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Sure we financed our house 100%, but ya know what? It works

by J. Money on Monday, December 8, 2008

UPDATE: Our house has since tumbled by $60k at least, and we’ve recently refinanced (Woo!).

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 ChickyFinance.com started asking me questions ;) And who am i to deny anyone such answers?

Here are some quick facts about the place:

  • 3 finished levels
  • Over 1700 sq. feet.
  • Beautiful location

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.

I know people are gonna call us insane for some of this stuff, but ya gotta pick financing that best works with your situation. While we were able to afford a conventional loan (principal + interest payments), our main goal was to get our monthly payments as LOW as possible.

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.


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