I've basically had to admit to ourselves that we probably bought at the top of the market, and even worse, our builder talked us into a 5-Year ARM, so we would have affordable payments. When our 5 years are up at 4.25% (in 2027), this loan will adjust to 8%, based on today's rates, which we actually can't afford. We could afford up to about 6% before we would be unable to afford the payments, based on my calculations. That also assumes that nothing (like our insurance) goes way up.
Okay, so you messed up. Instead of beating yourself up, you have to figure out how to work with what you have:
- You have four years at a decent rate. Start looking into refinancing now. As you say, lots of people fell into this trap, so you'd be smart to jump now rather to wait for everyone else to figure out they're in trouble.
- Do you have a pre-payment penalty on this loan? If you pay extra each month, will it go straight to principle? Verify that, then -- if circumstances are what you'd want -- pay more each month. No, it's not easy, but it'll get you paid off faster.
- Sounds like you're living close to the financial edge, so look for ways you can cut back: cut out streaming /subscriptions that you're not really using, cut back on groceries and eating out, don't buy new clothes, cut back vacation plans -- for example, stay in a cheaper hotel, choose a destination to which you can drive.
- Or add more income to your household. Look into part-time jobs.
- Do not dip into your 401K or retirement savings; that's extremely expensive, as it will cost you penalties and add to your taxes -- and you'd be creating another problem for yourself down the road.
- The worst thing you can do is nothing. Seriously, you're saying you can't afford this house if your interest rate goes up, so don't just sit back wringing your hands hoping for a break. Create some luck by making good choices.
I'm guessing you are younger than me. When my older sister bought her first house, the mortgage rate was around 13.5%. Yep. Fixed rate.
Yep, we bought our first house when we married in 1990, and we were just a little less than that. It forced us to buy less than we technically could have afforded, and it motivated us to pay off sooner rather than later.
Put this down as Mistake #2. When we first visited the Sales Office, we were asked if we had a Realtor. When we said No, we were told we would get a better deal if we were unrepresented. So... we did just that. You are probably correct, we would have been better of.
Lesson learned. When someone is making money off of you, be wary of what they tell you.
Apparently other people around him keep sending him articles on how ARMs will help him afford a house and even people at work are telling him to just get an ARM to get the house he wants. Yikes.
Yeah, and leasing a car lets you "drive more car than you could otherwise afford", but free lunches don't exist. This type of "creative financing" is just kicking the can down the road. Paying today and making moderate choices are better long-term choices.
I have around 9 years left until I'm eligible for Medicare. I'd like those last 4-5 years to be part time. It seems like it would be a nice compromise between having income and still having extra time to care for myself, exercise, and have a more robust social life than what I currently have time to do.
Definitely yes! That's where I am right now. I've retired from full-time teaching, and I'm working 3 days a week as a permanent substitute. It's a nice balance.
Life is short. No one ever looks back on their life saying, "If only I had spent more time at work."
No, but people do say on their deathbeds, "I wish I were leaving my wife with a paid-off house. I wish I weren't leaving her debt. I wish I were leaving the kids a bit of money."
True, but there's nothing like the feeling of being 100% debt free.
Definitely yes! I grew up in poverty, and we were never sure about food, clothing, and other necessities. I never had reason to feel that tomorrow would be better than today, so I place a high value on feeling secure.
My PMI is less than $50 a month. I just double checked. It’s 29.08! Thank the stars!
Okay, so your PMI is low, but it's still money down the toilet. It protects the lender, not you -- you yourself will never, ever get a single penny back from that PMI. As soon as you're able to get rid of it, do so!
But I get what you're saying: you have to look at the big picture. If paying less on your mortgage /keeping PMI allows you to pay into a high-interest retirement account, it might be worthwhile.
No, not necessarily.
You don’t have the money if you’re also going into credit card debt every month, which many homeowners do.
Yes, I figured out pretty young that not everyone who LOOKS flush with cash actually is.
I have sat around the lunch table at work plenty of times hearing my wealthy-looking friends count down the number of days until pay day ... or talk about how they must conserve the miles on their car or pay more when they "turn in their lease". They probably look at me buying used clothing, sharing a small car with my husband, living in a modest house and have no idea we are saving, saving, saving.
, brought up to me that she bought her house on a temporary buydown from the builder. Her mortgage is temporary at a 3% rate, which will step up to 4%, 5%, and then 6% fixed rate after 3 years. She told me she had been confidently told that rates would come down before the 3 years were up, and she could refinance.
) until I made it to the door to let out my two dogs before I unstrapped them from their car seats. (my mother or someone knew I was traveling and expected a call so if I did get killed, someone would get the babies out - maybe - if they weren't shot, stabbed, whatever LESSON: Always have two ferocious giant dogs.
