Was Anyone Else As Stupid As Us (and probably 1/2 of my neighbors)

[ruadisneyfan2]

Financial literacy REALLY needs to be taught more often in school because you CANNOT trust banks to help you decide what's best for you. They don't really know the meaning of that concept.

Our kids had to take it to graduate HS. It’s a state requirement in NJ.
It should be a national requirement.

 

[Mikey15]

I'm not sure if they require 20% now, but they might. They never used to, but then if you didn't then you had to pay some extra fees that added up to thousands. I think if I couldn't come up with 20% they were going to tack something like $8K onto my mortgage.

I may as well clarify for anyone who's curious.

In Canada, the 'normal' amortization is 25 years, instead of 30, with the drawback that we don't get access to such things as 15y or 30y fixed rates. Much like the US, if your down is less than 20%, your mortgage needs to be underwritten by some form of insurer... while CMHC is similar to Fannie/Freddie, the difference in Canada is that insurance premium is charged in full at the start of the mortgage and added to the mortgage balance. That's goofytinkerbell's $8k. In the US, PMI is a monthly fee rather than part of the balance and can be dropped once LTV is under 80%.

30 year amortizations do exist, but they do require 80% LTV. 35y and even 40y existed for a very brief period about 15 years ago, but quickly went by the wayside. Even with interest rates as low as they were for a decade+, it really didn't make sense to stretch it out, and it definitely doesn't now.

There's a lot of rigid differences between the two countries when it comes to housing, but also a lot of things that are similar. And there's a lot of people with what we call variable rate mortgages who are sweating bullets right now. Even people whose fixed mortgages renew this year are not having a great time.

 

[gottalovepluto]

You can’t really get a 30 yr fixed rate mortgage outside the US. We’re very unique in that!

 

[goofytinkerbell]

1

 

[SomewhereNotAtWDW]

Well, it's been a little over a year now. I am beyond aggravated that nothing has changed in terms of interest rates. Rates are even worse than when I first posted, and I am still terrified of our ARM adjustment. Being perfectly honest, we still can't afford a fixed-rate mortgage at 7%. I am hoping and praying that maybe things will improve in 2025 or 2026.

With that said, our family has been trying to be more responsible, and I have been working on trying to find a way to save more money in preparation. Over the past year, we managed to put aside a little over $17,000 for future mortgage payments, in a high yield savings account. This is about half of what our higher payments will be, and I am hoping we will be able to save more as time goes on. We have also cut back dramatically on extracurricular activities for the kids and skipped vacation this year.

Some people would probably question my thinking. Our home is not even increasing in value anymore; it's kind of going sideways, if not a little down in value. My thinking is that I already have the kids in a great school district, and buying this house was utter chaos. I just have no desire to sell or even try to start over. It's just not worth it to us.

Keep your fingers crossed for us. We are really trying to get ahead of everything. My husband has been looking for higher-paying jobs but hasn't been successful so far. The job market is just so tough right now.

 

[nono]

Rooting for you! If life only came with a crystal ball...

 

[NYCgrrl]

My thinking is that I already have the kids in a great school district

That’s a good point and asset for your family, now and in the future.
Glad you are being proactive and have so much saved already.
Keeping good thoughts for you and yours.

 

[Mikey15]

While it’s likely coming in September instead of tomorrow, the latest inflation data pretty much confirms the Federal Reserve is about to begin a rate cutting cycle. There’s still a long time between now and 2027 for your ARM – maybe even a recession between now and then.

Chin up, there should be a chance to get a fixed rate for 6% or less sometime in the next 3 years!

 

[Anthony1971]

You can also consider a CD there are rates above 5% at many banks including Sallie Mae and synchrony and others.
For conventional mortgages not Arm, Ballon or like the rate is tied to T bills or Treasury notes as this is the indicator for long term debit not the discount rate or overnight lending rate most put emphasis on.
It is possible for overnight rates to go up and mortgage rates to go down or vice versa.

 

[Anthony1971]

I will add keep a watch on long term CD’s to get an idea where interest rates may go in the coming years. If you are looking to convert to a traditional mortgage T bills are more important but a long term CD also includes this in the banks predication. In other words no bank is going to pay more interest then it expects to receive from lending money as this will generate a loss and the reason banks can fail. Please don’t use articles this is someone’s opinion Banks pay employees for exactly this and it is in print for all to see. You still have time….. planning is always key and this can easily end in having extra funds.

 

[barkley]

Chin up, there should be a chance to get a fixed rate for 6% or less sometime in the next 3 years!

i don't know when they dropped but the last time i looked at the local credit unions here the rates were in the 7 range but just now i looked and depending on the term (15/20/30-all fixed rates) they are now in the 6's (6.125/6.375/6.625).

i also suspect that if the fed starts cutting rates we will see fixed rates dropping. allot can change in 2 years.

 

[LuvOrlando]

Well, it's been a little over a year now. I am beyond aggravated that nothing has changed in terms of interest rates. Rates are even worse than when I first posted, and I am still terrified of our ARM adjustment. Being perfectly honest, we still can't afford a fixed-rate mortgage at 7%. I am hoping and praying that maybe things will improve in 2025 or 2026.

With that said, our family has been trying to be more responsible, and I have been working on trying to find a way to save more money in preparation. Over the past year, we managed to put aside a little over $17,000 for future mortgage payments, in a high yield savings account. This is about half of what our higher payments will be, and I am hoping we will be able to save more as time goes on. We have also cut back dramatically on extracurricular activities for the kids and skipped vacation this year.

Some people would probably question my thinking. Our home is not even increasing in value anymore; it's kind of going sideways, if not a little down in value. My thinking is that I already have the kids in a great school district, and buying this house was utter chaos. I just have no desire to sell or even try to start over. It's just not worth it to us.

Keep your fingers crossed for us. We are really trying to get ahead of everything. My husband has been looking for higher-paying jobs but hasn't been successful so far. The job market is just so tough right now.

I think it is safe to assume that interest rates are going to be relaxed in the near future.

Last week, China beat the US to the punch and let their interest rates drop so the US can only hold on for so long before comparative lack of value in the international arena forces an adaptive response from the US. The US is not just competing here so what other countries do has a profound impact, the US is playing multiple boards as are all the other currencies so there are often factors we aren't seeing easily.

If I was in your shoes I would keep everything lined up to pounce and refinance when rates are permitted to slide and then watch closely, maybe make friends with a loan person at a local bank who will white glove you when the time comes and tell you what to have on hand. Make sure all your & partners bills are paid just before due and try very hard to make sure your credit use stays steady or dips a little every month, even if a balance drops by like $50 a month there seems to be an impact on scores and that matters a lot. Stay on top of your & partners credit report and correct errors immediately because the corrections take a month to be reflected. Keep all the paperwork at your fingertips and make sure of to take advantage of any leeway you can get to protect your position, meaning if you can lock in a loan and wait a month to exercise then take advantage of that month in case rates dip more - once things move they can be quirky so do your best to hedge.

 

[mikehn]

You know the saying, no pain, no gain. Hopefully it wont be too painful for too long.

 

[DawnM]

The lenders are like sharks and even though they have changed some things, not enough has changed.
I am so sorry.

 

[barkley]

i don't know when they dropped but the last time i looked at the local credit unions here the rates were in the 7 range but just now i looked and depending on the term (15/20/30-all fixed rates) they are now in the 6's (6.125/6.375/6.625).

i also suspect that if the fed starts cutting rates we will see fixed rates dropping. allot can change in 2 years.

i posted these rates last tuesday. in the course of 5 days the rates at the same places have dropped to 5.875/5.875/6.375.

 

[buzlite]

Don’t trust anyone when they tell you what future rates will be. Even the feds projections can change based on the economy and unexpected developments. Your builder, realtor, banker, financial planner do not have a crystal ball and are not “experts in the market”.
I would speak to a realtor and try to sell before the big rise in your interest rate. Just downsize and avoid the stress.

 

[ruadisneyfan2]

Don’t trust anyone when they tell you what future rates will be. Even the feds projections can change based on the economy and unexpected developments. Your builder, realtor, banker, financial planner do not have a crystal ball and are not “experts in the market”.
I would speak to a realtor and try to sell before the big rise in your interest rate. Just downsize and avoid the stress.

It probably can’t hurt to see what’s out there and what recent comps are in the area but “just downsize” is not so easy. If it’s anything like our area, homes for sale are slim pickens and most sellers are getting multiple offers above asking price with multiple cash offers or waiving a home inspection. To me that is a crazy amount of stress also.

I would watch rates closely for the year before this affordable interest rate expires and refinance when it reaches a lower rate that OP deems acceptable.

 

[PrincessDadx2]

Well, it's been a little over a year now. I am beyond aggravated that nothing has changed in terms of interest rates. Rates are even worse than when I first posted, and I am still terrified of our ARM adjustment. Being perfectly honest, we still can't afford a fixed-rate mortgage at 7%. I am hoping and praying that maybe things will improve in 2025 or 2026.

With that said, our family has been trying to be more responsible, and I have been working on trying to find a way to save more money in preparation. Over the past year, we managed to put aside a little over $17,000 for future mortgage payments, in a high yield savings account. This is about half of what our higher payments will be, and I am hoping we will be able to save more as time goes on. We have also cut back dramatically on extracurricular activities for the kids and skipped vacation this year.

Some people would probably question my thinking. Our home is not even increasing in value anymore; it's kind of going sideways, if not a little down in value. My thinking is that I already have the kids in a great school district, and buying this house was utter chaos. I just have no desire to sell or even try to start over. It's just not worth it to us.

Keep your fingers crossed for us. We are really trying to get ahead of everything. My husband has been looking for higher-paying jobs but hasn't been successful so far. The job market is just so tough right now.

Are you sure of your numbers? By my calculation, the difference on a $750,000 mortgage from 4.5% to 7% is $1,188 per month. A lot, but $17,000 will cover that for 14 months. Maybe you owe a lot more than $750k?

Bottom line is I do not think you made a mistake. You like your house and would lose more in transaction costs by moving. You still have 4 years to go. Don't borrow trouble. You state that you can handle 6% and rates are already at that level today for 30 years. You are saving a significant amount of money as well. If you really can't sleep at night then refinance at 6% today. Personally, I think you will get under 5% in the next 18 months. We are just at the start of an interest rate reduction cycle that will play out over the next few years. Your risk is much more around income reduction, losing your job or becoming disabled, than it is about this interest rate change.

 

[Forevermarypoppins]

For your next home:
Build or buy smaller. Get all the energy efficiency necessities.
Save more money for retirement.
You can be happy and living without financial stressors is priceless!

 

[mistysue]

I will admit I skipped a few pages - but seems like nobody is bringing up that when you hit the 5 year mark you can refinance and your balance is lower, so your payment doesn't go up as much as the original loan having been that higher percent. I bought my house with a 5 year balloon and when I refinanced after 5 years my interest rate was 1% higher but my payment was lower. I then kept making the old payment anyway to pay off sooner. It put me in a better spot if I had financial strain along the way.