Adventures in Refinancing, Chapter 5



I’m very proud to announce that this chapter will end our story on getting a refinance. As of Monday, we finally closed on our new mortgage under the Home Affordable Refinance Program (HARP)!

Here’s what has been going on since last time:

Our Home Appraisal:

So after the initial consultation and deposit, there was not a lot to do except wait until the estimator came back with his appraisal of our house. And so we waited, and waited, …

And after 8 years of not “really” knowing how much our house was worth, we finally received an official home appraisal as part of the process. How did we do? Bum-badda-baaa (victorious trumpets sounding ….):

• $137,000. (sad trumpets dying ….) Wha-wha-whaaaa

Yes, this was a bittersweet moment. $137,000 was much less than what I hoping for given that my neighbors (with the same exact house) were given an estimate of $160,000. But on a positive note, $137,000 was just the right amount I needed to be within a 105% LTV (loan to value) ratio. If we had gone over 105% LTV, we would not have gotten the best interest rate they could offer.

This just goes to show you how much discrepancy there is in the whole appraisal / home value assessment process.

How Much Did We Save?

What was the final outcome of having done this refinance?

• Our payments dropped down by $101.36.

• Our fixed rate went from 5.75% to 3.75%.

• We dropped down from an initial 30 year mortgage to 20 year mortgage and erased about 1.14 years worth of payments in the process.

• That’s a total savings in interest of $41,104.97.

So what would happen if I kept paying the extra $101.36 by adding it to my principal each month?

• I’d pay off the whole mortgage in 17.0 years instead of 20.0 years.

Want to try this for yourself? Download my Microsoft Excel spreadsheet and try it yourself.

MyMoneyDesign_Mortgage_ExtraPrincipalPayment_Calculator

 

What Else Did We Learn Throughout This Process?

There was a lot to be learned throughout this process. The ambition to get a refinance inspired many other questions and posts (as well as many other Excel spreadsheets) that analyzed different mortgage scenarios. In case you missed any of them, here is a round-up:

Which is Better – Points or No Points on Your Mortgage?

Which Is Better – Paying Down Your Auto Loan or Mortgage?

Which is Better – Paying Off Your Mortgage or Investing the Money?

Now that my refinance is complete, I hope you can use these resources and lessons to help you further in your own efforts. Enjoy!

Have you been thinking about getting a refinance, are in the process of doing so right now, or just finished getting one?  Please feel free to share your experiences! 

 

Table of Contents:

Chapter 1, Chapter 2, Chapter 3, Chapter 4, Chapter 5

Photo Credit: Microsoft Clip Art

Comments

  1. says

    I’ve looked at refinancing but unfortunately it’s just not in the cards for us right now. Our original loan was a “rural development loan” which meant we avoided PMI even without 20% equity.

    Well, the Rural Development program doesn’t offer refinances, so I’d have to go with a traditional mortgage. While I would save more than PMI would cost me, I don’t think it’s worth the hassle right now. Once my income stabilizes though we’ll be looking into it.

    I’m glad to see that the Home Affordable program worked for you!!

    • MMD says

      I’m not familiar with a rural development loan. But avoiding PMI from the very beginning does sound great! We still have to pay it.

      At any rate, I’m sorry to hear that your options are limited. Unless they had changed around the HARP rules, I don’t think I would have been very lucky either. Being underwater and having PMI were two very large obstacles.

  2. Hunter - Financially Consumed says

    Congratulations! We’ve just had some HARD discussions with a few lenders this week. It’s complicated for us, because we need to move in June for the Navy. Our mortgage is slightly under water so instead of paying $8,400 in fees for the privelage a lengthy refi, we chose a loan modification. For $1,000 we’ll drop the rate 0.75%. Not much but it will save is $172 per month so will pay for itself very quickly.

    The location we’re going to (Mandeville, LA) has NO RENTAL MARKET; everyobe buys. So we needed to save our cash reserves to purchase down there. Soon we’ll be landlords and new homeowners again…and I’m completely stressed out.

    I used to blog 7 hours a day but now I paint the house most of the time and blog occasionally.

    • MMD says

      Thank you! I’d spend $1,000 to save $172 per month also. Why so much for a refi?

      Sorry to hear about the stress. I already spend a lot of time working around our own house, so this is one thing that scares me about potentially buying another one (to rent out). Thanks for finding it within your limited time to comment on my story.

  3. Katie says

    I am planning on refinancing very soon. I calculated that I could get a 15yr loan with today’s rates and the payment would only be around $25 more per month. It would be great to knock ten years off the loan for a few bucks a month.

    • MMD says

      We considered a 15 year loan as well. It would have made our payments pretty much the same as what we’re paying now, but it of course would erase an extra 5 years of payments which is an incredible amount of money to be saved. Ultimately, we figured property taxes will go up over the next 10 years, so we’re better off locking into a 20 year and having that margin of error to work within. And if we really wanted to, we could just add the extra onto the principal each month and artificially turn it into a 15 year :)

  4. Julie @ Freedom 48 says

    Well worth it! I think a lot of people don’t ever consider refinancing, or that it’ll save them a ton of money.

    • MMD says

      Definitely! Although 20 years is a long time, those thousands of dollars you save in interest are worth the move! I’d much rather see that $41K in my investment account than with my mortgage provider!

    • MMD says

      Thanks! I almost gave up hope in the beginning, but I’m glad I kept digging into it and found a mortgage company that would work with me. I’m pretty happy with the rate I received.

      Given the headache of my one refinance, I couldn’t imagine being in your position and trying to negotiate for multiple properties! Good luck with that!

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