Thursday, February 21, 2008

Confusion in a Confusing World

There are some things I really don't understand even if I manage to deal with them when I have to. Health insurance makes no sense to me. I am really lucky that I have never had a debilitating disease or accident, because I doubt I could navigate the red tape. I would probably end up dead. The stock market is a mass of confusion. People make money on it? How? I have trouble with my 401K! And mortgages.

I bought my house in the spring of 2001. Homeownership was NEVER something I aspired to. I felt no desire to own, no need for roots. I figured if I continued to rent, all the repairs, the details would be someone else's problem. "You're throwing your money away," I was told. This just confused me. I had a roof over my head and someone else to fix the A/C, the roof, the dishwasher. It seemed like a good deal to me. But there was Chance*, my 80lb four-legged baby. Love of my son's life. Do you know how hard it is to rent a place with an 80 pound dog?

So, when the owner of the house I was renting returned to to the states from overseas, I started looking at homes for sale. It was a good time to buy, prices were much much lower than they are now. I looked for a couple of months before I bought and I think I got a really good buy. My mortgage payment for a 3BR/2BA house with a garage, a pool and a fenced yard cost less than rent on an apartment. And I have grown to enjoy homeownership, despite the $4000 for the new roof (before the really bad hurricane seasons), the fire in the garage, the leaks, the OUTRAGEOUS jump in wind insurance (after the really bad hurricane seasons) the... you know, homeownership woes. It is nice to know it is mine as long as I make the payments. And, I have built a lot of equity.

Then last month I received a notice from my mortgage company that my payment was going up almost $300 a month OR I could pay them a nice sum of $2000, because my escrow account was short, for the 7th year in a row. Now, I don't like to criticize much, but isn't it the mortgage companies job to plan for this sort of thing? My taxes and insurance barely went up for the first 5 years I owned the house, why did I have to write a check every February to make up the difference? I understood last years check of $1100, my insurance went up... but only about $700. The difference this year was about $1000 so why the huge check? So I decided to refinance, without an escrow account, paying my own taxes and insurance. And now I am in a quandry.

Closing is scheduled for tomorrow at 1:00. I am taking a loan for $110,000, taking out a small portion of the equity to get myself a brand new fancy kitchen. I was told that closing costs would be about 2.5% of the loan. I can do math. 2.5% of 110,000 is 2750. I was given the total on closing this afternoon and it is $4900. Do you see my problem? I had even figured closing might be $3000, but that is almost a $2000 difference. Am I a moron? Do I just not understand the way these things work?

Plus, some of the 'fees' seem fishy. I understand the 1.5% origination fee, but then why am I paying another $695 to the bank? The original paperwork said there was $175 for the NOTARY, but the final paperwork (which they sent me because I was yelling) changed the $175 fee to an escrow fee. Did I mention that I am not going to use an escrow account? I am paying my taxes and insurance myself.

Of course, the interest rates are on the rise again (how can that be?), so if I don't use this loan, I could end up .25% or .5% higher rate and then I am not even sure it would be worth it to refinance. And I don't know anyone to ask. DSD is just as lost and confused as I am.

What to do? Hopefully I will figure it out, but if anyone out there in Blogland has some advice, I am listening!!

*Chance passed away about 2:00 AM on January 2, 2005. I miss him every day.


andante said...

Arghh...I wish I could counsel you or offer any sort of advice. I'm a true novice in these waters. It sounds to me like you are tangled up not only in the mortgage mess but an insurance mess, leaving me to wonder how soon you hit some sort of evil trifecta.

Since I don't have anything positive to offer, I hope you'll post whatever positive steps you've discovered or taken. At least ONE of us would feel better.

Carl said...

I have a blind spot in all those areas that you mentioned, and I've only bought one house, and that was way back in the late 1960's. I was able to quickly pay that off by getting a mortgage with a prepayment provision, and after later selling that, I dodged the house-buying problems entirely by buying some woods and taking a few years to build a house with my own hands. So I, too, have nothing to say that would be relevant to what you are experiencing. Anyway, thanks for being so detailed, and I take you to be the resourceful sort who will come out on top regardless.

Pete Bogs said...

I am almost 40 and have never paid a mortgage... I have no clue about equity, etc.

I have only just begun to get a clue how a 401(k) works, and to do my own taxes!

LeftLeaningLady said...

andante, the insurance mess has occurred because it can. After the 2004/2005 hurricane seasons the insurance companies panicked, rates skyrocketed, many lost their insurance and those who didn't watched their premiums skyrocket. (Tripled) I had both happen to me. Actually my insurance was cancelled twice, but Governor Crist and the Florida legislature made it illegal to cancel without cause so the company had to pick me back up. Of course, I am afraid to file a claim, because then I am really screwed. Ain't it a bitch?

Carl, your way sounds best, but since I can barely paint, I can't see me building a house with own two hands. I don't know if I could build a tent with my own two hands.

I will post about this again when I know something.

LeftLeaningLady said...

Well, at least I can say I have always done my own taxes (except for the one time I screwed them up so bad I had to pay a professional to fix it).

andante said...

I hope by now you have begun to see some daylight or at least a way out.