We closed on our house three years ago today. As of spring, this will be the longest that Diana and I have lived in once place, and we've been living together for 13 years with six moves. What I never thought that I would be doing is refinancing it already, but there are a lot of things about 2020 that don't entirely make sense.
Our home ownership journey has been exceptionally weird the whole time. When we got married in 2009, we owned two houses in the Cleveland area, when the market was a mess. We moved to Seattle at the end of that year as renters, and were able to shed her house as a short sale but couldn't sell mine. Eventually we moved back to Cleveland into my house, because even with Seattle wages, we weren't getting ahead. Then we moved to Central Florida, sold my house in 48 hours, and put a deposit down to build a house within a week or two. Getting the loan for that house was a struggle because I was working contract at the time (which in bank terms might as well be unemployed), but it eventually got worked out and we landed a surprisingly decent rate of 4.375%. I was thrilled!
We were in that house for almost three years when we felt the walls were closing in a bit because I work mostly remotely, Diana's quilt machine was partially in a closet, and Simon was sprawling out, as kids do. Property values were going up and the house appreciated, and rates were going even further down, so we pulled the trigger and built another house. This time I got a rate of 3.999%, which seemed even more crazy.
And that leads me to today. Normally one doesn't really consider refinancing unless they've been at it for years, they can get a better rate, or want to shrink to a shorter term. I kept seeing ads for rates under 3%, so I figured, what the heck, I might as well look into it. I found some crazy low rates that involved putting big sums down or buying points, but the break even point, where the reduction in monthly payment compensates for the up front cost, was three or four years, which is too long. I went back to the guy who scored my first Florida loan, and he came back with a rate of 2.875%, more than a point lower than where I am! Best of all, rolling the cost of the loan into it, I don't have to put anything into it. I'll come out $300 ahead monthly and be break-even in 19 months. That's crazy. If we stay put for a dozen years, our net savings will be about $30k.
The flip side of this interest rate madness is that saving money straight up (not investing) is basically pointless. The savings account I have used to pay 3%, and now it's like 0.39% or something silly like that. What a crappy thing when in "uncertain times" you want to hold on to a little money in a risk-free and liquid way in case of an emergency. This also illustrates why home ownership is such a huge key to American "success." With a house appreciating by at least 5% per year and paying 2.875% interest on only a portion of the house's value, I'm wealth building and I have a place to live (assuming here the housing market doesn't take another shit). A renter just has an expense that they'll never get anything back for. That's messed up. It feels like an old European aristocracy, where the land owners have all the power.