Experts argue both sides of the debate of whether it's better to rent or to own a home. Buying a home during the housing bubble turned our dream of owning a home into a nightmare. Now that we have owned our house for 8 years, I can finally say we woke up from the nightmare. We have realized our American dream at last. It just took us a while to get there. According to a recent CNBC article, President Barack Obama recently discussed accomplishments in the housing recovery. I am glad we didn't give up on our underwater mortgage. We kept paying extra until we had enough equity to refinance our mortgage at 2.75 percent without having to pay private mortgage insurance. Looking back, I can see some of the missteps that created our home ownership nightmare.
Overpaying for our house
The first mistake we made was to buy our home during a housing bubble. We knew we were in the middle of a housing bubble, but we wanted to buy a home for our family. In 2005, people were competing to reserve a lot in our Florida community. We met with a new home sales consultant at a neighboring subdivision. In fact, we were so desperate to "win" our house that we put down a deposit on the lot without even visiting the actual subdivision in which we now reside. We paid $180,000 for our home, which is now worth $120,000. If we could have rented for one or two years, we could have bought our home for significantly less money.
Paying the minimum at first
During our first two years of living in our new home, we rarely made any extra payments. We had a higher interest rate of about 6 percent when we took out our original mortgage. We would have saved more money on interest if we had paid extra on our mortgage in the beginning instead of waiting. We made the excuse that we had to spend money on new floors and furniture. We weren't worried about appreciation because housing values were on an upswing after we moved in.
Paying high closing costs
According to a Bankrate.com article, Florida closing costs in 2013 averaged about $4,300 for a $200,000 loan with 20 percent down. After paying our refinancing costs at the start of this year, it took us 6 months to pay the mortgage down to where it had been before. Although I'm glad we locked in at 2.75 percent, I regret the fact that we did not shop around enough to find a bank that would offer us lower fees for the application, processing, underwriting and other lender fees. As it is, the third-party fees such as appraisal, credit report, title search and survey fees were already high.
After refinancing, we now have an extremely affordable mortgage payment of about $900 a month, which beats renting. It would be nearly impossible to find a 4-bedroom and 3-bathroom home in our area with rent for less than $1,000 a month. Also, our home will be paid off in another 14 years. From my experience, owning a home still makes economic sense in most cases. We could have walked away from our underwater mortgage when the housing market crashed, but we stayed put until the fog cleared. It's funny how our worst financial decision turned into our best now that enough time has passed.
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