In light of the subsequent sub-prime mortgage collapse, I think buying when we did was a smart choice. For one, houses in our neighborhood have been selling at $150k+. We paid $130k. We are going to have an appraisal done if we decide to refinance, and I will update the value of our home at that time. Also, I don’t know if we would have been approved if we had waited much longer. When I couldnt find a good house in our price range, I started thinking "okay, we can rent for a year, find a good house in a good neighborhood, and then buy." But this would probably not have worked out. Plus, I honestly believe that we are where we are supposed to be, that we need to be here, and I really do like it. I like our house. I like our ward, I like our neighbors. Everything seemed to work out.
Even though we could rent for slightly cheaper, buying was the right choice. And now that rates are going down and our home value is still up, we are looking into a refinance. We had NO down payment. So we have an 80% and a 20% loan, no PMI. All in all, $1030 a month. Refinancing, if our home comes in at $155k, give us about 86% loan to value, which means PMI, but the interest rate should be roughly 4% less than the higher interest rate on our 2nd mortgage. We would save roughly $100 a month. And have the peace of mind knowing that in 15 years, should we still be in our house, we won't have a balloon payment hanging over our heads.
What would we do with that $100 a month? Would we save all of it or keep paying the same amount on our mortgage? I don’t know. If we pay the same amount, we are basically making an extra payment a year, which cuts time off of our mortgage and saves us interest in the long run, but maybe that money is better spent on saving an emergency fund, saving for retirement, paying down bad debt, all kinds of things. I just don’t know. We aren’t planning on being here 30 years. At most, we are looking at 5. So what is the benefit? A little more equity? An extra thousand when we sell? It is a quandry.