This week the IG Husband and I said goodbye, cut all ties, and parted ways…with our mortgage lender! It’s the most responsible, liberating, adult thing we’ve ever done. After a long short four years we paid off our mortgage and became homeowners. To commemorate the best way I know how, I’m sharing the photos from our first-home photo-shoot and sharing my 5 secrets to buying a home in less than 5 years.
How did you pay off your house?
It’s not personal, it’s business.
That was the best home-buying advice I received when we were house-searching. It’s the first on my list, because this should be the mind-set throughout the buying process no matter what your needs or purpose. You know how your heart races and you feel butterflies fluttering when you first fall in love? I felt that when I decided to marry my husband, not when buying a house. Overly emotional feelings can cloud our judgment and cause us to make poor decisions, so don’t look for love when looking for a house. Instead, look for what makes sense financially from a business point of view.
Blessed by serendipity.
We were so fortunate that it all came together for us in 2012, immediately after the real-estate market crash in Miami when there was no bubble to speak of. It was a buyer’s market and we took advantage. Personally, I wasn’t mentally ready to start searching when we did, but I learned to look at the prospects with an open mind. This is something you can do even when the market is more stable.
Short-sale for the win.
What we did is called a short sale. This means the seller sold the house at a price that was lower than the amount owed. Because this represented a moderate loss for the lender, there were a lot of hoops we had to jump through. The sale took a very long time in comparison to the sale of a traditional home. We had more inspections than I expected. And right before our closing date, the bank which had pre-approved our loan decided the house we wanted was too much of a risk for them to loan us money on. In addition, the property came as-is which means we have to front the costs of many necessary repairs. However, this also means that at 40% less than the market value of the property at the time, we got an amazing deal. Our goal was always to be relatively debt-free, so we weighed out the pros and cons. We were willing to live with the property’s problems temporarily, knowing that rather than having someone else turn a profit on our purchase, we could always work on those issues later at cost.
Put all your eggs in one basket down payment.
This is the one single piece of advice I can give that can be applied no matter the property, market, or circumstance- the bigger your down payment, the smaller your loan. It’s that simple. After having put in place an aggressive long-term saving plan with many luxuries sacrificed, we were able to put down almost 40% of the sale price. This was a risk because it represented practically all of our savings. However, taking into account the fact that the term on our loan was short, we took that risk. I wouldn’t recommend this over say a 30 year period, because you always need an emergency fund to fall back on. We decided that we could afford to make some small financial sacrifices during the time we were paying off the house, since it would be such a short period.
Swim with the loan sharks.
The type of loan we received is referred to as a “hard money loan”. In our case, we were able to borrow funds from a private investor using the property as collateral. The risks were high, for us it meant a higher interest rate (these usually range between 8%-12% on hard money loans). However, we agreed to pay it off in 4 years because when we did the math we found that paying 10% interest over 4 years turned out to be way less than paying the traditional 4% fixed interest rate over a 30 year period. We’re talking tens of thousands of dollars of a difference. Think of what you could do with that kind of money!
You’ll never know the value of a sound financial decision, until you’ve finished paying off the debt.
You know that saying about how you never know the value of a moment until it becomes a memory? In my case, I feel you never really know the value of a sound financial decision, until you’ve finished paying off the debt. There were times I was frustrated with our finances, especially when I found we had to skimp on luxuries in order to make our mortgage payments. However, being a girl in her thirties who is relatively debt-free and already a home owner is an amazing start to 2017.