and that's always a good move.
@NorCalRN - long comment? HAH! do you know who you're talking too here ;) i absolutely love alllll comments, esp long ones, so keep them coming sister (wow, that *really* sounded bad)! Back to it though, GOOD job w/ that 25% down payment - HOLY CRAP that's good :) I'm impressed...maybe you should be writing this blog? haha...but i hear ya about the houses out there these days, freakin' low as hell. but you're right, no loss until it's sale time!
@Dawn - awwww :( stupid husbands and their stupid issues...at least you have your finance stuff down! i'm not sure how the whole "things happen for a reason" line plays in your situation, but you're doing a helluva good job w/ it all :) always enjoy reading your blog.
@ka1t_lyn - well said my dear :) you will one day when the time is right. for now, you just enjoy being in school and keep doing your thing...and tell God i say hi too, you rank well w/ him up there :) i gotta keep learning from YOU on that one.
@MoneyGrubbingLawyer - haha...you keeed, you keeeeed! Thank you sir, much appreciated.
Beautiful place! Wow, no money down is sweet. But, the good thing is, if you lose your home, you didn't lose any equity in the first place! :)
hah! that better never happen ;) I'll rent it out or go pimp the street corner before it gets taken away from us....
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