The Final Chapter Of My Mortgage Refinancing Journey, Hopefully

The last post about my mortgage refinance journey left off with me waiting for either the DU refi program to come through or Fannie/Freddie to revoke their ridiculous hatred towards condos. So I waited and waited for one of the two situations to shake out so I could reap the benefits of a 4.875% 30-year fixed mortgage. Neither happened.

My lender called two days ago and said he could get my application approved without either of the two options above. I didn’t really follow all of the details except that I was good to go. The only problem was that my 4.875% was no longer valid.

My lender said he had been waiting for a week or two for rates to drop and he was concerned the rates weren’t going to drop any lower. Also, if we didn’t close soon, the appraisal and paperwork that had already been filled out would no longer be valid.

He quoted the current rates as follows:

• 30-year fixed – 5.375%
• 15-year fixed – 4.750%

I had a huge decision on my hands. My current mortgage is 30-year fixed at 6.25%, which comes out to a monthly payment of $1502. The 5.375% 30-year fixed has a monthly payment of $1354, a savings of $148. The 4.750% 15-year fixed has a monthly payment of $1842, an increase of $340.

I took a few hours to weigh the pros and cons of a 15-year vs. a 30-year mortgage. Obviously I will be spending significantly less on interest with the 15-year mortgage. The 30-year mortgage comes with significantly less risk since the monthly payment is $488 less.

I can afford the 15-year monthly payment as long as I don’t lose my job. I feel pretty secure with my job. If I were to lose my job, I have contacts at a few local biotech/engineering companies, which should make finding a new job easier. I also have $10,000 built up as an emergency fund, which would make losing my job significantly less disastrous. I still have the option to return to tutoring for some good money. Finally, this added risk will make me even more motivated to make money through my self-employed projects.

In the end, I decided I was a risk-taker. Why should this decision be any different? I will most likely not make another payment to Wells Fargo, which is good because they were not very kind to me. My next payment will be in September so my August “payment” will go towards covering my closing costs.

Hopefully the next installment of my mortgage refinancing journey will be my last. When I close I will update you all and also post about my updated amortization schedule and run a few numbers regarding how much interest I will be saving. It will also be interesting to see how much more equity I will be building with this new mortgage.