Last month, the Beloved and I watched the film Margin Call. It was a dramatized take on the events at a prominent Wall Street financial firm (they should have disguised the name as Breeman Lothers) as the home mortgage based crash of 2008 began to unravel around them. It was a good, albeit depressing, film. Of course, all of us that rejoiced in our always-growing 401ks and real estate holdings have had to eat the down side of being over-extended. Maybe we’ll all be a little more cautious of schemes that seem a little too good to be true in the future.
That film was on my mind as we completed a refinancing of The Aerie this week. We had been speaking with our financial advisor, and he had really lobbied us to take advantage of the extremely low mortgage rates. One of the problems today – as opposed to the other times I’ve financed a home in California – is that now lenders are actually requiring 80% loan-to-value (in the good-old-days of bad-old-practices, you never had to put anything down, which when you think about it, is crazy). And giving the plummeting local housing values over the last couple of years, that missing 20% was no longer in equity.
Well, we went through the process – locking a rate, getting the appraisal, and crunching the numbers. As it turns out, we could re-fi but we’d have to extract some dough from our “rainy day” fund. Yet our new rate will save us nearly $1200/month, which should let us rebuild the rainy day fund pretty quickly.
oi
So, we signed and signed and signed and it’s all done.
Hopefully, it won’t rain on us for a while.
Saving $1200 a month is awesome! I’ve contemplated refinancing our place again. We’re down from a 6.25 to a 5.13. I’m sure we could get it to the 3s or 4s, though I suspect we’d have to increase the span of the loan, and I’m not sure I want to do that part. Still… $1200 is a good chunk of change.
We looked at it when rates were ~5%, but we couldn’t make the numbers work. Dropping it down to 4.125% was just too worth it.
Congrats! That is a great savings. We’ve thought about doing the same, but we’d probably have to wipe out our rainy day fund, and neither of us has the kind of visibility about the stability of our jobs to make us comfortable doing that.
Well, with the state budget and enough $$ at work to keep the doors open for another year, there was no time like the present.
53K is half of what is left of our mortgage! Makes it really difficult for us to contemplate a move to California.
N&M — no doubt. Prices are down, but Southern California or the Bay Area are still gonna cost. Sadly, the central valley is full of empty developments.
Well, there aren’t jobs for us in the central valley so that’s not really an issue.
You could be realtors. :D
Was the “ZOMG! I’m a GROWN UP” feeling scary when you went through this?
It sounds like an awesome deal. Congrats.
Tell me about it. I do always have sort of a feeling like I’m playing at this and they’re going to catch me.
That IS a great savings per month! We did this about 4 months ago.
Lauri — I’m really glad that the rates were so low and that we got a good appraisal. If that had failed, we would have had to put too much back into the house to make it worth it.
I’m glad your refinancing was approved. It’s gotten to the point where even people with high credit scores have been turned away because they don’t have enough money to put down. It also makes me very glad my parents’ house is paid for. The only thing they have to worry about is property taxes, and those are so low it seems almost criminal. (Not that Dad feels that way: he screams ‘Highway robbery!’ every time he opens his tax statement.) They pay less than a quarter of what I had to pay annually in Minnesota. Which makes me sigh, for all sorts of conflicting reasons.
HG — yeah, our credit wasn’t in issue. We were really holding our breath over the appraisal. Fortunately, it came in at a value for which we didn’t have to break the proverbial bank to re-finance.
It’s funny about taxes here. The overall rate is nice and low, but our houses are so expensive, you end out shelling out anyway!
Wow, congrats. I know you guys are like us in that you love travel for your rainy days; so those savings will come in handy.
amelie — I also want to increase our charitable contributions. Give back to better causes some of that money that was going to Wall Street.
Bravo!
My life fell apart about a month after Lehman Bros. filed for bankruptcy. That timing was not coincidental. Ah, memories.
But congrats! Sounds like you made the right decision. And isn’t it always sunny in SoCal? ;-)
Jenny — yeah, good times. We’d bought The Aerie in 2007 and saw the value go up a bit and then down, down, down. It feels like it’s stabilized, which we can definitely use.
Sounds fantastic. May it stay dry for a long time at your home.
LG — meteorologically, we’re having a very dry winter, so I want some actual rain just no metaphorical rain… :)
Congrats. Someone tried to talk me into doing this at one point, but I declined. My reasons were that our then-current house payment was decent (the payment was far less than the $1200 you’ll be saving) and I was about 5 years away from paying off the house and couldn’t see the logic of extending that time. I can see where for other folks it’s a good deal.
Thanks GOM — yeah, we’d only been a couple of years into our mortgage, so re-setting the clock didn’t hurt us and the cost over the life of the loan is still ridiculously less than if we’d kept the higher rate.