My Refinance is Finally Done

After about six weeks of gathering paperwork, submitting paperwork and waiting, waiting, and more waiting, my refinance is finally done!!!

I closed yesterday on my new loan. I bought my house over three years ago using 100% financing through a combination of a first and second, 5 year, interest-only adjustable rate mortgage. The rate on my first mortgage was 6.375% and the rate on my second mortgage was 8%.

For those of you that have been keeping up with the housing crisis, this type of loan is one of the causes of the problem. Some people used this loan to get into a home they couldn't afford in the first place. When the rate adjusted, they couldn't afford the new increased payment and had the house go into foreclosure or were forced to do a short sale.

I chose an interest-only adjustable rate mortgage for a number of reasons:

• I knew what I was getting into. I knew that if I did not pay anything on top of the interest-only payment, my loan balance would never decrease. I reduced the balance of my loan by about $9,000 by making principal payments.
  
• I didn't plan to stay in my home more than 5 years.
  
• All of my closing costs were paid by my builder so I didn't have any out of pocket expenses.
  
• If I changed my mind and decided to stay, I could refinance to a fixed rate mortgage.
  

I decided that I liked my home and I wanted to stay for awhile so I started shopping for a fixed rate mortgage. My rate was not scheduled to reset until 2011; but I didn't want to cut it that close. Besides, mortgage rates are at historically low rates. Since my current mortgage company was not interested in keeping my business, I went with another company.

Yesterday, I closed on my new 30-year fixed rate mortgage. I was able to lock in an interest rate of 4.875% and will save thousands of dollars in interest. Not only that, since my mortgage is now a fixed rate loan, I never have to worry about the payment going up.