First person: Refinancing to survive on one income

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First person: Refinancing to survive on one income
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First person: Refinancing to survive on one income

In July 2007, my husband and I bought our first home together. The house, originally built in 1991, had recently been flipped by some investors -- so recently, in fact, that we were driving by the exact moment the realtor put the "for sale" sign in the yard. Although it had some years on it, the house was move-in ready. With the intention of only staying five years before upgrading to a larger house, it was the perfect starter home for us. Then the economy took a dive, and so did our five-year plan.

When we purchased our home it was at an interest rate of 7.25 percent, and our mortgage payment was in the mid-$1,200 range, but as the years passed and taxes increased so did our monthly payment. The last two years we paid $1,318 a month for our home, and though we were living paycheck to paycheck, we were still getting by. Then the worst happened.

The day after Thanksgiving 2012, my husband became -- like so many of our countrymen -- the casualty of a R.I.F. (reduction in force) and was laid off from his corporate job. We had no idea how we would continue paying our high mortgage payment, along with our other bills, or how we would get through Christmas and our son's second birthday. Worse yet, our HVAC unit was finished -- completely beyond repair -- and needed to be replaced. We had no money to pay for a new unit, and the thing was running constantly but blowing hot air when it was hot outside and cold air when it was freezing out. We were struggling and didn't know what to do.

Then, out of the blue, we got wonderful news.

Four months earlier, we had begun the application process for a rate reduction program through our lender, which is similar to refinancing in that we would receive a lower interest rate but unique in that it allowed us to keep all of the other terms, including length of the mortgage, the same. However, because of our debt-to-income ratio, we were skeptical of being approved. By early December, our paperwork had gone to the underwriter, and we were told that it would take another month or longer to get a decision. All we could do was wait.

Though we tried to put it out of mind, we couldn't help but think how much the reduction in our mortgage would help our family, not just with monthly bills but to replace a vital appliance in our home. Surprisingly, less than two weeks later, we got a phone call late in the evening telling us we had been approved. We were ecstatic! Our luck had finally turned, and we knew we would be OK.

Our interest rate dropped to 3.75 percent and our monthly mortgage payment was lowered to $994, a savings of $324 per month. Additionally, we were able to replace our entire HVAC unit -- and just in time, too, as we were approaching some 80-degree days in Jacksonville, Fla. While we have to make monthly payments on the new system, doing so would never have been possible without refinancing our mortgage rate.

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