When we first purchased our St. Petersburg, Fla., home in 2005 for $129,000, we thought we had it made. Built in 1938, at the height of the Great Depression, our home was constructed when good materials were cheap because few people could afford to build. The home was in excellent condition and our interest rate of 6.25 percent wasn't bad; we were still building our credit, so we paid higher than we wanted, but definitely not as high as some of our friends. Because my husband is a veteran of the first Gulf War, we financed with a special veterans' mortgage that we really loved.
In 2007, we were told that our 5-year-old son had autism. He was in kindergarten and while public school was tough, he was bright enough to stay in a general education classroom until fourth grade. That's when his school woes began. We looked into our options and decided that to give our son the best we needed to remove him from public school and home-educate him.
To do that, I would have to quit my job -- a thought that terrified us -- and we would have to figure out a new financial plan for our family. We wanted to keep our home, the place where my son had lived since he was 3 and where many of our family memories took place. After reviewing our budget and deciding where we could cut back our spending, we also decided to refinance our home. Interest rates had dropped significantly and government financing for veterans had really improved with plans that offered low interest rates and more of our payments put toward princpal instead of interest. We decided to go ahead with the refinance, though we knew that would mean financial sacrifice for us.
To do that, we would have to first save for the refinance. We sold our second car, since I would no longer be working outside the home, and my son was homeschooling. On Mondays, Wednesdays, and Fridays, my husband took the car to his office, which was one long bridge and 30 miles away from our home. Every Tuesday and Thursday morning, however, my son and I had to wake at the same time as my husband and drive him to work -- round trip an hour of driving -- so that we could have the car for doctors appointments, shopping, and other errands. We eventually decided that we could do without a car long-term, freeing us from over $500 each month in payments for the loan and insurance.
Next, we gave up eating out and ordering in more than once each week. I learned to cook better than I ever had ... something that I now love to do. Before we cut back we were ordering pizza or other food two or three times each week; we were now saving more than $150 a month just by cutting out fast food!
Finally, I quit my two part-time jobs. At first, the loss of income really hurt, and we found ourselves wondering if we should put my son back in school. We were unable to take vacations, and we counted every penny for a while. However, downsizing to one car and eating out less helped negate the loss of income. After a month or two I began to earn some extra money freelancing and operating an online auction store.
After six months of these financial sacrifices, we finally had saved enough to refinance. We searched online and found a company that provides special mortgages to veterans. The interest rate for this loan was 3 percent for the first five years, less than half of the interest rate we were already paying. The loan also recalculated our principal amount on each year's anniversary, essentially reducing the principal amount on which our interest is calculated each year. The end result was a mortgage payment that was $150 lower each month, and which continues to reduce every year for the first five years. We build up equity in our home even faster, a side benefit of the refinance.
In the end, all of the sacrifice was worth the struggle: We feel more financially free with one car payment and a lower mortgage payment. I spend much of my time each day helping my son to learn, finding social events for him, and just spending more time with him, to help him to be successful in the future. He gets more of my attention and more quality time with me, as I now only work from home and our mortgage is low enough to allow us to do it. For our family, budgeting, sacrifice, and refinancing became a recipe for financial freedom and success!
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