Is this us? Washington Post writer has a similar mortgage story
While browsing through my Google Reader last night, just after posting my 100% financed article for today, I happened upon One Frugal Girl’s article “What were you thinking when you purchased your home?” where she commented on a Washington Post article. The article, titled “Was the Mortgage a Mistake?“, was written by a guy named Michael, who purchased a home up the Pike from us with an interest-only loan and 100% financing.
The differences are apparent though. Their home is a townhouse in Gaithersburg, MD. Ours is a single family home in Rockville, MD. We’re walking distance from 2 metro stations, while I’ll assume they MIGHT be near one. We have a bustling town center within walking distance, as well as shopping galore within 2 miles of our home (including a mall). Numerous bus lines pass nearby, and we’re 10 minutes from the tail-end of I-270, where traffic really eases up.
We looked at homes in Gaithersburg 3 years ago, but all of them were too far from main roads. We liked the Rockville area (see above reasons), so we looked into older homes. We found a 1900 sq. ft. Cape Cod with .21 acres in an excellent location for just under $400,000. The Michael from the article paid about $80,000 more than us for his townhouse. Oh, and we have a pool, which is a good and bad thing.
I’ll admit that we took a major risk when we bought our home 3 years ago. Our jobs could have taken a big downturn, but we’re not in risky industries. I’m in IT, but a unique sector that is growing significantly in this area. Stacie, as you know, is a Registered Dietitian, and fat people are everywhere, even in our own home! 🙂 When we bought our house, we were financing at 29% of our gross income, but now we’re quite a few points below that (on both loans total, not just the first mortgage).
When it comes time to refinance, if we choose that route, we’ll be in a better position than others who have overextended their finances. We are keeping our spending to a relative minimum, although we still treat ourselves to keep things interesting. We’re considering another auto purchase (for Stacie this time), but we’re also waiting until our Pontiac dies. We are also planning some major home improvements, but they’re not needed, just wanted. If we don’t get around to them this year, then we’ll plan for next year.
Are we worried about the market? Of course. What if we wanted to sell and the market still stinks in 2 years? What if we go into a recession? Well then we refinance and keep the house. It’s the pain of being a homeowner, but renters aren’t immune to market fluctuations. That house or apartment is still owned by someone, and they probably have a mortgage themselves.
You have spent some time explaining and defending your mortgage arrangements. If you had to make the same decision again today, would you still take on the 100% mortgage? Or would you stick to renting?
Plonkee, I’m not sure what we would have done. I complain about owning our home and wishing I would still be renting sometimes, but I do like our home. If I knew then what I know now, I would have bought back in 2001 when I moved here, then sold in 2004/2005 at the peak of the market. Then I would have rented until now, when my profit would have more buying power.
But you can’t change the past, so I won’t bother regretting my decisions (too much). But to answer your question, I couldn’t have put even 5% down since I had no savings, and our parents don’t have any either. The best choice would have been to continue renting, paying down debt, and then buy when we’re ready.
You mentioned the desire to stay in your house after the principal becomes due. Will you be able to afford the mortgage payment with P & I?
OFG: If our rate resets to something awful like 10%, yes, we could still afford the mortgage.
Actually, on our loan, it’s still interest-only after the 5 year mark. It’s just the rate that changes. We could handle a rate reset on the interest-only, but add on principal, and it would hurt quite a bit. Also, by that time, we would be debt-free (I’m sure we’d have to get another car by then, since Stacie’s car will have about 175,000 on it).
Hey, Dont diss Gaithersburg, I love it! I live in gaithersburg, can walk to an olimpic sized swimming pool, bought 2 years ago for $145K (40K) in renos, and have a nice 3 bedroom 1 and 2 half bath townhouse and can walk to everything I need. Oh and I live right off of 270… I am not sure what you are talking about saying gaithersburg is not by major rds. you must have been looking in the wrong places.