This post is by staff writer Honey Smith.
Well, the last couple of months have been a pretty wild ride in The Honeycomb. We moved out of our old place and concluded our experience with Cash for Keys, we bought a house and moved, and I am experimenting with a new student loan payoff strategy. Let’s explore each of these big changes a bit further, shall we?
Big change 1: The culmination of “Cash for Keys”
After I posted about foreclosure from the tenant’s perspective, the law firm representing the bank served us with papers for an eviction hearing in superior court. The kicker? The hearing and eviction date were set 2 weeks before the move-out date we’d agreed upon in writing with the same law firm!
We contacted them and they agreed to reschedule the hearing for after our Cash for Keys deadline. However, I had to wonder what someone who wasn’t an attorney would have made of the paperwork we were given. Individuals faced with this situation should probably work with a tenant advocate or attorney familiar with the foreclosure laws in their area.
After we moved out, we arranged a final walk-through of our old place. The documents we were given said the property had to be “clean-swept and empty of all personal belongings.” We did vacuum the carpet and mop the tile, although I don’t think that was actually required.
At the final walk-through was a representative from the law firm/bank and a pair of locksmiths. They changed every keyed lock in the place to ensure that we wouldn’t be able to re-enter the property. Then they gave me a check for $2,000 and I was outta there! The money is reported as income to the IRS via a 1099-MISC.
The official communication we received from the law firm felt very intimidating. There can be a lot of drama with a foreclosure! However, the walk-through was very low-key. While I worried that they would reduce the payout if the place wasn’t clean enough or something, the checks were prepared in advance for the full amount. I guess they either give you the money or they don’t.
Big change 2: Buying a house
Pretty much as soon as we received notice from our landlords that the property was being foreclosed on in late December, we decided to buy instead of rent. Jake was starting his new job in January, so we knew both the area and budget we were looking for (unlike a month earlier when we chose to let a rental go). A few factors made us good candidates for a mortgage:
The length of my job history (almost six years at the same employer)
My credit score (820 — Jake’s was 720, good but not great), and
Jake’s high salary ($130K per year plus bonus)
We had to wait a bit because the pre-qualification required a certain number of pay stubs. Since Jake started his new job on January 1, we didn’t have those until February. We were able to start house-hunting in earnest in March and ended up with our second-choice property. Here are the details:
Purchase price of $225K — we put 5 percent down and financed the rest at 4.625 percent
Our total monthly payment (PITI) will be $1,386, and our first payment is due in July.
Assuming no increase in property values and no extra payments, we will be able to drop PMI in eight years. The property appraised at $12K over the sale price, which helped.
The house has 3 bedrooms/2 bathrooms and just over 1650 square feet.
We love it!
For me, the biggest factor in choosing a house was the location. I didn’t want to be more than 5 miles from work. The biggest factor for Jake was a two-car garage. We each got the thing most important to us, though we did have to compromise in some other areas. Previously, we were paying about a thousand dollars a month for just under a thousand square feet, so this is quite an upgrade.
We actually had saved enough to put ten percent down, but we didn’t want to spend our savings down to zero and then be faced with a major repair right away. The A/C unit is on the older side, for example, and we are just coming up on summertime where temps routinely surpass 110 degrees Farenheit. I’ll post our new budget once I have a better idea of our regular expenses.
New student loan strategy
A couple of weeks before closing on our new place, I took my student loans off Kwikpay/auto-debit. As I noted when I set my financial goals for 2014, my servicer was advancing the due date whenever I paid extra on my smaller balance. In addition, they were allocating my entire regular payment toward my large balance instead of splitting the payments between them.
As a result, I was paid ahead 8 months on my large balance and over a year ahead on my smaller balance. Although I had more than enough saved up for closing on our new home, I decided to stop Kwikpay (set to deduct on the 28th of April) in case of emergencies. I made my regular payment manually after we had closed on May 2. To me, the peace of mind was worth a 5-day delay.
Originally, I had planned to re-enable Kwikpay the week after we moved. But then I realized that if I made ALL my payments manually, I could direct both the extra payment and the appropriate portion of the regular monthly payment toward the small balance. This would enable me to pay off the smaller balance much faster, which was my original plan.
Sometimes your student loan servicer will give you an interest rate reduction (usually 0.25%) if you enable Kwikpay. However, my student loan consolidation combined with multiple migrations to different servicers seems to mean that I lost that perk at some point. As a result, I wasn’t giving anything up and had a lot to gain by making this move.
In other words, automatic payments weren’t worthwhile for me. In fact, I think having total control over my payments will inspire me to pay down my debt even faster! I don’t know why I didn’t think of this solution before.
Do you have any financial changes on the horizon, large or small? What’s the biggest financial adjustment you ever had to make and how did you handle it?