3.03.2012

Refis Through the Years


Earlier this month, we closed our fourth refinancing on our house. Including the original purchase, that’s five transactions in 12 years. I guess that’s not unusual for most American homeowners, but for buy-and-holders like us, it seems awfully snazzy. Some of our triggers were quite common and some were unique to our situation:

1. 2000 – Bought our house, with help from Penn’s Mortgage Incentive Program (cash for Penn employees who bought a house in the neighborhood). One of the best (luckiest) financial moves of my short life, as the house has more than tripled in price since then and we have locked ourselves into a coveted spot within the catchment area for Penn Alexander School. We put 25 percent down (sale price was high five figures) and went with a 15-year fixed rate loan at 7.2 percent for the rest.

2. 2002 – One of the stipulations of Penn’s program is that you are employed by the school, which Amy was at the time, being a nurse at HUP. If you leave Penn, they can no longer guarantee your mortgage, so you have to refinance. Fortunately, it’s a good time to refi. We choose a 5+1 variable rate loan that starts at 4.9 percent.

3. 2007 – Interest rates have crept up, so we get out of our variable rate loan now that the five-year period has expired, and jump into a fixed rate loan. I think this was a 10-year deal, somewhere in the mid 6’s.

4. 2009 – While the world is melting from overleveraging home equity, we join the party way late, pulling out money to pay for grad school and home renovations, and lock in at a lower rate, something like 4.6 percent. Because of our house’s significant price appreciation, and the fact that we bought so low, we’re way above water, so there’s no problem getting approved. Still, while we needed the money, we lament that we were awfully close to paying off the whole thing; imagine that, two people in their mid-thirties who didn't come from money and don't make a ton of money yet being all the way done paying for a whole house!  But now we are back to being 15 years away from doing so.

5. 2012 – Insanely low interest rates, plus a no-fee program at our bank, induce us to go through the paperwork of refinancing. We score a 3.5 percent rate for a 15-year loan, and with no penalty for early repayment, we can make the same monthly payment amounts as before and be done with our mortgage well before 2027.

I’ve made more than enough blunders in the stock market to give back all the good I’ve gotten from our house. Still, I count myself quite fortunate to have bought what we bought, when we bought it, and to have stumbled into good timing regarding renovations, refinancing, and schools. Now, with my interest rate at 3.5 percent, I can’t possibly need to refi any time soon, right? (I give us 18 months.)

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