Don’t forget you can deduct taxes and interest from your income taxes, and you may be able to refinance to a fixed rate before the ARM period ends, hopefully at a lower rate. The HOA fees sound manageable, especially since it’s better than renting in many cases. You’re still building equity in your home.
@Teo
Our HOA is around $400/month. How exactly does the interest deduction work if we’re likely not exceeding the standard deduction?
Ori said:
@Teo
Our HOA is around $400/month. How exactly does the interest deduction work if we’re likely not exceeding the standard deduction?
In many cases, it doesn’t actually change your tax situation significantly unless you have enough other deductions to exceed the standard deduction.
When making a large lump sum payment on your mortgage, consider a recast instead of a refinance. This adjusts your monthly payment to reflect the new balance without the need for closing costs, keeping your current interest rate.
@Nari
I wasn’t aware of this option. Thanks for the information!
We just learned that our lender, Wells Fargo, will offer free refinances in 2025 for qualifying loans. Maybe your lender has a similar program?
Noor said:
We just learned that our lender, Wells Fargo, will offer free refinances in 2025 for qualifying loans. Maybe your lender has a similar program?
I’m working with a local lender, so I’m not sure if they offer something similar, but I’ll definitely look into a refinance with Wells Fargo. Thanks for the tip!
@Ori
Just to clarify, Wells Fargo is offering free refinances only for loans that originated with them.
Noor said:
@Ori
Just to clarify, Wells Fargo is offering free refinances only for loans that originated with them.
Understood, thanks for clarifying!
Sometimes, a reality check helps. Consider how much worse it could be if you had no home at all. It’s a tough thought, but it puts things into perspective.
You might be able to refinance to a 5.5% 30-year conventional mortgage soon. Keep an eye on the rates.
You’ve made it through the toughest part. Hang in there, rates are likely to go down eventually, and you’ll be able to refinance to a better rate.
I’m in a somewhat similar situation, having committed to a fixed 30-year mortgage at around 7%. While it feels like not much equity is being built initially, the decision to buy was driven by the unique appeal of the property in a challenging market. Condos may not offer the same level of uniqueness as houses, but owning your place provides significant peace of mind.
Expect to refinance within 18 months or less when the market shifts. Don’t worry too much about the payment changes; they’ll likely be manageable.
Consider refinancing with a first lien HELOC and aim to pay it off in 6-8 years for more efficient equity build-up and interest savings.
The combined amount of interest and property taxes you’re paying likely exceeds the standard deduction, making them tax-deductible and providing a net benefit. Also, you can look into refinancing when rates drop. If you can secure a rate 1-1.25% lower than your current one, it could substantially reduce your monthly payments and lower your private mortgage insurance costs.
I live north of Denver and purchased a condo for $415k over a year ago. It’s larger than any home we could afford in the area, and we’re happy with it. While others may have secured lower rates, owning your place allows you to personalize it and make it feel like home. We view it as a starter home where we can begin our family, planning to move to a larger house later. It’s normal to have doubts, but try to enjoy your home despite them.
In the short term, maybe. But looking at a longer timeline (10 - 30 years), definitely not. Just ensure you can afford the monthly mortgage payments and you should be fine.
If you’re willing to drive 45 minutes in any direction, you could potentially save $50k. It’s something to consider.
I purchased my house back in 1998 with a 7.125% rate. Despite economic downturns, I’ve managed to maintain payments. Don’t worry too much; try to enjoy your home.