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Saturday, October 6, 2018

A Freelancer's Out-of-the-Box View of Traditional Mortgage Refinancing (Not Just for Freelancers But for Anyone Who Owns a Home)

First, the term "freelancer" should give you several hints. Like, for instance, I don't make $1,000 (or any other figure you may choose) twice a month. I don't have automatic deposits of this fictional $1,000 on the first and the fifteenth into my bank account. Some months I don't make any money. Other months I make enough to cover the next month as well. Most months I make enough to cover my bills for that particular thirty-day period.

Second, sometimes the term "freelancer" is synonymous with "broke." But it's only a temporary state of brokeness. As a freelancer, you just don't know how long that period will last.

You need guts and faith and determination to succeed when self-employed.

I love working for myself and count any financial hardships as part of the job. In other words, I'm not all about the money. Only enough to pay my bills. Even to the point of working a second (and, at one time, a third) job too. So keep that in mind if you wish to follow my lead to become a freelancer.

However, my findings below could be of great help to a homeowner with a traditional day job too.

Third, I'm no financial guru, just a working gal with years of experience in the trenches. What follows is my most recent learning opportunity.

This idea to refi all started with something I saw online about HARP ending this year (not that it can't be renewed for another year but you'll have to check that out for yourself). But I don't qualify for HARP as my current mortgage is a conventional loan, not a Fannie Mae or a Freddie Mac (a government-issued/approved loan).

I then checked out HAMP, but I don't qualify for that either as it seems to be for those "underwater" folks (meaning, their mortgages are upside down, owing more than what the property is currently worth on the market), while I am grossly "overwater" (my own term, BTW; meaning, I owe way, way, WAY less than the current market value of my property, whether going by Zestimate or by my local county tax assessor).

And I want to keep my house in the family, even when I die, passing it on as a hopefully paid-for asset, so what little I know about reverse mortgages doesn't work for me. But, if any of you are interested in that vehicle, you'll need to conduct your own research and due diligence.

So I recently tried to refi my mortgage at my small local bank (not one of the big countrywide chains) to get a much better interest rate and to lower my monthly payment. However, as a freelancer, I couldn't easily qualify, like when I worked as a legal assistant (with consistent and equal income payments), at the time I originally bought this property, as a first-time homeowner. And it seems banks tend to look to refis as debts to sell, mostly to those entities seeking loans which meet the government standards of Fannie Mae or Freddie Mac funding.

Therefore, my back-end ratio (based on my current mortgage payment) was excessive and threw me out of consideration for any refi (from any bank at least) even though my front-end ratio (based on any new mortgage payment) was in the barely acceptable range.

Yet I'm shaking my head. Regardless of the ratios, I'm making those mortgage payments that the banks/government deem me unreliable to make. And for the last eighteen years at the same address.


AND, like I mentioned above, my current mortgage balance is way below market value, almost a full one-third of what my property lists for today per Zestimate. Regardless of its market value or its Zestimate valuation, this land is where I plan to live for the rest of my life. Obviously having property as an asset for a mortgage loan is immaterial in the bank's point of view, which is mind-boggling at first glance.

Even the taunt of repossessing my home, should I fail to make those mortgage payments (as predetermined by faulty ratios used by banks) and for seven months in a row (as per a quick internet search into what constitutes foreclosure factors), isn't enough of a lure to induce banks to lend me the money. Even with a $4,000 "hickey" (from my viewpoint) earned up front by the lending bank.

Still shaking my head ...

Which makes me think the banks are more interested in a guaranteed payment of a fixed amount each month.


Kinda like what I would want too in my own business.

Plus, per my local bank  (not one of the big chains either), I would have to double this year's income in order to be considered for a refi to meet those needed ratios.

YET, when I figure out how to pay off this current mortgage in six years (an acceleration for sure), I only need $418 more than my normal payment a month (to start with) to accomplish this. Granted, I should add roughly $1.17 to this principal-only extra payment figure and increase it by at least $0.03 each month to keep in alignment with an online amortization schedule (or so it appears by a comparison of my last three monthly mortgage statements).

In my mind, this converts my current high interest rate on my mortgage into a much more pleasing "net" rate of interest (by saving years' worth of interest payments).

This seems more feasible to me, and I am currently researching flexible online work to accomplish this (consider this my second job) which still allows me the time I need to focus foremost on copyediting projects (my first job). I have also reframed my mind-set as to this second-job search about being something to help me get out from under my mortgage faster.

Like I wrote in my last blog post, seek those long-term fixes (paying off your mortgage as early as possible) over the short-term (a refi, with fixed fees of about $4,000 added in from the very first, per my bank anyway). That $4,000 figure was enough to dissuade me from any refi option. I have worked too hard to pay down my mortgage to have this much added back in.

No. That doesn't work for me, not with my situation. Neither does a second mortgage. So, if you ever consider a refi, rethink your options as to paying off your current mortgage earlier.

Such are the random thoughts of this freelancer as to the traditional refi process in the States.

Not having a mortgage payment would be a big boon to any freelancer or to any 9-to-5 worker alike. Granted, I'll still have to pay insurance on my home. I'll still have to pay property taxes. But I'm paying them anyway. And I'll save much more money by paying off my mortgage.

Wish me luck.

Welcome to My World, Where Every Day Is a Saturday

Denise Barker, Author, Blogger, Copy Editor
Books that Build Character(s)


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