We live in a cozy little house nestled alongside one of the Finger Lakes, 15 miles north of Ithaca, N.Y. When we purchased our farmette in 2001, it was in desperate need of renovation. Built during World War II, the builder saved money by using a lot of recycled materials. The rooms were tiny and cramped, including a 22-inch-wide and 12-foot-long passageway to the only bathroom.
With high hopes of making this our perfect home, we took out a 30-year fixed mortgage of $150,000 at a rate of 7.1 percent. Our monthly payments were $1,008.
The builder changed the house into an open, airy, and charming space, with views of the lake and rolling hills. About a third of the money we took out in the mortgage was spent on renovation.
In early April 2012, a friend mentioned she was remortgaging her house for 3.5 percent, the "best rate in town." I'd been to my credit union earlier that week, and remembered seeing a better rate posted there.
A quick call confirmed that the going rate for a 15-year mortgage was 3.2 percent. I thought, "This really is the best rate in town!" I scheduled an appointment with the loan officer, and collected the appropriate documents to prepare for our meeting.
Loan officers love people like me. I pay bills on time and pay my credit card balance off each month. I have savings, a 401k, and equity. All of this equates to an excellent credit rating, which the mortgage officer checked. The big three credit reporting companies gave me scores of 799, 804, and 812. The young woman who was working with me smiled when she read me my scores. She said, "These are the highest rankings I've seen! When I saw these, I knew you were golden."
I locked in that 15-year mortgage at 3.2 percent on a balance of just under $100,000. This dropped my monthly payment to $700 -- that's giving me $300 plus in savings every month!
Rather than fritter away that $300 each month, I plow most of it into the mortgage. I told the loan officer that I want to be mortgage-free in 12 years. Her response: "Based on your credit rating and credit history, I'm sure you'll beat that goal." I think so, too, thanks to refinancing!