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Written By: Gary on September 26, 2010 No Comment

When I purchased my home I thought I’d stay in it around four or five years, give or take a year, next month will make eleven years! I’d never owned a home before, but interest rates were good, I had a condo that I liked and when the rent on my Southgate apartment jumped way up, it sealed this was the deal for me.

Mortgages For Dummies, 3rd Edition Eric Tyson, Ray Brown The rates on the 5-year Adjustable Rate Mortgages (ARM) seemed pretty decent; I knew rates were down but I like to cover my bets, and any year after five years the mortgage could go up 2% a year. Silly me, I was worried that if the economy got better I’d have a higher mortgage rate; but I never thought I’d live here more than seven years (when it would have the opportunity to have jumped up 2% two times).

Well it’s that time of year again and my mortgage adjusted, it went down 1/8th of a percent. I’m now paying 3.125%, this is much less than my original 6.875%. While I understand the value of my home has probably dropped, at least I’m not paying a higher mortgage at the same time, the lower value means less property taxes.

Year Rate
1998 6.875%
1999 6.875%
2000 6.875%
2001 5.25% (paid $750 to lower rate*)
2002 4.25% (paid $750 to lower rate*)
2003 4.25%
2004 4.25%
2005 4.25%
2006 4.25%
2007 4.25%
2008 4.875% (first yearly adjust)
2009 3.25% (yearly adjust)
2010 3.125% (yearly adjust)

I was paying the higher rate in the beginning when I owed a lot more money, so the higher interest rate did affect me more, but at the time it was a low interest rate. I think the rates were around 7% at the time and I paid a few hundred dollars ($300-ish) to lower it 3/8ths of a percent, which was supposed to take three-and-a-half years to make that few hundred dollar fee back, but since I paid the $750 to lower the rate I lost out on that (I think it was three years to the day) but only the $30-$50 I hadn’t recovered; I still think that was a good decision, who could have predicted a crisis of 9/11 proportions would occur?

I’m living on the East side of Dearborn (Michigan, United States) and they’ve finally removed the old deserted Montgomery Wards building and finishing a new office building which might help (a tiny bit) in revitalizing this side of town…

I made pretty good money decisions on this for my first time. The one big mistake I made was at the time of purchase I did have the ability to put 20% down (I had put down 15%) and I wish I had done the 20%; yes I know that’s a lot to put down these days, but my mother always taught me to be a good saver and I knew I’d want to buy someday. Here’s why: The PMI insurance, this is the insurance that you pay for to guarantee that you won’t default (but only for the first 20%), was harder to drop than they made me believe: you had to pay for an inspection and if the value of the house had dropped it wouldn’t be 20% and it wouldn’t get waived so I was a little nervous and a little annoyed. But it was $35 a month that I was putting towards nothing (for me, at least) that could have been towards my house and I didn’t like seeing it on my statement. It was about $35 for every 5%, so if I’d put down 0%, it’d have been $140 a month (that’s $1440 each year!). But if something had happened at the time and I needed the money, that would have been gone from my reserves (but I’m still kicking myself for it).

So other than my PMI rant, the whole home owning process has gone really really well. I’m still happy with the home. It’s been very centrally located to the three different jobs (Allen Park, Redford, Hamtramck) I’ve had since I lived here.

*Surprisingly, when I paid the $750 for the ARM to adjust adjust the rate, it actually restarted the 5-years over! So when I ended up changing to the 4.25% rate, it held for the next 5 years.

Written By: Gary on September 26, 2009 One Comment

I originally purchased my condo almost ten years ago. I purchased it with a five-year ARM (Adjustable Rate Mortgage) which means that after the five years my interest rate changes once a year. Since I never thought I’d live here five years, let alone ten it seemed like a good option for me. I’m still living here and due to a variety of circumstances my rate never started fluctuating until last year (see my ARM story from last year).

I was pretty happy when my mortgage rate only jumped up a little last year, but with the economy even worse this year my rate actually dropped 1.625% to a new total of only 3.25%! I know this shows the economy isn’t very good right now, but (while I don’t really talk about it) my personal economy isn’t so great right now either, so this is really a good thing for me.

I believe my mortgage rate is is based on a margin of 2.875% plus an index (1 year treasury-bills) which is currently 0.40% so that makes that a 3.25%. So unless the index can go less than 0.0.% (and I don’t think it can) I’m pretty much as low as it can go.

FYI, My mortgage was bought up by HSBC as soon as I got it (within hours) and they’ve been a pleasure to work with. And to get my mortgage, my first mortgage, my bible was Mortgages for Dummies. Also, Here’s a place to get the current and past rates from the U.S. Treasury.

Written By: Gary on September 26, 2008 2 Comments

So it’s that time for my five year ARM (Adjustable Rate Mortgage) to start adjusting. Was a little nervous because I didn’t know how it would go. It could have go up 2% but it only jumped from 4.25% to 4.875% so I’m pretty happy about 5/8ths of a percent (it’ll stay that rate for the next year). What I couldn’t understand was why my payments dropped if the rates went up? Turns out they recalculated my mortgage based on what I currently owe and since I’ve been paying extra on my mortgage it went down; so even though my interest is going up $45-ish a month it actually dropped my monthly payment.

I’ve had a really great experience with my first mortgage. I set it up with a local company and it was immediately sold to HSBC (it was sold so fast; I signed Friday at 4 pm and Monday I got HSBC paperwork dated from Friday). I purchased the five year ARM at 6.875 interest (I think I paid a small amount for points to drop it 3/8 of a percent) then a few years later I had them redo my interest rate to 5.25% with just a phone call (and a $750 processing fee on my MasterCard) and then I did it once more (5 years ago) to 4.25% for another $750 phone call. The phone call required no paperwork, just them checking my credit and my payment history. So I managed to stretch this 5 year ARM out to almost 9 years while dropping my interest rate in the mean time.

It’s worked out quite well for me (other than the fact that housing values have dropped) especially since I never thought I’d live here even 5 years :)

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