As a personal finance writer, I’m supposed to stay on top of financial news and know what’s going on. So I’m kind of embarrassed to admit that I missed my chance to refinance my home before interest rates rose. We got busy with life and put off refinancing, which turned out to be a big mistake.
Why We Wanted to Refinance
My partner and I bought a home over a year ago. At the time, my partner’s credit score was only in the 600s. Since lenders were tightening up their standards due to the pandemic, we didn’t qualify for a conventional loan. But we were able to get an FHA loan with a 4% interest rate.
My partner and I had a lot of big expenses come up around the time we bought our house. We needed a new car, had to pay for a cross-country move, and needed money to furnish the house, among other things. We also purchased an older home we knew needed some maintenance, including a new water heater and gutters. So we decided to put less than 10% down to avoid depleting our savings.
As a result, we’ll have to pay a little over $100 per month in mortgage insurance for the duration of the loan, which isn’t ideal. We also wish we had been able to get a lower interest rate, so we’ve been considering refinancing for a few months.
My partner’s credit score has improved, so we thought we’d qualify for a conventional loan with a lower interest rate than we have now. That may have been true if we had started the refinance process a few months ago. But because we only started seriously looking into it in February, sadly we missed the boat.
Interest Rates Rose, So Refinancing Didn’t Make Sense
When we spoke to a loan officer in February and discussed our refinance options, we were shocked at how much interest rates had gone up. The Fed had just announced that interest rate hikes were coming, which caused mortgage rates to shoot up. To get the interest rate down to a level we were happy with, we would’ve needed to spend about $14,000 on discount points.
We’ve been trying to pay off our house aggressively for the past year. So far we’ve knocked $16,000 off our mortgage balance. But if we refinanced and rolled the cost into the loan, we would’ve erased all that progress.
Refinancing into a conventional loan would have eliminated mortgage insurance and reduced our monthly payment by about $150. However, we decided refinancing wasn’t right for us because of how much it would cost due to rising interest rates.
If I had acted sooner, we might’ve been able to get the rate we wanted without discount points. Refinancing when interest rates were low would’ve saved us thousands of dollars, so I definitely regret waiting.
The main takeaway I’ve gotten from this experience is that I shouldn’t put off important financial matters. No matter how busy I am, I have to make time for my finances, especially if I’m considering something as major as refinancing.
You never know when interest rates will rise, and you could miss the signs if you’re caught up in daily life just like I did. Now I know I have to jump on financial opportunities when I see them instead of waiting for a more convenient time.
Have you ever missed out on a financial or business opportunity because you waited too long? Let me know in the comments section below!
Vicky Monroe is a freelance personal finance and lifestyle writer. When she’s not busy writing about her favorite money saving hacks or tinkering with her budget spreadsheets, she likes to travel, garden, and cook healthy vegetarian meals.