More on the savings below the fold, but first some background:
My wife and I bought our current and first house in 2005. It was a sellers market at the height of the housing market. People were overbidding on houses with multiple bids on every property. We used some luck and some hard negotiating to underbid sellers price by $20,000.
I remember our loan officer trying to convince us to sign up for adjustable rate mortgage. I said hell no. Instead, she got us a 5.85% fixed rate mortgage. With no down payment, we would require mortage insurance. She also claimed that with normal appreciation, we should be able to pay off mortgage insurance within 5 years.
In 2009, we attempted to refinance. At this point we had credit scores over 800 and twice the income from when we originally bought the house. We though it would be a no brainer. We went through our bank. We had both been customers for 20 years each.
We assumed that our bank would want to do the right thing and help out good customers. This bank is considered a too big to fail bank- fresh with a billion dollars in bail out money.
We assumed wrong. After spending 4 months copying paperwork, faxing documents, waiting for responses, requesting responses to responses, we had an appraiser show up at the house. He spend less than 5 minutes in the house and sent us an appraisal equal to our purchase price of our house 5 years earlier.
A few days later we were notified that we were under 20% equity, so therefore refinance was denied by the bank. We were also out $350 for the appraisal.
During this time our mortgage payment was okay and manageable for us.We just were not able to put away extra money for savings and remodeling. Earlier during the Great Recession, my sister's husband had been laid off. They had been able to secure refinancing after missing two payments through the original HARP program.
On the other hand, we had done everything right, we had never missed a payment, we had good credit scores. Mortgage rates were hovering at or below 4%. We still had our good income. We even overpaid each mortgage to try to bring the principle down.
Meanwhile, our neighborhood housing prices continued to go down as the housing crises deepened.
More below the fold......
Fast forward to early 2012. I had read rumblings about this HARP 2 program reengineered by the Obama Administration to help underwater homeowners. Our house was close to underwater after 7 years of regular mortgage payments.
To make a long story short, In May, we were approved to refinanced our 30 year 5.85% fixed mortgage into a 15 year 3.25% mortgage administered by Fannie Mae. We used the HARP 2 program. Our monthly payment increases by less than $100, but we can live with it for the trade off of putting in more equity each payment.
According to my calculations, if we do regular payments with no extra, we will save
at least $230,000 in interest payments over the next decades. If we stay in the house, we anticipate owning it completely by around 2022 by making some extra payments.
After that, owning to good health, maybe we can have some great fun as a family.
Thank you President Barrack Obama. This family thinks you deserve reelection.