I
stumbled upon a novel way to consolidate family debt through refinancing before
I read about it in the newspapers or at the start of the world wide web
(internet). After three months of looking for a home, I had purchased a small
1938 fixer-upper in October 1996 in West Los Angeles, CA. There were several
reasons that led to this purchase. One, I kept overhearing the tax implications
for a single person. In short, I heard that a single person has few tax breaks.
Second, I had seen an advertisement from a US Department of Housing and Urban
Development announcing its annual convention to education future homeowners. At
that convention, I attended a lecture where the speaker said that if you are
renting, you are buying a house or property for someone else. Third, within
three months after moving into our apartment on the Westside, I saw a new
notice posted over the mailbox banning all barbecuing on patios. When I called
the local fire department to inquire about its regulation, I learned that there
was a ban on gas pits on a balcony and not a small charcoal barbecue pit in
apartments. Finally, the house is located on a street named after the state
from where my husband was raised. So, by October 1996, I cleaned out what
little savings I had since I had anticipated only one purchase that year, and
it was a new SUV in June.
The
Financial Atmosphere in the Mid-90s
Even
though I had a decent government attorney position, I felt uncredit-worthy and
disappointed when I had left the HUD convention in March 1996 because different
representative at several financial institutions could not give me a
pre-approved loan letter for the house hunting process. So, you can imagine how
difficult it was to find financing within the 90-day escrow period. Back in the
mid-nineties, before the real estate bubble burst, you could not combine your
income with a boyfriend to qualify for a mortgage. A decade later, the lending
world was making so much money that it was allowing any combination of people
to borrow money. So, I ended up with an adjustable loan that adjusted every 6
months with a 1 percent margin. All I knew was that the lender was making a lot
of money off me. Although the rate started at 8%, 18 months later it was at
13%. So, at that point, we decided that we better consult with a mortgage
broker. Fortunately, the mortgage was the type that we could refinance.
Solving
Two Problems At The First Refinance
At the
same time, I had married, and my husband had delinquent student loans. I had
paid off half of it before the purchase of the car. The student loan debts kept
growing, and we were looking at $30,000. So, we refinanced $240,000, covering
the original loan, the student loan, and several thousand for home
improvement. Our note went from
$1400 to a little over $1600, but it was well worth it. The most memorable
aspect of the refinance was that our curbside appraisal was determined to be $600,000, essentially tripling in value of
our purchase in 18 months. At this point, we came up with our household
proverb, “It’s better to be lucky than to be smart.”
Second
Refinance to Improve Our Quality of Living
In
2003, we decided that a small starter home that once housed the prior owner’s
family of five was not big enough for today’s family of 4, especially when we
had occasional visits from family members living out of state. So, we cashed
out $230,000 for an expansion. The rate was at 6%, but the house gave us enough
equity that the refinance went smoothly. We had thought that this was the last
time we would refinance, but we were wrong.
Recent
Refinance for An Historically Low Interest Rate
In 2011, we decided to
refinance once more. The interest rate was too low to ignore, and deep down we
didn’t like the idea that the loan extended to 2033. We also decided to
purchase a quarter of a point because we had the cash and also shorten the loan
to 15 years so that it would end at the same time as our initial loan, 2026. At
the end, our rate was 3.25% when the average rate nationwide was close to 4%.
We dropped our monthly note slightly to $2,635.01. We really love our federal credit union that serviced the
military and my sector of the federal government, and we are currently a year
ahead in payment. We are not sure if we are going to have to borrow against the
equity of our house to send our two children to college, but we won’t rule it
out knowing that this little property through refinancing has really helped us
financially through the course of our ownership.
First, the salesman asked us for a
summary of a year's electricity usage before measuring the roof. A good
salesman will sell you enough panels that will product as much electricity as
you may need so that it can be affordable. We received a letter with the
technically information, offering both Sunpower and non-Sunpower systems:
We heard about the rental option from
another company where for only a saving of $10 per month, you would be using
solar power. However, that's not the way to go since you never own the system.
By owning the system, after the break even point, you just save the electricity
portion of your utility bill and would only have to pay for the connection fee
(currently $22 per bi-monthly billing). We were skeptical how the rebates and
energy tax refunds work in Los Angeles.