We refinanced our mortgage! January 16, 2021

We kept getting phone calls from our current mortgage company. They wanted to let us know that rates were lower and they thought they could get us a really great deal on a refinance. We kept ignoring these calls because it felt weird and predatory, and they always called when we were busy with something else.

Turns out, it was actually a good idea. Interest rates had in fact dropped quite a bit since we bought our house, so once they ran the numbers to show us our savings, we went forward with it.

I’ll admit, we didn’t shop around for the absolute lowest rates. But the good news is, with the lower interest rate, we’ll end up paying off our mortgage 4 years earlier than if we had stayed with our first mortgage, even if we don’t increase our monthly payments. Which feels pretty nice.

But there’s a relatively simple way to accelerate our payoff even more, without actively scheduling extra payments. We can switch from monthly mortgage payments to paying half of a mortgage payment every two weeks. This results in about 13 months of payments per year.

I ran the numbers in Bankrate’s Biweekly mortgage payment calculator, and it shows that if we switch to biweekly (as in fortnightly) payments, we’ll pay off our new loan an additional 2 years earlier and save an additional $18k in interest.

Of course, this option isn’t for everyone. You’ll need to consider if you can afford those extra payments, and check to see if your lender even allows you to do this. There’s a good post explaining why you may or may not want to do this. We decided that this path made sense for us because it’s not super aggressive to the point we’re missing out on investing options or having to forgo other things we want to do. It’s a happy medium between maintaining slow and steady payments and driving ahead with really aggressive payments. Plus, we can just automate it and forget about it!

Have you refinanced a mortgage? What were your requirements for moving forward with it? What is your mortgage payoff strategy?

We skipped past the starter home June 27, 2018

2016 was a big year for us.  We had our first child!  And then later that year, we bought our first house!  We’d been “seriously” house hunting for about a year. At the beginning of our search, we had a vague idea of what we wanted: something closer to work, in a good school district, with a garage, a yard, and enough rooms for a growing family. As we went to more and more open houses, we got a better idea of what we wanted. A family room right off the kitchen so we could entertain guests or have kids play nearby while we were in the kitchen. We also wanted a big enough kitchen to host my famous fondue parties 🙂 After an inspection of one house we almost bought that showed high levels of lead all over the place, we realized we also were only going to look at houses built in or after 1978 to avoid any lead paint issues.

Of course cost was a big factor as well. We were originally pre-qualified for a mortgage WAY more than we ever wanted to spend, just based on credit scores, income, etc. So we pared down choices to a more comfortable price range far below that amount. We had to keep in mind that our monthly payments would include the actual mortgage payment as well as money for escrow to cover property taxes and homeowners insurance.

We did consider first buying a “starter home” or a “fixer upper” but realized a few things: we are not super handy, and aren’t good at picturing a hypothetical home based on the current condition of a “fixer upper”. Plus we were already expecting our baby when we started seriously looking for a house, so trying to deal with renovations while pregnant/with a newborn was not something we wanted to do.  And most of the fixer uppers were still quite expensive as-is!  Also, we knew that if we went with a small home to start, we’d probably want to or need to move to a bigger house within a few years. And so a few factors related to buying a new house a few years down the line became clear:

1. The housing market in the Greater Boston Area is so hot that it’s hard to buy a house if you have any sort of contingencies. That could include getting a mortgage, wanting an inspection, or having to sell a house first. We were still renting, and so we were in a much better position than anyone else who might have to sell their house first. So the next time we’d buy a house would be while also already owning a house, which would make us less desirable to sellers.

2. Costs associated with selling/buying/moving are not negligible. And with every move, you inevitably have more stuff you’ll need to move, so it’s more expensive. Closing costs when we bought this house ended up being significant, so trying to sell a house only a few years later means you might lose money even if you sold it for more than you bought it for.

3.  Even with the recent boom in house prices, we had no guarantee that our house would go up in value enough that we’d make money on the sale.  And keeping in mind point #2, it’s possible we’d lose money on the whole deal.  Regardless of if you think a house is an investment or not, this would make a starter home for us a risky short-term investment.

So, we bought this house.  We like it a lot!  We plan on sticking around in this house for a while.  Sure, there are some small fixes our home inspector found that we’ve been working on, and we have plans this summer to upgrade our heat/hot water system (they’re at the end of their useful lives) and add a generator (after dealing with multiple power outages since we’ve moved in, due to various rain/wind/snow storms).  But we don’t have plans to do any major renovations any time soon.

I would have loved to have started with a smaller, cheaper house, but our needs and the housing market meant it didn’t make emotional or financial sense.

How did you decide if/when/what to buy? Or are you still renting (out of choice or necessity)?

My Friends are Buying Houses Series: Katelyn Buys a House August 1, 2011

This is the first in my new blog series, My Friends are Buying Houses.

As with all the future guest posts, the writers are expressing their own views, opinions, and experiences.  I hope you’ll give them the respect you give me!

My friend Katelyn bought her house a few months ago.  She made a plan for saving money and stuck with it, asked around for input on location, and then dove right in.  Here’s her story:

Buying a house seems like a ridiculously scary and complicated process, right?  Sort of.  There are many things to think about, but if you have someone working with you, it’s not that bad and the end result is one of the most amazing things a person can do.  I would like to preface this by saying that I am a single woman who purchased a home on my own.

I bought my house in April of this year, although the process started long before that.  I had been considering buying a house for a couple of years.  I had a few factors to contend with though:  money, location, and timing.  Money is pretty much everyone’s biggest concern.  I am very mindful of my spending practices.  I knew I wanted to buy a house, so I started making decisions to reduce my financial output.  There were certain things I couldn’t get out of:  rent, Grad school payments, car payments, and bills.

However, I was completely in control of reducing my bills.  I lowered my heat to 60°F during the day and put it up to 62-63°F when I was home.  DO NOT let your home’s temperature fluctuate more than that.  You use up more energy spiking your heat up 5-10 degrees than if you just stuck to within 2-3 degrees of a particular temperature.  I had originally been keeping my heat between 68-70°F.  In making this change, I saved nearly $100 in the coldest month of the year.  That’s $100 in just one month!  I also took to unplugging electronics I was not using.  Don’t leave your computer charged plugged in all the time.  I unplugged my coffee maker, toaster, etc.  If I wasn’t in a room, I turned off the light.  I started using energy-efficient light bulbs.  All of these things help to save a few dollars on my electric bill.  I also got rid of my land line, solely relying on my cell phone.  I reduced my internet and cable to the lowest they could do.  In trimming my telecommunication expenses, I saved another $100 per month- crazy!

I also started shopping around for inexpensive food and really relying on sales.  It doesn’t take too much time to make a list of the grocery items you eat/use often and take a look for when they go on sale.  When they do, if you can, stock up.  At one point, I had enough toilet paper and paper towels to last 4 months.  I had my monthly grocery expenses down to $100.  I used to spend nearly that in a week.  Shopping around and stocking up during sales:  savings of about $300 a month.

I started eating out less and inviting people over more.  If you do it potluck style, the onus of providing all the food gets shared.  You can still hang out with people, but it’s not as pricey.  Oh and it tastes better, too!  🙂

So in all of this saving, I knew I wanted to buy a house.  I just didn’t know where or how big or most importantly, what my price range would be.  I work in on the North Shore of Massachusetts and had been living in an apartment approximately 10 minutes from work.  It was certainly a convenient commute.  However, I was not close to my family.  I wanted to be sure that I was in close range to work and closer to my family.  I started asking friends and family about the towns in the area in order to get a better, more honest feel for them.  Buying a house is a forever-type decision.  I wanted to be in a town that I could potentially raise children in.  I narrowed my search to 2 towns and started crunching numbers.  I this ended up being a lot more difficult than I originally thought.

Enter my mother, Karen Giovannucci.  My mother is a real estate agent with Coldwell Banker.  I highly, highly, highly suggest working with Coldwell Banker.  If you’re in MA, you can even work with my mother!  (here’s her office) What I didn’t realize was just how easy it was to get pre-approved for a loan and to figure out just how much I could spend on a home.  Any good real estate agent would put you in contact with the loan officer for their company.  That’s what my mother did.  I provided information about my bank accounts, credit card accounts, loans I had, pay stubs, etc.  Fairly basic and I was good to go in a week.  After providing this information, the loan officer will tell you how much you are pre-approved for and at what rate.  I was pre-approved at a 5% fixed rate (do NOT do adjustable rates).  I figured out my price range and began my search.

Now, I had a price figure in my head that included how much I had for a down payment and how much I was approved for in loans, but I needed to be smart about how I went about searching.  I did not want to be at the very top of that range because then I would have a higher loan.  I wanted to be a little below that.  I also needed to consider the condition of the house.  You don’t want to buy a house at the top of your price range that needs a lot of work – you won’t be able to afford fixing it up!  Make a list of your essentials  (your must-haves):  garage, yard, number of bedrooms, bathrooms, hardwood floors, levels, basement, etc.

One thing I did a lot of in this process was drive around.  I did ‘drive bys’ of the homes I was interested in.  This gave me a good feel for the neighborhood, commute, and overall look of the home before I even stepped inside.  If I liked what I saw, I either waited for an open house or scheduled a visit with my real estate agent (my mom).  I can’t even tell you how many houses I went into.  One house was too close to the highway (I could hear it inside the house).  One house had a lot of poor workmanship that I would have to undo.  One house had water in the basement.  One house had an unusable second floor.  One house smelled of oil in the basement.  One house had an unusable garage.

Finally, after weeks and too many homes to count, I found my house.  It has a garage, beautiful yard, 3 bedrooms, hardwood floors, a full basement, wonderful neighborhood, close but not too close to the highway, and in a fantastic town.  I put in an offer in mid-February.

This part of the process is also a little crazy.  You have to play a little game with the buyer.  Think about how high you are willing to go with your price.  I suggest going anywhere from $5K-10K below that with your initial offer, then bargain, bargain, bargain.  I got quite a bit covered after I fought for it.  :-).  After you get an accepted offer, get a home inspection.  If any structural damage is discovered, demand that the home owner pay for it or take it off the price of the house.

Personal side note:  if the home owner gets a quote for home repairs, I wouldn’t necessarily trust it.  Get your own person in and hire them.  I had a NIGHTMARE situation because I hired someone recommended by the homeowner.

After the inspection is done and the final number is decided upon, you can set a date for the purchase and sales and closing.  Before these dates, you need to get a little more paperwork in order, but your real estate agent should give you a flow sheet.  My entire process was wrapped up and I was a homeowner at age 25 on April 12, 2011.  :-).

I love my home and have been doing some necessary repairs to it.  I am making a list of things I want to do in the future, but mainly I am just enjoying it.  I even got a puppy!  I still exercise smart money-spending and because of this, I can dream about my future in this home.  Right now is a wonderful time to purchase a home.  Rent doesn’t build equity.  Essentially, you are throwing away money every month.  Buying a home is a wonderful investment that can pay tenfold down the line.  Good luck!

If you’d like to talk more with Katelyn, you can find her at her blog, Katie Takes on The World, and on twitter, at @WorldViaKatie.  And you can email Mrs. Giovannucci (Katelyn’s mother AND realtor) if you have any questions.  Even if you’re not in Massachusetts, she can help you find someone in your area.  And Mrs. G said you only really need 3.5% down!  But I hope to have more saved when I’m ready to buy a house!

I want to buy a house…maybe May 6, 2009

About a month ago, I started scrolling through listings at realtor.com to get an idea of what is out there:  What can I get?  How much will I have to spend?  I started fantasizing about owning my own place.  Took out a few books on home buying from the library.  I even went to a seminar hosted by work for first-time home-buyers, where I got a better idea of what the home buying process entails.

I’m hearing a lot these days about why now is the “perfect time to buy a house.”  Interest rates are low, there’s the first time home buyer tax incentive, and house prices have dropped significantly.  We’re also reminded that you claim points and paid interest on your taxes, likely providing yet another tax incentive.  Sounds like nothing should hold me back, right?

Of course we know it’s not that simple.  Now is the time to buy IF you were planning on buying now.  I hadn’t really planned to buy anything until further down the road of my financial, personal, and professional life.  I mentioned a while back that my financial priorities are first to eliminate my student loans and car debt prior to getting involved in a mortgage.  My student loan rates have dropped pretty low, so a mortgage would probably be at a higher interest rate.  Plus I’d like to have more money for a down payment, which is counter to my desire to use extra savings to pay down student loan debt.  And I’m not super keen on getting financially locked into a place (it’s a relatively non-liquid asset).  I also figured I wouldn’t buy a place until I got married.  But more and more people are buying for themselves, or as unmarried couples.  And I don’t know if I’d have to move for my job.  And of course, we don’t know how much more house prices might drop.

I also know that right now, the place I could afford would be small…a “starter home”.  And I know I have an image in my head of what my future home should look like.  How easy would it be to sell the starter home to buy a different place?  It’s not as easy as it used to be…

Anyway, in the meantime, we’re going to keep looking at listings casually, and I’m going to default to saving/paying off debt for a while.  I’ll keep reading books, and check out websites with helpful information.

What’s your plan?  What do you think I should do?  Is now the time to buy?  Or should I wait to buy a bigger and better place in the future?  And where else should we be looking for information?