Most folks don’t get to decide whether to get a mortgage. If you want a house, you need a mortgage, full stop. My situation was a bit unusual. I managed to buy the house for cash, then used money from friends & family and signature loans to complete most of the repairs. The house means a great deal to me, and many more folks than me have invested their time and money in it. Allowing a bank to put a lien against it, especially after our nightmarish experience with the Beierman Ave house, seemed really risky.
On top of that, I was fully convinced I wasn’t ready to even think about a mortgage or home equity loan. My experience with my credit union led me to believe the house had to be 100% fixed, inspected, and spit-shined before any such loan would be possible. A visit from our friend and neighbor Jon Zemke quickly changed that perception, and soon I was talking to the loan officer he used and paperwork was being drawn up.
In the end, the math made it irresistible.
I had taken out two 5-year signature loans. A combination of luck and care (mostly the former) gave me a pretty sterling credit rating to make that possible. The first in July 2012 for $30,000 had an 8% interest rate from my credit union. The second was thru Discover a year later for $20,000 at 12%. By now they’re under $40,000 outstanding, but it was $1,100 a month just in loan payments (I can hear those of you with student loans playing the world’s tiniest violin for me). In short: I’d played out this option and it was hindering my ability to put my own money directly into the house moving forward.
It’s not hyperbole that mortgage interest rates are at historic lows. The last time they were this low was the 1950s. So, I nabbed a 15-year fixed-rate mortgage for $75,000 at 3.681%, which I closed on Friday. No weird stuff, pre-payment penalties, or escrows – the most vanilla mortgage you can get. It eliminated my personal loans, the payments are half of what I was paying, it adds $30,000 to the project coffers, it improves my credit score, and it does all without tying me to a mind-boggling 30-year.
Put another way: if I kept paying what I’m paying for my current loans, it would be a 6-year loan for double the money.