What To Know About Refinancing:
Answers To Home Mortgage Refinancing Questions

What To Know About Refinancing And Our Home Mortgage Refinancing Experience

Perhaps a better way to say it would be What we wish we had known about home mortgages and refinancing. It was 2005 when we bought a home in San Diego, California.

Several years later, we needed our home mortgage refinance questions answered.

Home Mortgage Refinancing Lessons Learned

By that time our mortgage pre-payment penalty timeline had been fulfilled, and our monthly payments had adjusted to nearly $5000 on a 1070 square foot house with a valuation that was $150,000 less than we owed. What a dumb financial decision we had made!

We had purchased the house when changing careers. I discovered that most of the answers I was getting when attempting to refinance our mortgages were pre-bubble, that is, based on the terrible advice given before the real estate bust here in San Diego.

Of course the eager Realtor who sold us the home and the home mortgage specialist who facilitated the first and second mortgages were no where to be found.

They were the ones who recommended we keep our cash, make no down payment, take out an interest only loan, and then refinance in 2 years, when we could take out $100,000 or more because of increased housing prices.

I confess we were willing participants in what we now all know was bad mortgage advice. I am not sure they ever confessed as to their stupidity or greed, but I know now that was our motivation.

What To Know About Refinancing A Home Mortgage

What we needed to know about refinancing required better answers than what the high pitched refinance telemarketers were providing.

I remember that We would receive refinancing offers in the mail, some days as many as 5 or 6. In addition were the desperate telephone calls from refinance companies urging us to take action. Only one problem, home values had begun their downward spiral and the home did not have enough equity for a new mortgage.

Sometimes I wonder if we as a country have learned our lesson regarding the housing market. It seems we are once again being bombarded by Mortgage Brokers pitching house refinancing opportunities. In fact some of the same radio ads I hear for refinance loans are the same ones aired a few years ago pre-real estate bubble.

Back then, we had only lived in our modest 3 bedroom San Diego home for 5 months when we began hearing from mortgage refinance loan brokers who want to be my best buddy.

By the way, I often told people we just bought a $100,000 in San Diego. When they questioned how we could possible do so, I gave the simple answer that we had to pay $540,000!

So, why did we spring for a house purchase in San Diego when we changed careers?

Reasons We Purchased A Home In
The San Diego Ridiculous Housing Market

Just before we bought our house, I had read that it took over $130,000 annual income to purchase a median price home in San Diego. It was also reported that fewer than 10% of the people owning homes could even afford to buy the present house they owned if they had to buy it over again.

To answer the question "Why did we agree to buy a house in the San Diego market, especially with such ridiculous housing prices and home mortgage payments?" The answer at the time for us was simple:

  • We had no money and owned no house of our own (one of the pitfalls of living in church parsonages most of my ministerial career).
  • We were paying $2000 per month rent anyway, with rental increases sure to come, so we reasoned.
  • Our career change journey had led us to San Diego, where we were convinced we would most likely work until we retired.
  • And figured that if we lost it all, we would end up back where we were anyway -- no money and no house of our own. Little did we expect this would actually happen.

Concluding Our Home Mortgage Refinancing Story

Did we ever refinance our first and second mortgages? Nope, never happened. Oh, we had several desperate real estate lenders attempt to make it happen.

But by that time, even though they would attempt to get us what was owed plus another $30,000 or $40,000 for themselves, the San Diego real estate market had plummeted, with most mortgage holders upside down in their mortgages. That means they owe more for the home than it is worth.

Short Story About What To Know About Refinancing

To make this a short story, we eventually sold the home on a short sale, with the new buyer paying $150,000 less than we owed. A short sale means that the lenders took what was offered for the home and even though short of what was owed, paid off the loans.

All of this actually turned our to be the best thing that could have happened, for which we are very grateful. In fact, in a little more than a year, we bought another home for cash.

While that is another story, we went from threat of foreclosure to being debt free based on applying what we learned about home mortgage financing.