May 22nd, 2012 
Jessica 
Our "Investment Property"
Click here to read “Refinancing? (Part 1).”
When Brad and I were married in 2005, we bought a house in Maryland, thinking that we would live there for many years to come. As you know, life doesn’t always turn out the way you plan. 19 months after we moved in, we were moving out. We left our careers in teaching and moved to China for two years. Unfortunately for us, the housing bubble burst, and our house lost a third of its value. We paid $150,000 for our home back in 2005. Today, according to Zillow.com, it is still only worth $93,800. Our house was on the market for 6 months, but no one was willing to pay what we were asking. We decided to rent out our home, and pay the difference on our mortgage each month. We were blessed with a wonderful renter who has rented our home for almost 5 years now, as we have moved around the world and back.
Another unfortunate aspect of our housing purchase was that we bought it with an 80/20 loan. From what we’ve heard, this type of loan has been made illegal since the housing crisis. We bought our house with two loans: Wells Fargo owned 80% of our mortgage, and Citimortgage owned 20% of our mortgage. So we have always had two mortgage payments every month.
If you read last week’s Financial Update, you probably noted my excitement in announcing that we finally paid off our debt to Citimortgage! For the first time in 6.5 years of home ownership, we only have one mortgage payment. Yeah!
It had been 13 months since I last called Wells Fargo to ask about refinancing, so I decided to try again this week. If you read last week’s Financial Update, you would have seen that we currently owe $107,017.41 to Wells Fargo, but the house is only worth $93,800 according to Zillow.com. So I thought that asking for a refinance again would be informational, but would lead to nothing. Imagine my surprise when I called, and Wells Fargo gave me a list of possible refinancing options!
First, by refinancing, our interest rate will decrease from 6.25% to 3.75%, saving us 2.5% in interest!
Our refinancing options are as follows:
- 30-year fixed: 6.5 years longer than our current loan, $190 less each month
- 20-year fixed: 3.5 years shorter than our current loan, $55 less each month, $29,000 savings overall
- 15-year fixed: 8.5 years shorter than our current loan, $72 more each month, $53,000 savings overall
After discussing everything with Brad and Wells Fargo, we will definitely attempt to refinance our 30-year mortgage to a 15- or 20- year mortgage. For now we hope to qualify for the 15-year fixed mortgage (as Dave Ramsey recommends), but if we do not, we will still be happy with the outcome. We hope to pay ahead on our loan no matter what, shortening the years and decreasing the interest due. We should hear from a loan processor later this week, and if we are approved, our refinance should go through within the month.
Have you refinanced, or attempted to refinance recently? What were your experiences, good or bad?
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We are currently refinancing our home, less than 3% interest. Our previous loan we got a .25% lower rate for being a stock holder of the local bank, and also a .25% discount for having it withdrawn from our checking every 2 weeks, which makes a 30 year loan paid off in 24 years. We currently have 17 years left but going with a 15 year loan with the same monthly payment and saving 2 years and about $30,000.00
Thanks for sharing your experience! I’d never heard of those discounts. We’ll have to check and see if we qualify for those too. They did warn me that ours would be a little higher because it’s a rental property.
Have you considered refinancing with another company? Since you currently are working with Wells Fargo, they will likely be less enthusiastic about making your interest go down. They already have your business. Why would they need to change? If you use another company, the process will likely go more quickly and you may get a better rate.
I agree. Today they told me they turned the loan down, and when I questioned them about it, it appears that they either filled the application out wrong or misunderstood the HARP refinance program. So we’re back to square one. After further research on the HARP program, I saw that they highly recommend shopping around for the best rate since rates vary greatly from company to company. I’ve heard good things about Churchill Mortgage, so I’ll be contacting them next. Thanks for your input! It’s been very helpful. 🙂
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