It’s Monday – let’s talk about money honey. moolah. benjamins. greenbacks. dough. skins. bones.
Let’s talk about our situation with money. Jeremy works at a sales position…and with most sales positions there is the salary and then the commission. It’s the companies way of keeping things moving – giving the sales guy some motivation. And the company usually expects a certain amount of sales…duh. Which in turn means that sales guys can generally estimate how much they are gonna make at any given point if they hit their goal. My darling boyfriend, being the overachiever that he is, has always hit or exceeded his goals. So I say that to preface the fact that in our old house, we knew that we could live comfortably with only his salary – and his commission was for paying off past debts, renovating, and then fun stuff (like vacations to Dominican Republic).
When we bought this new fancy dancy whale of a home, we knew that it would require us to still contribute a little over at the old house (since it was a lease-purchase like we explained in this old post) and that we would depend more on Jeremy’s salary AND commission. AND that I would need to bring in a little each month to keep us afloat. Basically we are saying outloud with a megaphone – hello, we are housepoor. And that’s okay because we chose it going into this situation.
Some folks ask – What do you mean, you are broke?! like broke broke?
To which I reply - we make enough to cover our bills, put food on the table, tithe and celebrate special occasions - but we don’t contribute on a monthly basis to a savings account for Will’s college, for emergency savings (we have a small fund already in savings but it’s nothing major) or a retirement fund beyond Jeremy’s work. We do purchase some things for our home with a strict budget – only because it helps feed this blog which in turn makes us a little money. a very very very little bit of money.
I am telling you all this to not just keep it real…although I do love to do that on occassion. I am telling you all this because I want to emphasis what an impact our decision to refinance is having on our lives. We are saving over $220 a month!
Now that you know the punchline – here’s our story -
When we bought this foreclosure, we knew we were getting a great deal based on the size of the home and the size of the lot. Granted things are different in different areas of the country (or Australia – Howdy Mates!) so it’s hard to compare anything…so don’t try. We do live out in the country. Not the burbs. The country. I have to drive at least thirty minutes to get to the nearest Target. SOooo….we bought our 6000+ square foot home with the five acre lot for less than $300K.
The type of loan we used was a government program called an FHA 30 year fixed. The interest rate was 5.25% and our monthly payment was $2293. This payment included the principal and interest, property tax, homeowners insurance, and mortgage insurance premium (aka MIP – which basically backs the loan in case you default on your mortgage – I think it’s called private mortgage insurance or PMI for other types of loans).
So the first thing we did was ask for a reassessment on the property tax. You see, the tax people had our house assessed at a $370,000 value…and were taxing appropriately. But we didn’t pay $370K. So Jeremy went down to the county’s tax assessor’s office and they changed it according to our sales contract…and he also applied for homestead exemption…all in all, for two very simple things - we are probably gonna save $50 – $100 each month (starting in May) because of the decrease.
Then we started researching programs to refinance. Different companies do different programs. For example, our local bank Wells Fargo would have cost us $8K more than the program we chose – so it’s important to do your research to find the best fit for you and your situation. We ended up finding a program for FHA loans through New American Funding called a FHA streamline refinance program. It’s a no/minimal documentation program with no appraisal needed. It’s main objective is to get us FHA-ers into a lower interest rate…thus making it a simple rate refinance. Long term – saves us money.
So after a bunch of paper signing with the notary (who bonded with Jer over talks of video gaming),
(it was a grand time – don’t let them tell you otherwise. And yes, I am no longer ashamed to ask random people to take their photos – even if all we are documenting is ”sign, initial, sign, date”…or giddy smiling during a self-portrait.)
With our new paperwork officially done, we have worked our way into the same FHA 30 year fixed type loan…but this time with a 3.75% interest rate (that’s a 1.5% decrease) making our new payment $2,071 per month (a $222 decrease) which is expected to drop even less when our property tax reassessment becomes effective in May.
But it’s gotta cost something, right?! Well, sure. But to avoid all the extra details I will just cut to the chase…our old payoff for the house was $280,657 and now the new loan amount is $281,386 (that’s a $729 amount that they rolled into the loan total). Which means that if we chose to save our $222 that we saved on a monthly basis and put it toward the principal – we could be back at our old payoff in four months.
And the real reward? Well, besides saving $222 each month plus more come May – is the long run amount. Estimated roughly at about $80K. Here’s my math:
- OLD PLAN: 30 years x 12 payments x $2293 = $825,480
- NEW PLAN: 30 years x 12 payments x $2071 = $745,560
- DIFFERENCE: Estimated savings over life of loan = $79,920
All you math whizzes and loan officers and refinance gurus don’t correct me or quiz me please, this is my best rough estimate.
The point is this…we refinanced. We saved money on this dream home of ours. and now I’m off to buy some shoes. kidding. only a little :)
Anyone else refinance lately? Penny for your thoughts!
p.s. HOLY FREAKING HAIRY MOLEY. You guys put Bower Power in the finals over there at the Homies. IN TWO CATEGORIES! Do you know what that means? It’s BIG. It’s like putting a Drag Queen in the Miss America Pageant…and with your help, I could actually place in the top three…spanx and all. I beg, I plead, I wish on stars & airplanes in the night sky that you pretty pretty please cast a vote for me. (yes, it requires a little registration but they won’t send you any junk)….Click Here….and Click Here…and even if I don’t place – well, I count each and every one of those votes as a dream come true.