Mortgage Refinancing Is Not A Viable Option For Us

We moved into our home in June of 2007. At the time, we got a 30-year mortgage rate of 5.875%, which was pretty good since the average rate was around 6.25%. Luckily we had locked in the ‘lower’ rate a few weeks prior.

At the time, we put down 20% of the purchase price of the house. I had hoped that this would create a comfortable cushion because prices in the Detroit area had already been dropping. In fact, we purchased the house at a price 13% lower than what the previous owners had paid for it just a couple years before.

Unfortunately, the market has continued to trend way downward, and the amount of equity in our house has decreased tremendously to the point that we are nowhere near the level where we have 20% equity in our home.

If we were to refinance, I’m certain that a lender would do a new appraisal on the property given the change in market conditions over the past two years. This would definitely show that we do not have the 20% threshold of equity required to avoid personal mortgage insurance (PMI).

When I ran the numbers, we would probably be able to get a rate about 1% lower than what we’re paying now. This would save us about $225 per month. However, PMI would take away a huge chunk of it. And, if I recall, it is also not tax deductible, so I think our net cost would actually be higher for the short term.

While it’s true that PMI would be dropped at some point, it could be a long way off before prices stabilize and before we paid enough to get to that point. Too long where I’m not comfortable making the move.

Our other option would be to basically make another down payment to get us to the 20% equity level. While we have cash available to perhaps swing this, I don’t like the idea of having little cash on hand, especially in this day in age.

While I would love to write some articles about us refinancing, I simply don’t see it as a viable option for us.

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Baby Furniture On The Way!

We received good news that the baby furniture we ordered will be delivered on Thursday! Just in time for our second baby shower. Both my mom and my mother-in-law were generous enough to throw us a baby shower. The first was last weekend and the second is this coming weekend. We need the space to start putting away clothes and such, so the furniture will be great.

One thing I could not imagine is skipping the assembly fee. For an extra $25 they are assembling the furniture. I’ve heard horror stories about cribs taking hours and having parts that don’t seem to fit or are left over. The $25 was a luxury expense, but I already know it was money well spent.

All I hope is that they don’t send a delivery guy like we got for our bedroom furniture in 2007. It was a different store, but they came to put things together, and one of the guys was a complete klutz. He scratched our bed rail, the headboard, AND dropped the mirror. They had to come back to replace all three items.

Let’s just hope he hasn’t caught on with a job delivering baby furniture!

We are just about a month away!

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Is The Sunday Paper Going The Way Of The Dinosaur?

Recently, the Detroit Free Press and Detroit News, the two major newspapers in the local market, announced that they would be making drastic changes due to the decline in the newspaper industry, as well as the economy. Both papers have been producing the daily paper for decades upon decades.

In the 1980’s, the papers combined a lot of operations including printing and distribution, though they had separate writers, columnists, and editorial staff. That move, at the time, was seen as somewhat dramatic, but it has since been applauded and probably saved one, if not both, of the papers. Many cities, in the meantime, have seen at least one of their major papers shut down.

Still, the papers took another revolutionary step in the last couple of weeks. Instead of doing seven day home delivery, they are now cutting back to three days. The other four days, you either have to purchase the paper at a newsstand, pay to have it delivered by mail, or read an electronic edition that displays the pages on a computer screen just as if you were reading the paper. With any paid subscription, you get seven day a week access to the complete digital edition. They also have the ‘traditional’ free web versions which are supported by advertising.

I’ve been a subscriber of the Sunday only Free Press for a few years now. I enjoy sitting down and reading through the bigger edition, and I also find that the coupons and advertisements pay for themselves.

But, with the change to three day home delivery, I’ve found that the Sunday option to my Free Press subscription is no longer available. They are forcing subscribers that want home delivery to take all three days! Right now, my subscription rate is locked in until the end of the year for about $5 per month, or $1.25 per Sunday edition. This is a savings off the newsstand price of $1.50. But after the end of the year, my price will jump to $12 per month. I consider this a $3 per copy charge.

Why?

Because even though I’m getting two extra days, I don’t want them! Let me say that again: I don’t want the extra two days of print editions. I only want my Sunday Free Press! I don’t have time during the week to read the extra editions. Most of the time since they started delivering them, it goes right into the recycling bucket. While I’m happy to have recycled, it still seems like a big waste to produce something that customers don’t want.

The funny thing is that I’ve e-mailed them about this, and have also read through the many editions of ‘Frequently Asked Questions’ that they publish regularly during the transition. Not once is the lack of a Sunday only option mentioned.

I hope that they correct this by the time that 2009 ends. I have a feeling that there a lot of subscribers in the same boat that I’m in. We are currently purchasing the paper because the price makes sense, and ‘putting up with’ the extra two days of delivery. But, once the price jumps, there could be a mass exodus of subscribers. If that happened, I would simply cancel my subscription and plan on going to the gas station on the corner to pick up the paper.

Still, it’d be much easier if they gave this customer what they want, and not force an option that is undesirable at a higher cost. I don’t think I’m the only ‘dinosaur’ that wants the Sunday paper, am I?

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Net Worth Review: April 2009

Another month, another check of the net worth. I’m going to break it down a little differently this month, into the four major categories that I track.

Overall, we had a positive month. There was a bit of a damper because of falling property values.

Here’s a breakdown of our major categories:

Property

  • I use a combination of Cyberhomes, Zillow, and recent sales to estimate the value of our home. I also take out estimated costs that it would cost to sell our house (e.g. real estate commission) which I believe gives me a true picture of what we’d walk away with in the event we sold our house.
  • Cyberhomes dropped it over 10% this month, so we saw a significant drop. With the recent sales, it is probably pretty close to reality, but it still stings.
  • I normally would report a percentage change, but at the moment we’re hovering around even, so this would be pretty meaningless. Suffice it to say, it isn’t reporting well.

Autos

  • I know some people don’t consider autos as part of their net worth but I do. I take the Kelly Blue Book value of the car, adjust it based on ‘for sale’ of similar cars, and subtract out any auto loans.
  • We have no auto loans, and the KBB value actually went up slightly for both cars (showing the escalating demand in the new car value).
  • Overall our net worth on autos went up 2% for the month

Current Assets

  • This is where I track all liquid assets such as bank accounts, non-retirement brokerage accounts, money markets. I also track against that any non-mortgage or auto debt. In our case, this consists of student loan debt and whatever balances we have on our credit cards since last paying them off at the beginning of the month.
  • The stock market did very well, leading the charge for a 28.5% increase in this category.

Retirement

  • This consists of all vested 401(k) balances and Roth IRA balances
  • Again the stock market led the way, and this category went up 16.5% for the month.

Overall

  • Assets went up 1.4%
  • Debt went down 0.26%. This was our smallest reduction in many months. But, with my wife leaving her job, we added some additional cash on hand versus making some extra debt payments. Also, the debt payments will slow down quite a bit, since we had been using a good portion of her salary to make extra debt payments.
  • Overall net worth (including property) went up 5.3% for the month. Overall it’s up 6.2% for the year.
  • Overall net worth (excluding property) went up 16.5% for the month. I mention this because it shows what a drag property was. Overall, this is up 23.3% for the year.

Goals for the month:

  • Adjust to a full month without a second income
  • Purchase most everything left to buy for the baby
  • Make Mrs. Beagle relax more to get ready for next month, when the baby is due!
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