Refinancing to afford private school and start a business

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Refinancing to afford private school and start a business
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Refinancing to afford private school and start a business

In 2007, my wife's jewelry business had really started to grow. I would come home to find Teresa's inventory spread across the kitchen table and most of the furniture. And any space not occupied by jewelry supplies was being claimed by our 1-year-old daughter and her toys. The situation wasn't going to get any better because Teresa was pregnant with our second baby. We had to move.

Fortunately, I had just the right place in mind: a condo located in German Village, the Columbus, Ohio, neighborhood where I grew up and a model of historic preservation and revitalization. It featured four floors, three above grade and a finished bar in the basement. The finished area of the main house offered 2,916 square feet. There was a 484-square-foot carriage house over the two-car garage, which could become Teresa's studio and a guest house. The main house and carriage house together gave us four bedrooms. The condo was our best option given our growing family -- and business. But at $250,000, we had to jump through some hoops to make the purchase happen.

We had little money to put down so we opted for a 100 percent loan-to-value mortgage, meaning a down payment was not required; a subprime loan. This loan hit us with an 8 percent interest rate. We had been turned down by numerous banks because the condo was non-conforming due to the lack of a condo association, management company, or board. I realized this was the best -- and possibly the only -- rate we were going to get. I had sold a car, paid off another car, and paid off some debt to make ourselves look as good as possible, but the 8 percent wouldn't budge. So we closed in September 2007 with a principal and interest payment of $1,834.

In June 2009 we jumped on the opportunity to refinance. The bank called us to tell us about the program through the Homeowner Affordability and Stability Plan. We had looked into refinancing before, but the banks were tightening lending and didn't want anything to do with subprime loans or a non-conforming condominium. This was an entirely new mortgage so we had to submit all the paperwork and income records to qualify. We only paid $200 out-of-pocket and they even sent someone to our house to close the loan. The rate dropped to 5.5 percent bringing our payment down to $1,419. That's a savings of $415 a month and $4,980 a year.

That extra money allowed us to enroll our children in private preschool at St. Mary School in German Village -- the same school I attended while growing up. With them in preschool, Teresa could quit her job and concentrate on her business full time. Her jewelry business has grown fivefold since 2009 -- and it is still growing because of the studio, where she can work, meet with clients, and hold events.

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