When we bought our current home, we got a 30 year loan with 6% interest for the bulk of the mortgage, plus a HELOC with a variable interest rate (which has ranged between 4.25% and 8.75% over the last six and a half years). The total amount that we borrowed was $180,000.
On our new house (fingers still crossed that everything goes through as planned and that it does indeed become our new house), we’ll be taking out a loan of about $172,000. It will be just a single loan, with no second needed this time, as we’re putting 20% down on the house. And we’re getting a 15 year mortgage this time. Interest rates are driving me nuts – as I’m sure is the case for everyone else who is trying to buy or refinance right now. We had applied for our loan while our house was under contract the first time, but then we put things on hold once that contract fell through. By the time we got the house back under contract last week, the rates were rising at an alarming pace. We haven’t locked in a rate yet – we’re waiting to see what happens over the next few days. If only I had a crystal ball…
Whatever happens with interest rates over the next week or so, I imagine we’ll end up with a rate that is lower than what we have now. And we know that we’re getting a smaller mortgage this time around than we got when we bought our first house. The payments will be a few hundred dollars more per month, because we’re doing a 15 year loan, but the interest savings over the life of the loan are huge if we go the 15 year route. Our goal is to pay off the mortgage in six or seven years. This will mean substantial mortgage payments, but hey – we might as well aim high, right?
Lots of anticipation right now… Our buyer’s inspection is scheduled for tomorrow, and the appraisal will follow sometime soon. We haven’t heard yet whether the sellers on the house we’re buying are willing to move the closing date up for us or not, so July is a bit up in the air. Now if only we could get all of our ducks in a nice row… good interest rate, early July closing date, full price appraisal on our current house… it can’t hurt to ask for the moon, right?
While we’re on the real estate topic… if you happen to be in Australia or thinking about moving there in the future, you might be interested in the real estate opportunities that are available. Whether you want to find Sydney rentals or find Queensland real estate for sale, there are many options on the market. We spent some time in nearby New Zealand several years ago, and would love to go back and visit Australia someday. Who knows… maybe someday we’ll be looking for property there too!
JB says
Exciting! If it were me, though, I’d go for a regular 30 year mortgage (make sure there are no pre-payment penalties) and just pay extra on it every month. This way, if something were to happen to your jobs (heaven forbid) or other big expenses came up unexpectedly, you could drop down to the minimum payment. If you go with the 15 year mortgage, you are locked in at that higher monthly payment. Just a thought. :)
FrugalBabe says
JB,
We’ve been debating the 15 vs. 30 year mortgage decision for several months, for exactly the reason you mentioned. After adding in taxes and insurance, it was going to be roughly $1100 a month for the 30 year, and $1500 a month for the 15 year. Since we don’t have any other debts, and have enough liquid savings to cover several months of mortgage payments in a worst case scenario, we decided to go with the 15 year loan. It will save us half a percent in interest, and the payment could be made even with a relatively small income, since we don’t have any other debt obligations.
We did double check with the bank we’re using about pre-payment penalties, and they said that none of their loans have them. So all should be good there (we will check the fine print though).
2million says
I would recommend locking in as soon as you can – if rates go up youll be glad you did. If rates go down you can withdraw your mortgage application and use a different mortgage broker if they are not willing to reset your rate.
GC says
now if only the rates on your savings accounts would go up at an alarming pace