Thursday, November 15, 2012

Home Sweet Home: Financial Peace University Week 8

From the second I stepped foot into our house, I loved it.

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(I may have started jumping up and down as soon as the seller stepped outside to let us walk around.)

From having it bursting at the seams with people

to completely empty with just Dan and the dogs, I love it.

Having said that, looking back, it probably wasn't the best financial decision to buy it.  I had just started my first official job out of school and my fellowship.  When we signed the paperwork I hadn't even earned a paycheck yet.  We already owned a house with a very comfortable, small house payment.  However, as Dan says, I had house fever and there was no telling me no.  

Don't get me wrong - we could "afford" the payment then.  And, we can "afford" the payments now.  However, if something happens in the future, and one of us ends up without a salary, having this house payment would seriously strain our finances.  I would never forgive myself if I put our family in an unnecessary struggle because I wanted a bigger house.

I am going to keep that thought in the back of my mind as we start making extra payments on our house until it is paid off.  It will take us a long time (we probably won't even start for two years - paying off your house isn't until baby step 6).  

Do I regret it?  No.  Even in the year and a half we have lived here we have made so many memories.  Priceless memories.  But, I do want to work hard to not even have to think about it again.  

If you are buying a house, Dave's main advice would be to save up and pay cash for it.  Obviously, that isn't going to happen for a lot of people.  So, instead, he says to put at least 20% down on a 15 year conventional loan.  The payment that this creates shouldn't be more than 25% of your take-home income.  

Currently, we have a 30 year loan.  I have looked into refinancing into a 15 year loan, and it appears our payments would go up about $500, but the increased principal we would pay and the decreased interest are pretty hard to ignore.  More on that to come...

The rest of this week's lesson was on things to do if you are buying or selling a house.  As we are currently not doing either, I don't have much personal input to add, but there seemed to be a lot of good advice. 

Thought for the day

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  1. Definitely look into refinancing. We had our house refinanced 9 years ago and never really thought about it again until we had a banking workplace thing. They lady said now is the perfect time. We originally went from 30yrs at 7.25% to 5.7% at 20yrs. Only yuck factor is that we didn't have an escrow, and had to pay insurance and taxes on our own. This time we went from 5.7% at 20yrs to 3.6% at 15 yrs. Our pymt went up less than $100 a month. Out way all of the options out there. The first refi was before our daughter was born. Set our mind at ease a bit.

  2. We are kind of going through the same thing. We *love* our house, but looking back we are thinking it wasn't the best financial move. We are thinking of downsizing, knowing that we don't *have* to if it's not exactly what we want.


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