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Posts tagged with: second mortgage

Stephannie’s Debt Introduction

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Note: Stephannie has taken the time to provided the following post to show why she thinks she would be a good blogger for BAD. Take the time to read her story, then ask any relevant questions that you might have. This is part of our attempt to find the newest blogger for BAD. You can find more information about it here

My name is Stephannie, I am 33 years old and my husband and I suffer from debt regret. I can’t say that it’s always been this way. I had no problems with debt when I first started to accumulate it but, more on that later. Let’s do background first. When I was growing up finances were not something of which my parents spoke. I don’t ever remember hearing about a household budget. It was absolutely taboo to mention how much you made and you never, I mean NEVER asked someone questions about their income or their financial situation. My mom was always very frugal but my dad had no problem spending money, especially if what you were spending the money on was fun. I don’t remember them ever discussing finances within earshot of my brother and I. What we heard was ” We can’t afford that” from my mother and “You only live once, right?” from my father. Needless to say, by the time I got to college I wasn’t exactly prepared.

My debt story truly began when I started college. Luckily, my parents paid my tuition so that I wouldn’t have to take out any student loans. I worked part time to pay for books and other necessary things that I needed for school. The problem with this arrangement was that if all of my money went to gas, books, and supplies then how on earth could I pay for important things like clothes and going out? It did not take long to find a solution to that problem. One glorious day as I walked through the campus courtyard I saw a table set up that was giving away t shirts. Who doesn’t love a free t shirt, right? Well, there was a catch of course. In order to get the shirt you had to fill out an application for a credit card. I swear bells rang and angels sang. Not only could I get a free shirt but, I could also get a magical card that would buy clothes that weren’t even close to being free. Let’s just say it didn’t take long for that card to start smoking from overuse.

Once I was introduced to the fabulous world of credit cards I basically lost my mind. The first one was so easy to get that it was closely followed by a second and then a third. It was completely doable to only pay the minimums and I was living a fantastic, carefree, well dressed life. A couple of years into college I met a wonderful young man. Three months later we were married. It’s pretty safe to say that we were not financially prepared. We did not even talk about our personal finances until a few months after we were married. It then became clear that while we were both sharp dressers and excellent accumulators of fabulous “stuff” we were not exactly money managing geniuses.

The early years of our marriage were not exactly spent living large. Between the two of us we made about $22,000 a year. I had a monthly car note of $250 and we rented an apartment from my parents for $250 per month. Our combined credit card debt was about $6,000. With all of this information in mind I’m sure you can see that for us, the next logical thing to do was to have a baby. It’s really amazing to me how two relatively intelligent young people can make such terrible decisions. Ah, youth. Anyway, our first daughter was born in 2002 and in our infinite wisdom we decided that I would quit my job and stay home with the baby. This lasted for exactly one year.

Through the next couple of years my husband and I worked, paid bills, raised our daughter, and paid some more bills. It’s funny, I can distinctly remember thinking that if either of us were to ever make at least $20 per hour then we would be free of our money worries. Doesn’t sound like marriage and a baby made me much smarter, does it? In 2005 my mom and dad sold us a rental property that they had owned for many years (it was actually their first home and we lived in it until I was about 10). They were generous enough to sell it to us at a price well below market value and also allowed us to live with them for a year while we put every penny we had into renovating it. Because it was such a great deal my husband and I thought it was a good idea to take a loan out for more than the price of the house so that we could pay off our other debts which, of course, had just gotten higher. Woohoo, debt free!!! Nope. We were debt free for all of about 2 months before we took out a couple of loans, put some more purchases on credit cards and bought a more expensive vehicle. I swear we are smarter than we sound.

In 2005 my husband interviewed for a great company and if hired would be paid about $15,000 more a year than he currently earned. We got the phone call in July with the job offer and in November I was pregnant with our second daughter. We carried on for about two years with little changes in our debt. Our lifestyle “improved” significantly but, we felt like having debt was just the way things were done so we made no efforts to get rid of it.

I feel like this is getting terribly long so, I’ll cut to the chase here, and if chosen I’ll go into more detail at a later date. After a few years of living in the house we bought from my parents a house came up for sale in their neighborhood. We bought it and turned our first house into a rental. Our debt currently consists of two mortgages, 4 credit cards, one vehicle loan, one furniture loan, and one signature loan at our credit union. We also have a decent amount of medical bills due to some health problems my husband has had over the last year.

A little over a year ago I started to feel like getting out of debt was the best, and more importantly, the right thing to do. When I first started to feel this way I started to look up any blogs I could find that were written by people dealing with the daily struggles of paying off their debt and becoming debt free. That is when I found Blogging Away Debt. When Claire decided to stop blogging I really wanted to put my name in the running but, I was hesitant because I felt like we have made so many mistakes when it comes to our finances. Now that another opportunity has come up I don’t want to let it pass me by. There is still a lot I don’t know about how to reduce our debt in a smart way but with all of my research I’m learning new things all the time. I think it would be so good for me to share what we are dealing with and to get feedback from others who may see things in a way that we have not thought of.

Oh, and just one more important piece of the puzzle. We live in the south and my husband works full time and makes well over that magical number of $20 an hour. I ran my own business for 3 years but, 6 months ago I went back to work full time so that we could try to really put a dent in this debt. Needless to say, my younger self’s thoughts about money worries not existing if we were to make at least $20 an hour turned out to not be true. I’m sure you are totally shocked.

I would rather not get into hard numbers until after a decision about the new recruit has been made but, I will say that our total debt is around the $200,000 mark. This does include both mortgages, we feel like they were both good purchases from an investment stand point and about a year ago we refinanced them both for 15 years at much better interest rates. We also have a home which we have recently (2 months ago) inherited. While we do not owe anything on it, it is costing us a bit in upkeep and we have yet to decide what to do with it.

I’m so glad I got a chance to do this and if I’m chosen, Yay! If not I’ll be so excited to see what the next person has to say but until then, please feel free to ask any questions you may have!


Bad With Money

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This is a guest post by Purchase Baby who has recently started the Mickey Mouse Debt blog.

I’ve always been bad with money. Well, I call it binges really. At times I can be the most organised person – full of financial control. I can put my mind to things and save, save, save. And then something happens in my life and – BAM – I go back down the spiral road of debt.

Here’s my story: It started when I was a teenager. I used credit cards and loans to ‘keep up with everybody’. I come from a working class background, no airs and graces. My parents worked hard and saved hard for whatever they needed.

I landed a good job in advertising. A marvellous achievement for my age at 19 years old! Soon I got into the self-belief that I could keep up with everyone on the social scene. The trouble was, these people were middle-class and HAD money, while I didn’t! Anyhow, the credit cards balances started to pile up, and the loans. It took 10 years to get rid of the lot. If you asked me what I spent it all on, for the life of me I really don’t know!

Fast forward to 12 years ago. I bought a house with my partner. He was already £5k in debt as he wanted to help with the ‘deposit’. Within a year we (and I say we as it was my decision as well as hiss when he suggested it to me) wanted to get rid of his £5k debt, and I wanted to help him out. So we added £10k onto the mortgage (don’t ask why the extra £5k, we just did!) Within 2 years we did it again! We changed mortgage providers and added another £10k. Now, all of this time I was paying for the mortgage with the partner, as a partner when he could! Fair? Well, again I put up with it, so I’m not going to grumble – it was my fault in letting him get away with it in the first place.

The decade of 2000 was a very strange one. Everyone thought they were RICH. I had been in negative equity in the early 1990’s and so put my foot down in not putting anymore money onto the mortgage. I always believed in a mortgage should be 3 times your salary and capital/repayment. I’m glad I stuck to that guideline. However, I bought a second-hand car, and 3 years into my car loan financing debt I then took on the partner’s debt because “he couldn’t cope with it” (yes, he got himself into about £15k more debt). What a idiot I was, but hey, I could handle it because my salary was growing while his salary was, well, going nowhere. And that’s also my problem. I always look to help out others who are more in need than i am, and always put them first.

Roll on to 2008 and 3 more years until I would be debt-free. I had a serious knock-back. There was an unexpected bereavement in the family. It hit me HARD. I’m still not over it. And my relationship was beginning to show serious cracks. He couldn’t understand the pain I was going through, and the support I was giving to my family at this emotional time. And I couldn’t understand why he wasn’t “supporting” me. We slowly stated to become distant from each other. I needed things around me to feel happy. I decided to take out another loan, but this time to revamp the kitchen to cheer me up.

As a precaution, I took out credit cards (just as a back-up in case the loan didn’t get approved – which it did). it wasn’t long before I started to spend on my cards… and spend… and spend. I had to get the best of everything. I had to “keep up with everyone” and spent a fortune on business class flights to far off places like my work colleagues did. I was buying bracelets and fancy bags. I was doing things I had never done before – starting to live – starting to spend like I was middle class and not working class! It was the beginning of the recession / credit crunch, and instead of keeping my 1 loan debt in control, I added an extra loan plus credit cards! I was depressed and these “materialistic things” were making me feel happy, at least immediately. It took away the pain of feeling sad, lost, lonely and losing my family member.

Then the defaults started kicking in last July. I was not making the minimum payments on everything. I was getting phone calls from the credit card providers. I was not getting regular money from the partner (which wasn’t anything new, but now it was really affecting my cash flow). This has been going on and off until now. I decided in 2012 and I need to sort out this crap – and fast.

So, that’s my story. Here’s where I am in my life. Fortunately I do not have any children, so it makes it that little bit easier to concentrate on me, and me alone! No more bailing out other people’s debts. No more helping out people because they want something, but don’t have the means to pay for it themselves. The buck stops HERE and I’m determined to be debt-free within 2-3 years — tops.

With this in mind, I started my blog. It’s all mickey mouse money which we as consumer owe. It’s about all crap that we have accumulates. We all have to start taking control of our lives and get out of the debt cycle we’re all in. feel free to follow my journey and goal of becomming debt-free, and most importantly, having FREEDOM! I don’t want to be rich — I just be free of all of the stress and financial strain which millions of us are going through. We need a revolution, people.

Do you have a debt story that you believe others could benefit from reading? We are always interested in finding stories that touch on a variety of aspects of personal debt. Your previous writing is of little concern to us. Wehter you’re a long-time debt blogger or your story will be the first time you have written anything, we’d be interested in sharing your experience. If this sounds like something that is of interest, feel free to contact us.



Debt Free? What comes next?

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As my debt free date grows closer, I find myself thinking about the next step. I’m about 6 months away and it’s an incredibly strange feeling. I have had some sort of debt since I bought my first car at 16. I’ve spent half my life paying someone back.

When my debt is reduced to only my mortgage payment, what will I do?!?

If you had asked me, when I first started this journey, what I would do when my debts were paid, I would have said, “I want to remodel my 50 year old kitchen” or “I want to restucco my home!”

The fantasy has changed.

My fantasy now consists of a paid off mortgage and growing mutual funds.

I can’t tell you how strange it was to sit down to deliberate over the next step. Obviously we are going to save a larger emergency fund and aggressively pay our second mortgage but my dreams of ‘big shiny things’ are fewer and farther between. OK, I’ll just spit it out…

I’m an addict.

I’m addicted to the good feeling I get when I see zero balances.

Have you thought about your life after debt? What are your plans (other than investments and mortgage payoffs)?


Finishing Making Home Affordable…

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After six months, nearly 30 phone calls, and countless hours on the phone…

We were rejected for the Making Home Affordable Program through Bank of America.

Our application was ‘lost’ and we were asked to reapply. We applied with the exact same numbers we used 6 months ago but this time, we were denied. The program requires homeowners to spend 37% or more of their gross income on their mortgage to qualify and does not include the second mortgage in calculating the percentage. The monthly payment for our first mortgage is 36% of our gross income. I was disappointed with how close we were until the Bank of America representative (a supervisor) told me that even if we were at 37%, we would have been turned down anyway. She said that Bank of America isn’t likely to approve homeowners for the Making Home Affordable Program unless they are closer to 40-45%.

I asked her if we could refinance and she immediately said no. Not because we are upside-down on our home, but because refinancing requires homeowners to spend less than 33% of their gross income on BOTH mortgages combined.

I have a feeling there are a lot of homeowners stuck in this percentage window.

I’m disappointed to be stuck with a high interest mortgage, but we’re fortunate to be able to ‘afford’ our payment and we aren’t at risk of losing our home. We’re going to hold on, take responsibility for our poor decisions, and move forward.


Making Home Affordable Tips…

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I learned a lot about the Making Home Affordable/Home Affordable Modification Program (HAMP) in my 2 hour call with Bank of America.

1 – If you are hoping for a huge change… this is not the answer. Not all changes are permanent and/or large. Some adjustments may last as little as 3 months.

2 – Loan modifications are not quick. If you can’t wait the standard 9 weeks for the review of your file and another 5-9 weeks for paperwork processing, you don’t have enough time and you may want to move forward with other options like a short sale or foreclosure.

3 – Give an accurate listing of all your expenses. Don’t exaggerate but don’t minimize either. Have a good understanding of exactly how much you are paying. Keep this information available for when you call the bank.

4 – You will be rejected if you have recently made large purchases or if your credit score is low. You shouldn’t be making large purchases anyway so I can’t say as if I blame the banks for this stipulation.

5 – If you have a second mortgage with another lender, they will likely require you to get approved for the Making Home Affordable Program on your first loan before they will consider a change to your second mortgage. If you are accepted for the program on your first loan, it’s easy to submit the same paperwork for your second mortgage.

6 – This should not be your only option. It’s worth a try, but don’t fool yourself into thinking this will solve your problems.

7 – If your home is not a Fannie Mae/Freddie Mac mortgage, this program does not apply to you… BUT some lenders are still willing to modify other types of loans.

8 – This is a voluntary program. No one HAS to help you. Sure it’s good business sense to lessen foreclosures on the banks part, but if you are a problem child, don’t expect any help. Banks don’t want to keep you as a customer anyway. Be kind, courteous, and polite even if you are frustrated.

According to the bank’s calculations, my husband and I qualify. We are now in the first 9 week waiting period while they review our files. We have stellar credit scores and we haven’t made large purchases in a long time. We are good candidates for an interest rate reduction from the over 7% it is currently, down to the market rates of 5-6%.

Do I really think it will really happen?

No. But it’s worth a try.