Take my current home loan for instance – I owe about $235K. Let’s just compare a new 30 year fixed loan: one at 6.375% (my current rate) and one at 4.75%. At 6.375%, my monthly payments would be approximately $1466.86, assuming I didn’t have any points added to my loan for processing, paperwork, etc. At 4.75%, my monthly payments would be approximately $1225.87 – a savings of $240.99 per month. Over the course of a year, I’d be saving $2,891.88.

If refinancing is an option for you, take advantage of the low rates now! These 4% interest rates for home loans won’t last forever. Just hope that you’re not stuck in my situation of not being able to refinance – My refinance was denied!

Since the time of this writing, interest rates have shot up a bit to the 5% range. Still not too bad, especially if your current loan is in the mid 6% and above range. Best of luck to those of you who are looking to refi or get a new home loan.

My first loan, the 3/6 ARM, adjusted to its maximum amount of 6.75% after its first adjustment period, and interest rates were still low, so I figured that it’d be a good time to combine and get into a fixed rate loan. I refinanced through Axcess Real Estate and combined both loans into one and decided to add an escrow account too. My new payment is $1,791/month, about $300 of that goes into my escrow account for property taxes. All in all, I’m looking at about $1,500/month for my new mortgage payment, as compared to the $1,250 that I previously had with my 3.125% 3/6 arm and my 15-year 2nd.

I’m going to walk you through the type of loans that I got, but keep in mind that I purchased my condo at the beginning of the upward spike in housing prices. When I bought in June of 2003, I’ll be honest, I thought I was paying way too much for a 2 bedroom, 2 bathroom condo, but if you ask me now, I’ll tell you that I bought at the perfect time. When I bought, I would have never imagined that the price of my condo would nearly double in the next 3 years, which it did, along with most other housing prices in both Southern California and across the United States. The price of my condo has fallen since the peak of the real estate spike in 2006, but if I were to sell today, I’d still be able to take quite a bit of equity with me. The thing to keep in mind while reading this article is that I was able to “weather the storm” and survive with my mortgage while many homes (both in my area, and around the United States) were falling into foreclosure.

I bought this condo for $290,000 with 10% down and 2 loans. My realtor was able to keep me out of having to pay PMI somehow by getting a 10% loan in addition to my primary 80% loan, which I’m thankful for to this day. My 10% loan was at a fairly standard rate of about 6% (I can’t recall now and don’t want to dig up the paperwork) so my payment on that was a little less than $200 per month. Now, my primary loan was the loan that could really get me into a lot of trouble, and it was loans like this one that did get many people into trouble. My primary loan was for 80% of the selling price – $232,000 and it was a 3/6 ARM. An ARM is an Adjustable Rate Mortgage and you can read about My Adjustable Rate Mortgage here if you’d like to read my post to get more details. Basically, a 3/6 ARM will stay at a starting rate for 3 years, then after 3 years it will adjust, and will also adjust every 6 months after that. So here’s the deal, with my 3/6 ARM, I got an initial interest rate of 3.275% through IndyMac Bank and my initial monthly payments were $1,017.25 – When combined with my 10% loan, I had a total monthly payment of less than $1,250 and I knew that my monthly payments should have been somewhere closer to $1,650+ per month on an 80% loan, and about $1,850+ on a 90% loan (which I had).

The Mortgage Crunch
When I purchased my condo in 2003, there were all sorts of clever loan programs that would allow people to purchase homes that were way beyond their means, and the problem was that most people just didn’t understand what they were getting themselves into. I think this is where most people got into trouble was in not realizing that they were eventually going to have to pay the adjusted rate on their Adjustable Rate Mortgage. That’s where I differed from most borrowers and first time home buyers. I approached the situation with the attitude “how good of a deal can I get for the first 3-5 years”, whereas others simply asked, “how big of a house can I possibly get into”. Many of those who stretched their income to the max to get into the best and biggest houses are now either out of the house through foreclosure, or struggling to make ends meet.