Plan C

When T and I bought our house back in March 2005, we took out a loan in which the interest rate (4.62%!) was fixed for the first five years and then adjustable from that point forward. We knew that an adjustable rate was risky, but we also knew that we would most likely outgrow our two bedroom, 950 square foot cottage home within five years. So, we made two plans and were pretty sure that one of them would play out by March 2010.

Plan A: Work hard, put money into savings each month, pay down the mortgage. Then sometime in the 4th or 5th year, tear down our quaint, little house and rebuild our dream home- an up-to-date two story home, not too big but not too small.

Plan B: Work hard, put money into savings each month, pay down the mortgage. Then sometime in the 4th or 5th year, sell the house for a tidy sum and use the profits to purchase a newer, larger home more suitable for a family of four (0r five, depending on who you talked to).

Well, you’ve probably guessed from the title of this post, that neither of those plans actually came to fruition. We were pretty good about following through with the parts we had control over. We worked hard, put money (sometimes one whole paycheck) into a money market account, and did our best to make a few extra payments on the mortgage. But it was the things we couldn’t control that did us in. Like many others who bought around the peak of the housing market, we did not foresee that the market would crash the way it did, making it impossible to sell our house for any kind of profit. And while we did assume that we would start our family in this house, we never in our wildest dreams imagined that we’d have twins and that we would go from a two salary household to one, thereby putting an end to our savings plans. With not enough money saved, not enough equity built in, and just T’s teaching salary as income for our family of 4, we can’t get a loan that would allow us to move to a larger home or rebuild on our lot. So we’re a bit stuck at the moment, which means it’s time for Plan C.

Plan C: Refinance and stay put. So remember how we took out that loan with the incredible low interest rate for the first five years? Well, our five years is almost up. And while we would most likely continue to enjoy a low rate during 2010, our trusted advisor seemed to think that our luck would run out in 2011. With that in mind, we decided to refinance (now locked in at 5% for 30 years) and do what we can to make this house work for us for another 5 years or so. Yes, it’s tight with the four of us sharing such tight quarters, but we’ll live. And although our mortgage payment will be going up a bit since the new rate is a tad higher than the old one, it’s still doable.

Honestly, with all the foreclosures and unemployment going on around us, I feel so blessed just knowing that we have steady income and a roof over our heads. So, nothing to complain about here. Our dreams are still alive, and we know that we’ll be back on track someday. Roughly 2015, I’m guessing.