TWENTY-FOUR THOUSAND DOLLARS for a roof over our head - and that was only for our mortgage interest & taxes! Haha...talk about a wake up call.

If you are a home "owner" I'm sure you know what I'm talkin' about, but I've said it before, and I'll say it again - if you're looking to own a home one day be absolutely certain you're ready to pay for the associated costs.

There are a ton of benefits that go along with this "American Dream," (tax write-offs, stability, equity, etc) but you've got to be aware of the financial drains as well. And as most of you know, had I been more aware 2 1/2 years ago I would have done things a lot differently -- Like either bought a smaller place or continued renting for a couple more years.

But it is what it is, and today I thought it would be interesting to see the breakdown of how our living situation has changed financially since renting. The numbers may be off a bit as I can't recall exactly what we paid while renting (I didn't start tracking this stuff until after we bought - when I realized I need to pay more attention!) but it's pretty close:

CATEGORY Mortgage(s)/Rent Extra Principal Taxes Condo Fees Utilities (non cable) Insurance Maintenance ------------------ TOTAL:

Owning $1,800 $200 $278 $130 $150 $75 $100? --------- $2,733

Renting $1,300 $0 $0 $0 $200 $50 $0 --------- $1,550

As you can see, we pay about $1,200 MORE a month right now . That's pretty substantial, even with the tax write-offs (we may see about $600 of it back if I had to guess). But even crazier here, 100% of all that interest & taxes are NOT going towards the principal loans we took out on the house! Meaning we still would have owed the original $360k had we not been chipping away at it by our own accord (we have 100% financing, which surprisingly we actually like!)

So if you do own, or you're thinking about owning, take all these things into consideration :) Just applying $100 or $200 extra a month towards your mortgages will drastically cut the amount of interest you'll eventually pay in the end & won't drive you *as* crazy. But I must warn you, it's not that easy. I've been praising it for over a year now and I still struggle every time I sit down to do it! Haha...next time we'll be buying a place closer to the lower end of our budget, not our highest.

How much did you all end up dishing out in interest & taxes last year?

Labels: home ownership, mortgages, taxes

Guest post by Robert Sommers

With current mortgage rates still hovering just above historical lows, a lot of homeowners are tempted to pay off their original home loan with a second mortgage.

A second mortgage is taken out in addition to the existing mortgage and gives a homeowner access to cash in exchange for the equity in their home. Regardless of type, a second mortgage essentially function's as a second lien on your home and thus carries a high potential risk for the underlying lender.

When looking at a second mortgage tool or any other type of home loan that converts home equity into cash, (fixed rate, lines of credit, reverse mortgage, etc) you definitely need to consider all of the potential risks, as well as the rewards to make sure it's the right one for you.

Home Equity Loan

Home Equity Loans by far are the most popular second mortgage loans among American homeowners. A HEL is secured against the value of the underlying property and allows the homeowner to borrow money against their home's equity. The amount borrowed is dependent upon three things 1. the appraised value of the property, 2. the existing balance of the mortgage, 3. the amount of equity currently held in the property. The loan itself works in a similar way to other conventional loans, in that once approved by the lender, the borrower receives the entire amount as a lump sum.

The interest rate on a HEL is typically fixed, amortized for up to fifteen years and can very often be two or more percentage points higher than the interest rate on a comparable fixed rate conventional mortgage. Depending on factors such as income, debt, credit history, outstanding mortgage balance, and the value of your home, a lender will lend up to 75% of the borrower appraised property value, minus the balance of the mortgage. For example, if your home has an appraisal value of $570,000 and you still owe $220,000 on the mortgage, you could potentially borrow up to $207,500, if eligible.

Should you happen to fall behind on your payments and foreclosure occurs, your home equity loan lender has a subordinate claim meaning that it is next in line to receive proceeds from the sale of your home after the primary lender is paid.

Home Equity Line of Credit

Home Equity Line of Credit or HELOC also allows a homeowner to borrow against the value of their home is a. The loan is essentially a form of revolving credit in which your home serves as collateral. There are two major differences between this type of loan and a standard HEL. First, a HELOC typically has a variable interest rate rather than a fixed one, meaning that the amount of your monthly interest changes just as it would for an adjustable rate mortgage. The second difference is that rather than receiving the entire amount as a lump sum at the start of the loan, the borrower is given a predetermined line of revolving credit that has a draw period of 5-25 years during which funds can be drawn whenever needed.

There is a maximum limit that can be taken out and a minimum payment that is due each month, with the borrower given the option to pay off as much of the line as he and/or she wants- much in the same way as you would with a credit card or other revolving line of credit. A big advantage that comes with a HELOC is that the borrower pays interest only on the money that they draw, rather than the entire sum as they would with a Home Equity Loan.

Which Option should you choose?

Each of these options has advantages and disadvantages depending on your particular case. In a situation where you know exactly how much you need and a worthwhile plan for the funds (home repairs, school costs, and medical bills), a standard home equity loan would probably be your best option. Here you have the advantage of a fixed interest rate and the security of a finite monthly payment that remains unchanged for the life of the loan. This allows you to plan your finances more accurately in the long term.

If your extra expenses are recurring or variable, a home equity line of credit may be a better option than a HEL. Even though you pay a variable interest rate, you do so only on the money that you draw from the pool of available funds. However, keep in mind that the risk involved is very much similar to that of a credit card - in most cases you will actually receive a card that you can use to withdraw funds from the loan account. This can make it very tempting to spend more than you plan to or need to, and the variable interest rate may potentially cause problems if you end up spending more than you intended early in the life of the loan. Also, watch out for other risks associated with the HELOC's like hidden fees, pre-payments penalties, variable rates, abrupt freezes (J: Happened to me!!!) and closures.

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Robert Sommers is a freelance mortgage and real estate writer located in Baltimore. He has worked for over 25 years as a licensed real estate agent in all areas of commercial and residential real estate.

Labels: guest post, helocs, mortgages

Ever since I started tracking my net worth I've had the value of our home in there. I've often considered tweaking it and coming up with better methods of calculating it, but the concept of taking OUT your home (or cars for that matter) 100% boggles me. After all, the definition of "net worth" is the total of all your assets minus the total of all your liabilities, right? At least that's what I subscribe to.

So why do I bring this up? Because the main man himself Trent, from The Simple Dollar, recently decided to take out his mortgages AND cars from the equation. But interestingly enough, he left the mortgage on it. Huh?! You'll have to read his article for all the dirty details, but he basically feels that he can't just cash out his house & cars as he'll always need them to live - thus, they shouldn't be calculated into his net worth. And I suppose the mortgage on it is a liability no matter how you slice it, so he's def. still keeping that in there (although at that point, wouldn't it be more like "rent"?)

I find this interesting in a number of ways, but mainly that there are SO MANY different methods one can go about calculating this stuff. So out of curiosity I thought I'd play around with our most recent net worth and see what it would look like after playing with this house variable.

Our Net Worth (w/out home value): -$186,789.11

Damn, I'm not liking that too much. In theory I like the idea of not counting on the value of your home, but the optimistic part of me says that it WILL sell one day, it's just a matter of when and at what price. Needless to say, I'm not crazy/smart/comfortable with taking out my home value anytime soon - it's still an integral part of the "big picture".

(for all not familiar with our house's value, we calculate it @ $300k - the price our realtor set it at a couple months back. He's the master in our particular neighborhood, and has been selling (and living in) in our area for 20+ years. I also keep an eye out on Zillow & Redfin.com, but sometimes they fluctuate a bit too much for my taste.)

Our Net Worth (w/out home value & mortgages): $163,179.59

I'm liking this number a bit more ;) But while I'd love to sell our underwater house more than anything and break even, it's just not going to happen. Because of this, I still need to include our mortgages in there to keep things more realistic.

Current Net Worth: $113,210.89

For me, this number still works. It gives us a pretty accurate snapshot of our overall finances, and includes all real estate and autos. It's not as sexy as taking out the house situation altogether, or as hardcore as wiping out the value of our house, but it keeps me on track and motivated.

There really isn't ANY "right" way to calculate your net worth, you just have to do what works for YOU (kinda like most other financial situations, eh?). I do, however, give Trent mad credit for standing up and sharing his opinion. He knew he'd get slammed for it (which he did), but he also brought a fresh new way to consider tracking our financial snapshots.

How do you guys feel about it? Ready to nix your biggest assets? ;)

Labels: home ownership, mortgages, net worth, personal finance

1 Year, 5 months, and 17 days ago I wrote my very first post here on a personal finance lesson I learned the hard way. It was broken down into two parts: Operation Heloc: The Good, and Operation Heloc: The Bad, and it was all about how I tried to game the system to save a few dollars ;)

I was reminded of this when Tough Money Love cleverly celebrated his 1 year blogiversary by asking us bloggers to share exactly that - a financial lesson we learned the hard way. I've done a lot of crazy/stupid stuff in the past, but this one clearly stands out from the rest. You can read about it in depth via the links at the top, but here's the gist of it all in one paragraph:

When we first bought our house I started throwing all our paychecks AND savings/emergency funds against our maxed out HELOC (our 2nd mortgage) in order to defray a few weeks of interest. At the end of the month I'd take that credit back OUT and use it to pay our bills, mortgages, etc. This worked for 3 months until the housing market went to $hit and froze our credit line. Since it came without warning, I wasn't able to pull back any of the funds in time and thus denied us almost $10k in straight up cash. We tried to game the system and we lost, and now we keep all savings and emergency funds in a money market account ;)

Ever heard of UFirst Financial or money merge accounts? Well, it was sorta like that except I did it myself without fronting anyone $3,500. And in fact, it was a post of Trent's on money merge accounts that shed some light on this whole thing to begin with! I wouldn't be surprised if it's still one of his top posts, as it continues to get comments every single day. (currently at 2,432)

UFirst agents will still tell you their system works, and it may for some, but I just don't buy it (literally). Over the past year and a half I've come to realize that most things with finance are fairly simple. Anytime you try to cut corners or finagle a genius way to get rich quick, it usually comes back to bite you in the ass (unless you are, in fact, a genius). I'll still go and try out new ideas from time to time, but unlike the old me, I'll be sure to put in a lot more research before jumping in again.

In the meantime, I'll stick with the plain and simple method of personal finance: spending less and saving more. These two friends never steer you wrong ;)

Any of you learn a good financial lesson the hard way?

Labels: helocs, in the real world, mortgages, personal finance

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Today's guest post is by Brandon Laughridge of Mortgage Loan Place. MLP specializes in providing high quality mortgage content and has recently embarked on creating the web's best mortgage calculator with a $10,000 programming contest.
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The government is trying to re-energize the stagnant housing market - and that's making FHA loans more attractive than ever.

Headlines have pulsed these last weeks with news that the federal stimulus package will include an $8,000 tax credit for people who haven't owned a home in at least three years, if ever. The Federal Housing Administration has sweetened the deal: Buyers can use that money to pay for closing costs or even offset the 3.5 percent minimum down payment requirements for FHA loans.

But it's only with an FHA loan that buyers can use the tax credit for closing costs. Some housing experts expect the stimulus provision to help boost home sales in coming months. The National Association of Home Builders estimates that 40,000 more homes will be purchased because of the FHA initiative, in addition to the 160,000 sales already expected as a result of the tax credit.

Home buyers also have some flexibility in claiming the credit on their tax returns. They can choose to claim the credit for 2009 or file an amended 2008 return to receive the credit this year.

The new FHA initiative stipulates that home buyers can use the tax credit to offset the down payment only if a state housing agency is handling the loan. In all other cases, the tax credit can be used for closing costs, boosting a down payment or to pare down the interest rate.

There are a couple of other points of note for potential buyers:

• Income limits are a part of the process. The threshold for individuals is $75,000 and $150,000 for those filing jointly.
• So far, close to a dozen states are providing buyers with bridge loans to spur purchases immediately, well in advance of the next tax filing. These loans come with little or no interest and are to be repaid when the tax credit is applied the following year. The list of states includes Colorado, Kentucky, Missouri and Tennessee.
• The FHA is offering advances on the tax credit so home buyers don't have to wait.

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Editor's Note: As always, consult with a professional before jumping in and getting a loan ;) What works for one person won't always work for another...

Labels: guest post, home ownership, mortgages, taxes

That's the 100% truth my friends! The more you pay off now, the less you pay in interest later - It's like kickin' compound interest in its head and getting away with it. I'm certainly not the first to promote this concept, but it was about time I go on record and state it once and for all :)

As I've mentioned in previous net worth updates, we'd been talking about using the money leftover from our House Budget every month, and then applying it towards our 1st Mortgage principal. That way we could start knocking it away sooner than later, and it wouldn't require any big change in our financial scheduling!

Plus we really wanted to get into the habit of paying extra every month while we're in our "interest-only" payment period. In approx. 8 years we'll be forced to pay more anyways, so why not get to it and start erasing some of that "good debt" as they say (which, in all honesty, isn't all that "good" feeling right now - but we've already covered that one)

And what do ya know? I *finally* got off my a$ and started working on this. Yup, "Operation Pay Off Mortgage" is in full effect and it's feeling great. We can even see the difference it's making already! The one principal payment of $165 this month already lowered our future monthly payments by almost $1 :) So what, it's only a dollar right? Yes, but it's a dollar that you don't have to pay EVERY SINGLE MONTH for the rest of your loan! Which, in our case, has 28 years left on it. That means a savings of $336 (336 months) w/out including the 6.875% interest that would have compounded on top of it.

The point is - A one time payment of $XXX dollars shaves off money for the REMAINDER of your loan. So even if you went back to paying just the minimums, your initial savings are now already in effect :) Of course, we're not stopping now. Nope, we're gonna keep applying that extra money every month until we get that bastard down to zero. It's not gonna be fun dropping that money every time, but it's sure gonna be smart.

Labels: challenges, money management, mortgages, saving

Yep, not even my beloved USAA can save us from this one. Apparently we're TOO under water to refinance. Since when is $60k in the negative TOO much? ;) haha...ah well, it was worth a shot.

But what's really frustrating, if you'll allow me to say so, is the fact that there are, indeed, people who can/will be able to refi because they made some huge boo-boos.

That's great for them, and certainly for our economy in general, but what about the others who behaved and played by the rules? Shouldn't WE be granted some help as well considering we also took it up the a$$? This affects more than the people who helped us get in this mess to begin with. (emphasis on *helped* here as we all know there were many other factors stirring the pot.)

The Mrs. and I aren't perfect little badgers, but we should still be granted some sort of equal rights. We pay our mortgage on time, we didn't get too over our heads, and we were responsible. Shouldn't that count for something? Are we being greedy here? Whatever....I'll go ahead and stop now. I'm sure everyone's tired of hearing about this stuff. I just had to get it out since it's directly affecting us now.

I'm just hoping Mr. Obama has something good up his sleeves...

Labels: crazy economy, home ownership, mortgages, rant, USAA

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.

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.

Labels: home ownership, interest, mortgages

The Mrs. and i have made a decision on our HELOC dilemma! We have decided to stick with option #1 - to continue going with the variable rate with no locks. Your comments definitely helped us put things in perspective, and we feel the odds are in our favor :) And with the other week's news about the Fed leaving the rates unchanged, i'm thinking we're on the right path.

The worst that can happen is it starts to go up over time, but even so history shows the prime rate hasn't gone above 10% in 25 years...and if disaster does strike, raising it above this threshold, we'd hopefully be long gone with the loan anyways, or at least re-financed by then.

And if we're all wrong? well.....let's just say i'll be concocting some pretty colorful posts! That is, after i wipe up all the tears from my keyboard.

Labels: helocs, interest, mortgages

*Update: We've decided to go w/ option #1 :)
*Update 2: Our HELOC is currently at 2.80%!

Similar to my car dilemna, now going on 4 months w/out a decision, it's enough to drive a person crazy.

Do you lock in a rate now and hope you caught it on the rise, or do you wait it out a bit and save more money each month?

The funny part is that Mrs. Budgetsaresexy and I JUST had our first talk about this last Saturday, and we told ourselves that we'd lock in the next time it goes up...thinking we'd have at least a couple months before thinking about it again. Ooops. So I now bring this dilemma to you guys for help :)

Here are the details on our current loan:

• This is our "2nd Mortgage"
• It's a maxed out Home Equity Line of Credit (HELOC)
• It's an interest-only loan
• The rate is variable
• The current rate is 4.55% (Prime - .45%)
• The current balance is $62,602.23.

So basically, our current rate is lower than ANY OF OUR OTHER LOANS. It beats out our 1st mortgage, our car loan, and all credit cards. Sexy, ain't it? Of course though, that's only how it works out today.

There's a load of variables to consider here, not to mention hefty pros and cons, and we def. want to stay with USAA for a number of reasons. Here are the 2 options we're considering

Option #1 - Keep the loan as-is. Rate at 4.55%

• This rate can change at any time, depending on the Fed.
• We have 172 months to pay back this loan...8 months have already passed ;)
• This means monthly payments of roughly $230.
• PRO: Since we budget for $540 here, we save $300 every month!!! (our original amount when we purchased last year was $540, before re-financing and the fed lowering rates)
• PRO: Our emergency fund and house savings account gets padded each month with this $300!
• CON: We have no control since it's variable - The rate is associated with the WSJ Prime Rate, so it's all in the hands of the Fed. And considering it's been cut heavily over the past 10 months, I'm starting to believe the hype that it will start going back up.
• CON (in theory): It's interest-only - we are only paying off interest each month, adding nothing to the principal. I say in theory because the average home owner will not add extra to pay off the principal. We usually pay portions off sporadically, rather than a set amount each month. Our initial HELOC was $72k, so we've knocked it down by $10k already, even though we have an interest-only loan. Granted, most of this $10k was on accident.

We've been with option #1 from day one of buying our house, making it even harder to switch out as we're so used to it. It's so freakin' nice having that $300 cushion to play with :) BUT, we also know that we'll eventually need to lock in a rate as the tides WILL turn...it's just a matter of when.

It also gets a bit tricky because the rate above moves with the WSJ Prime Rate plus or minus the lender's points, while the rate to lock it in moves with the 182 T-bill (3 year ones I believe) plus or minus the lender's points. So it's like you have to judge two different trends.

Option #2 - Lock in a rate now at 7.72%.

• The interest rate will stay exactly the same now, as it will in 10 years.
• The HELOC would essentially convert into a Home Equity Loan (read about the difference)
• The loan will ammortize over 180 months
• The monthly payment would be around $588 (i used this simple loan calculator)
• PRO: We would now be paying both interest, AND principal. The main portion of course going to interest, but it's now all built in and mandatory - similar to a normal loan.
• PRO: No more worrying/thinking about interest rates adjusting, as it won't matter here.
• CON: The monthly price tag drastically goes up! no more padding any of our accounts :(
• CON: We'd now need to re-budget for an extra $45 a month, which is quite different than having an extra $200 to play with!

This lock in rate changes every month with USAA, on the 3rd Tuesday of the each month, so we have a few weeks to decide. It's important to note though that over the past 3 months it's gone from a steady 6.75% (from as long as I can remember) to 7.18% last month, and now to 7.72% this month.

As i mentioned, we're eventually going to have to lock in a good rate before everything goes up, but is that time now? According to that graph up at the top, taken from BankRate.com, i'm thinking option #2 is looking like the best bet here. What would YOU do?

Labels: helocs, interest, mortgages

MapGirl put out an interesting post yesterday about crazy interest rates these days, and it got me thinking. I, myself, have been coming across some pretty interesting things lately! Just take a look at our current interest rates:

• 1st Mortgage - fixed: 6.875%
• 2nd Mortgage (HELOC) - variable: 4.80%
• Credit Cards - variable: 5.25%

Can you believe that?! My credit card rates are LOWER than our 1st mortgage! haha...and it's not even by a little right now, it's by a whole point and a half. I get that our HELOC and c/c's are based on the prime rate, but my goodness it's pretty funny to look at.

Now, if i had the balls like some of you have, i'd take out a chunk of the credit card and throw it against our 1st mortgage! we'd save some pretty pennies for sure, but the whole thing scares me :) As soon as those rates start hiking back up, we'll have to knock away that credit card debt...and fast! We can't "lock in a rate" there like we can for our HELOC.

Speaking of which, although our $62k in our HELOC is variable right now, we always have the option of "locking in" a rate for a portion, or all, of the balance. While i don't think it's a good time right now, it's def. something for us to consider as the economy starts picking up. I'll be sure to keep you posted (pun intended).

In a perfect world though, we'd like to correct these #'s by refinancing our 1st mortgage. Bankrate is currently showing a national average of 5.79% for a 30 year fixed, which would save us a hefty $245 per month! BUT, there are a few hurdles we'd have to jump through:

1. We'd have to get it at "interest-only" - Currently this allows us to have a lower payment each month, while still giving us the ability to pay extra towards the principal. (It's not good for everyone, but for us it works.)
2. Our house would have to appraise within 10k of our purchase price - And since our HELOC was recently frozen :(, i'm gonna guess this is a long shot.
3. We'd have to pay closing costs and probably a point or so if i had to guess. - In the long run this would work to our benefit, but w/ Mrs. Budgetsaresexy soon to be in graduate school, we don't want to be shelling out much...esp if we might sell/rent out in the near future.

So, this leaves us back to square one :) But i'm not complaining! In fact, i hope the Prime keeps going lower to be honest. Selfishly, it effects us much more positively than does saving/bond/etc rates. On the other hand that would mean the economy isn't doing all that great....and that's plain scary!

Labels: credit cards, helocs, interest, mortgages

What a day for the consumer: The Fed cut rates by 3/4 a point, AND the Dow is up 400 pts!

(FOUR HUNDRED)

That's what i'm talking about :) This is huge for us as it'll drop our variable HELOC rate by .75%! Of course, this news isn't the best for those high-yield saving accts, but currently that doesn't apply to us.

A good 8 months ago we were paying 9% on our home equity line (our 2nd mortgage). But after all the fed cuts and refinancin' we did, it'll now be at an astonishing. 4.8%! Freakin' unbelievable. Of course, most of this is purely luck and timing, but hey i'll take that.

For those of you checking around for a decent loan or mortgage out there, i'd say it's not a bad time to pick one up these days ... And for all you investors out there. HOLLER!

Labels: federal reserve, helocs, interest, mortgages, stock market

We really got F'd on this one the other day! Seriously, it was going sooooo well. I really thought we fenagled ourselves a great deal. I mean, it still IS a great deal in that we are saving roughly $200 a month currently, BUT here is where they got us (and i didn't even see it coming!):

THEY FROZE OUR HELOC ACCOUNT!!!!

You might be saying to yourself, so what? You're still saving $200 a month. This is true, and i'm thankful for that. BUT consider what this now means:

1. It was frozen because the market values of the houses in our neighborhood have now gone down! And the bad part is i don't know by how much (according to my bank of course) as I have to await some elusive letter in the mail stating the amount. ARRGHHHH.
2. We have now lost access to our entire Checking and Savings account! Remember, we put 9k into it to save the additional interest each month with the belief we could take it out anytime we wanted...and this was working fine until now. Imagine your accounts having a $0.00 balance starting right now. Scary, eh?

So, did "Operation HELOC Savings" work? YES. It saved us $$$. BUT it also F'd us in the fact we "lost" all our savings and checkings, and we NOW have refigure out how to move on securely going forward, as well as start building the aforementioned accounts back up ... all the while paying our bill and mortgages at the same time.

On a good note, we (or really I), learned a big lesson here: Spend more time reading what I'm signing as there ARE loopholes for both parties. Seriously, i didn't see this one coming!

Labels: helocs, home ownership, mortgages

Yayyy, this is the HAPPY part!

So, "Operation Heloc" was put into place by my fiancee and i to save more money on our interest payments. Being brand spankin' new about houses, mortgages, etc, we really didn't know what we were getting into. We trusted our financial guy though (w/ Weichert Financial), and this is what we got:

1st Mortgage: 30 year fixed @ 6.875% - interest only, fixed rate.
2nd Mortgage: HELOC (home equity line of credit) @ 9%*- interest only, variable rate.

At first this didn't mean anything to us. After a cple months, however, it occured to me that 9% is pretty high considering the both of us have Excellent credit scores. I know it's a 2nd mortgage, but still. I started reading all the blogs out there and MAN there was a lot of info (Thanks guys!). The one that really caught my attention was a post from The Simple Dollar on Money-Merge accounts. After hours and hours of further research, it occured to me that we could (and did) do the following:

a) Refinance for a lower rate - We did this 3 months later and got it down to Prime - .45%!!! (at the time i believe it was 8.25%) knocking it down a good 1.2%!, and it only cost us $42 :)
b) We then took out most of our savings and checking $, about 9k, and "paid off" part of the Heloc. This was done by basically using the HELOC as a "checking" account. We xferred all our savings in it, deposited all my paychecks, and then wrote checks out of it to pay the bills. Wierd/COOL/neat? Yeppers. This in effect saved us even more in finance $.

So, overall the plan worked PERFECTLY! We saved a total of $72.00 each month just by doing the above. Since then, the rates have also been going down, so we are now set at a little over $200 savings EACH MONTH!

All in all i'm am happy with our decisions, and we have saved a total of $1,492.40 over the course of 6 months. I will, however, lock in a portion (if not all) of it when I feel the rates are at the lowest points.

Labels: helocs, home ownership, mortgages