I started this post about 4 months ago and then got so busy I didn't have a chance to come back to it until now. I had been doing so well with my debt that I decided in February to go and triple it. I bought a house.
I know, it sounds a little counterintuitive to take on a mortgage when I'm staring down my student loans. I decided to do it because in the long run it will save me money, though. Rents in my city are rising at an alarming rate. In the two years I lived in my apartment, my rent doubled. I figured at some point, the rent on a one bedroom apartment would catch up to the mortgage on a multi-bedroom house, and I wanted to get out of renting before that happened. I hated flushing money down the drain every month. When I paid rent, I was fattening the wallet of my landlord. When I pay my mortgage, a portion of that goes to me. If I kept renting, in 30 years I would get to keep paying rent. By buying a house, in 30 years I'll have a house. (Though I plan to pay it off much sooner than that. This is a get out of debt blog, after all.)
I used a down payment assistance program, since I didn't have a down payment saved up. The way it works is that a local business organization put up my down payment, and in exchange my mortgage is at a higher interest rate. The difference between market rate interest and the interest rate I'm paying is enough to cover the cost of the down payment in 3 years. If I sell the house or refinance before 3 years, I have to pay back the down payment assistance, but once I get to 3 years I can do what I want without having to pay it back (because I will have basically already repaid it in extra interest). I'll refinance then.
Because I'm self-employed, it was a little harder to get approved for a mortgage, but I had a good year last year, so once I filed my taxes, I was able to show that I can afford a house. (This is probably the only time I'll ever file my taxes on February 1. April 15 all the way from here on out!)
The process was dizzying in how fast it went. I gave the documents to my mortgage broker on February 1 to get approved for the loan. I found my dream house on February 3 and put in an offer that day. I closed on February 27 and moved in on March 1. It was exactly one month from handing my tax return over to sleeping in my very own home.
It's been a wild ride. The house was at the very top of my price range, but it's in the neighborhood I want, and it was recently remodeled. So I figured it would be an easy turnkey solution.
On day one, the water main burst. Fortunately it was on the city's side of the meter, so I didn't have to pay to fix it. (Well, I didn't have to pay out of pocket to fix it. My water bill and tax dollars paid for it.) I had to pay extra to get internet installed because the previous owners cut the phone line when they remodeled, so a technician had to come out to run a whole new line.
My back fence is in disrepair, the gate is buried in the ground and doesn't open (and I don't have a key to it anyway), and part of the fence doesn't even reach the whole way. So I'm having the back fence replaced next month. Fences are expensive!
And...my floors have asbestos in them in 3 bedrooms. My inspector didn't catch that on the inspection; it came as a surprise to me a few weeks ago. Because the asbestos is beneath the carpet it's not immediately dangerous, but it's still asbestos. I'm getting that taken out next week, and I'm getting the floors replaced the week after. The plus side is that now I have an excuse to get rid of the carpet. I hate carpet. I'll be putting in wood laminate instead.
In order to help with the mortgage, I've started renting out the spare rooms (more about that in another post later). So I went from tenant to landlord in short order. I've even had to evict someone already!
Right before the whole asbestos situation came up, I got a large amount of extra money at work (several cases I had been waiting to be paid on got paid all at once). I used that money to pay off my highest interest rate student loan, and then asbestos happened like a week later. The cost of the asbestos was about the same as the amount of that student loan. So I had to take out a personal loan (at a slightly higher interest rate) to cover it. One step forward, one step back. Doing the debt payoff cha-cha.
If I don't have any big emergencies, I can get my debt paid off in 5 or 6 years. The personal loan should be paid off by the end of the year because I'm still owed money on some more big cases. Then I'll go after my student loans because their interest rate is both higher than my mortgage and not tax deductible. I should have that taken care of in 3 years. Then I can refinance my mortgage down to market rate and start attacking it with all I've got. I can see freedom, even though it's still a ways off in the distance.
I really love owning my own home. I hadn't realized until moving in just how stressful being at the whim of a landlord was. I can relax now, knowing nobody can evict me or raise my housing prices. And I don't have to ask anyone's permission to paint or hang curtains.
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