Home Ownership

Our First Home

Let's talk about something fun...

Home ownership is something that we take for granted in this country.  When I lived in Argentina the interest rates on mortgages was around 24% for 10 years fixed or 12-14% for 2yrs and variable after that, with a substantial down payment required.  Obviously in the United States, borrowing money is very cheap and accessible to people in almost all financial situations with an income.  When my wife and I bought our first home in 2008 we put down 20% on our $84000 fixer upper.  Because of my wife's credit we had to base our loan from my income, this was not a problem securing the loan.  After the housing collapse and the mortgage rate decline I looked to refinance.  We initially started with an interest rate of 6.125%.  We had a P&I payment of $409/Month, I added $141 to that payment and split them into biweekly payments to maximize my interest savings.  Even with biweekly payments and the increase over principal we were looking at paying more for our home in interest than the initial purchase price.  As our AGI increased I looked into shortening our term and overpaying our mortgage by a lot.

In December 2010 (two years after purchasing our home), I found a local credit union willing to be creative with our balances.  They refinanced our home, a very small home equity loan, and two outstanding credit card bills to a 5year home equity loan at a fixed rate of 3.99%.  We just finished our first year of repayment December 2011.  Therefore we were able to change from an expected payoff of around 18 more years from now and about $90k in total interest to 3.5 more years of payments and $13k of total interest.

That sounds to me like a $77k savings as well as 172 months of having my mortgage allocation in my pocket instead of heading out the door.  172 months at my original payment of $550 is a whopping $95k, my extra payment of $950 for 44 more months is only $42k, that is a savings of $53K.

I can understand the choice to pay your mortgage down by just over minimum payments and investing the extra that you could put towards it but I would rather be 33 years old and have 100% equity in my house and only a roof over my head instead of a mortgage.

TOTAL SAVINGS IN HOMEOWNER COST = $130,000