We bought our first house in 1989 and I can remember discussing the details of our home loan with the person putting together our mortgage, Jim Halverson. He explained how our 9% adjustable rate mortgage could go higher but it would cap out at 14%.
That sounded like relief to us. Our game plan as savvy homeowners and as a responsible, young couple living in a free and democratic society was to pay down the freakin' mortgage! So we set aside extra money each month to pay down the principal.
We moved to our second house, where we still live, in 1994 with an adjustable rate mortgage. I don't remember where we started but I do remember friends of ours refinancing to a 7% fixed rate. Wow! We were envious of them.
Finally, we were able to refinance somewhere between 1999 and 2001 with a 7% fixed rate.
Now that really did feel like relief. Our investments in our mutual funds were now in a position to earn more than the interest rate on our house. I decided then and there we were not going to refinance again.
During the next few years, starting around 2002 perhaps, the phone calls came every night it seemed from a lender inviting us to take advantage of lower rates.
But I compared to our first rates and I held off from refinancing. I didn't feel like going through the hassle.
Finally, we made the strategic decision to remodel like so many other homeowners at the time.
We needed more room for our young teenage sons who had been living in our family room for a few years.
Money was cheap and though I wasn't earning much, I did have a steady job and we were saving on a regular basis.
We found a contractor who was going to tear off a sun porch which had no insulation and convert it to 500 sq feet that could be two bedrooms for our sons and a study for me.
During 2002, we used some equity to get started with the project. Then we decided we would refinance since we could get our rate down to 6% fixed. Early 2003, we had a new lower rate and I decided to stick with it - even if rates dropped lower. Which they did. I decided not to spend time comparing offers that came in the mail to us every day or answering phone calls from the mortgage companies calling almost every night. Nope. I was set at a 6% fixed rate.
Then we got letters in the mail saying we could get rates as low as 1% for 5 years or even zero interest. I looked at the fine print and learned the interest would continue accumulating. I said forget it, even though I had lost my job and had stepped out as a small business owner with a tiny marketing company.
I do remember during our re-financing period when my wife wanted us to look at a 4% loan and two people came from San Diego County to appraise our house. They said we had to pay $400 and I balked. But then I paid it and we never heard from them again. We called the company but got nasty responses.
That made me even more determined to stick with our 6% fixed.
Today, I'm glad we did. There wasn't much to be gained by chasing a 5.5% or 4.5% fixed in my opinion. In my perspective, where we started facing the possibility of a 14% mortgage, that was now nowhere in sight. I wasn't going to build wealth by chasing the lowest rate possible. In fact, I lost $400 to some blasted crooks.
The term "sub-prime" mortgage is now splashed all over the papers and people are wondering where to point blame. I'm going to make a few posts related to the sub-prime market in an effort to steer readers to good advice.
But also as a reminder not to let fear or excitement serve as factors to determine how you spend your money.
No comments:
Post a Comment