The year 2012 has seen many significant changes for my wife and me. Gina and I both began our seventh year teaching, shed a good deal of debt, and prepared to welcome our first child -- due Christmas Eve -- into our Clintonville, Ohio, home. The coming arrival of our son provided the impetus for many changes, including refinancing our home in December.
At the time of purchase, we had been convinced that 2010 was the penultimate year to buy a house. Our friends and family told us we were in a "buyers' market." Financial experts stated that interest rates were at historic lows and couldn't possibly last, let alone drop further. As a result, we closed on our first house in August 2010, borrowing $161,000 at an interest rate of 4.875 percent. Our monthly payment was $855.
In the intervening years, we lived a comfortable middle-class life while paying off our student and auto loan debts, noting all the while the steady drop of interest rates.
In March 2012, when we learned Gina was pregnant, we were hard-pressed solving the puzzle of accommodating another person in our family. Did we want someone else watching our baby? Could one of us stay home? With today's job market, could we count on finding part-time work? No matter how we ran the numbers, we were always seemingly just shy of being able to afford becoming a single-income home. Luckily, we found a solution in the still plunging interest rates: refinancing our home. At that time, we were well short of having the 20 percent in equity necessary to refinance without needing private mortgage insurance, so we began diverting extra income and some of our savings to additional principal payments. Our hope was to refinance our home by November.
We missed our target by one month, refinancing the remaining $145,000 balance in early December 2012. Our new interest rate is 3.44 percent and our monthly payment is $640 for a monthly savings of about $215.
This modest monthly savings is the difference between both of us working and, with some minor lifestyle changes, one of us being able to stay home with our son. Even if the job market continues to grumble along and we can't find a supplemental part-time income, we are now confident we can pay our bills. Our future has never looked brighter.