Home Debt Refinance Roadblocks

Refinance Roadblocks

by My Journey to Millions

What do you do when the universe appears to be against all attempts to complete a goal?  Perfect credit, spotless payment record, and 12 years at the same job (proof of ability to pay,) and I never imagined it’d be so impossible to take advantage of the record low interest rates.  But after 2 failed attempts to lower our rate on our mortgage I had to come up with a new plan.

I’m happy to say that our $135,000 mortgage has been our only debt for 4 years.  Our current 5.75% isn’t terrible but it drives me insane knowing rates in the 3% are just out of my grasp.  I feel like I’m throwing money down the drain every month I’m stuck at 5.75%.

Most people think of a mortgage as good debt but I sure don’t.  Debt is debt and I don’t want it!  One goal I have set for myself is to be debt free by 35.  That gives me 9 years to eliminate this debt.  Another goal is to eventually turn this property into a rental property and lowering the monthly cost would help make it more profitable for us.  Refinancing was supposed to help with these goals. But for now I just have to accept that I’ll be paying more in interest each month than I should need to for a few reasons:

  1. Our home appraised at $135,000 late last year.  Since it has no equity no one will even consider letting us refinance.  We could take a huge chunk of our savings to pay it down enough to refinance but being without an emergency fund isn’t a risk I’m willing to take.   Plus, we would still be paying PMI, most likely a higher amount than we are now, so I don’t see the point.
  2. Our loan is not held by Freddie Mac or Fannie Mae so we are not able to take advantage of the HAMP or HARP programs.

My plan now is to make extra payments on the mortgage regularly till I build up enough equity to refinance.  I feel like I’m fighting an upward battle because the housing market where I am is still tanking, so I can only imagine my home value is as well.  At least this plan will keep me on track for accomplishing my debt free by 35 goal.  It’s my only option unless someone just hands me $10,000 (a girl can dream can’t she?)

Readers:  Have you been able to take advantage of these low rates or are you in the same boat as me?  Do you think my plan is solid or should I be doing something else with the money going towards extra payments?

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W 08/28/2012 - 10:55 am

Refinancing without equity just isn’t going to happen, at least at any rate you want. I’m sure it’s frustrating, but from the bank’s perspective the deal makes no sense.

Em 08/28/2012 - 4:18 pm

Oh I know that and I completely understand why. Its just tough to handle something when you have no control over it (the market.)

Malingerer 08/29/2012 - 11:50 am

and the financial issues that reduced the value of the house in the first place occurred due to what? Oh ya, the banking crisis.. And now they wont lend her the money, but you bailed hem out? Perverse relationship, at least hats what it looks like to me.

Amanda L Grossman 08/28/2012 - 12:13 pm

Sorry to hear about your frustrations! You are absolutely right that you can pay it down faster and perhaps achieve the same financial goal as with refinancing (if consistent).

We refinanced in April (I think) and went from 5.5% to 3.5%. But we also have a VA loan and equity…perhaps that is why it was not difficult for us?

Em 08/28/2012 - 4:20 pm

3.5% very nice! Being consistent is the difficult part. But as our pay increases its easy to pretend that money doesn’t exist and just make it go toward the mortgage.

DebtsnTaxes 08/28/2012 - 12:39 pm

I know how you feel about not being able to refinance as you know my whole story. I just can’t believe there aren’t any programs out there to help someone who actually pays their bills compared to how many programs there are for people who don’t. Just stick with your plan of paying extra on it and I think you’ll be fine. Hopefully sometime in the next year you will be able to take advantage of the low rates. I don’t see them going any higher anytime soon.

Em 08/28/2012 - 4:22 pm

Ha, you certainly know the annoyance of refinancing! I guess it wouldn’t make sense for the bank to help a person who is actually honoring their commitment.

Jeff 08/28/2012 - 3:05 pm

my wife and I bought in may, so we were able to get an awesome 3.375% loan, and I feel pretty good about where it’s gone so far. If I were you, I’d look around for some other funding options for your 20% payment….perhaps lending club?

Em 08/28/2012 - 4:23 pm

Hmm I’ll have to look into other funding options. 3.375% is awesome!

Christian L. 08/28/2012 - 3:19 pm

As long as you’re not getting hit with a prepayment penalty, which is most common in subprime loans, then paying extra should allow you to pay this debt off in nine years.

But keep us update on your progress!

Em 08/28/2012 - 4:24 pm

No prepayment penalty here! I will certainly keep you updated.

Kathleen 08/28/2012 - 3:39 pm

Frustrating! It’s like the refis are only for people with more savings and the other plans are for people who are really underwater. Ask your parents what they paid, as an interest rate. That’ll make you feel better!

Em 08/28/2012 - 4:25 pm

Haha, very true about their interest rate making me feel better

Jason Price 08/28/2012 - 5:56 pm

Bummer on this but I do admire your dedication to paying off you mortgage early. Also, smart decision not to use your emergency savings to pay down your mortgage. Best to increase your payment a little each month. Overall, and I know this doesn’t help much, you have a good rate. 🙂

Em 08/28/2012 - 9:16 pm

Yes, it is a good rate. Sometimes its hard to remember that

DC 08/28/2012 - 6:59 pm

Sorry to hear about your situation. I am closing on my first house in about 6 weeks, so I was able to take advantage of the rates (in fact it was a big reason why I went ahead with buying a house). It sounds like you are doing all you can, and thankfully your rate isn’t too high (I personally believe it’s still beating inflation).

Em 08/28/2012 - 9:19 pm

Congrats on taking advantage of the rates and purchasing your first house! That’s gotta be exciting

Gen 08/28/2012 - 9:08 pm


Take a look at your mortgage statements as you set off on your prepayment quest. Sometimes companies will not apply that additional payment directly to principal unless you call up or specify on the payment ticket.


Em 08/28/2012 - 9:21 pm

Thanks for the advice, everyone should be aware of this. When we pay online there is a specific field for adding extra to the principle, which makes it a very easy process.

a blinkin 08/30/2012 - 9:32 pm

I remember when 5.75% was “an all-time low.” They continue to trickle downward. I wonder when they’ll stop? I’m sitting happily at 3.1%.

Here’s a crazy idea for you. I don’t recommend it but just thinking outside the box..

Refinance both of your free and clear cars and use the equity in them to pay down the mortgage. Then you’ll have 2 auto loans at 2-3% and your mortgage will be around 3% as well! Doable?

a blinkin 08/30/2012 - 9:33 pm

Best bad advice ever

jefferson 08/31/2012 - 4:47 pm

we are in the middle of a refinance right now that will take our interest down from 5.25% to 3.2%, and will save us a bundle over the course of the mortgage…

We took an 80/15 at a rate in the 7’s when we first bought the house and were stuck in that mortgage for years and years until we finally got enough equity.. But you will eventually get there 🙂


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