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What we just did to increase our debt by 100%: The home purchase:

Posted on : 30-06-2009 | By : The Wife | In : Debt Discussion, The Journey

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We just purchased a new to us home (closed May 2009). We have been renting for the past 3 years from family and finally decided that it was time to get into our own home again. There were several reasons for doing so: first, interest rates are excellent and we are able to afford payments on a home that suited the family beautifully. Secondly, we qualified for the $8,000 IRS tax credit. We bought the home paying only $500 to get in. We used a zero down RD loan (USDA) and got a 4.75% 30 year fixed on our loan. We paid $206,000 for our house and our loan is $214,000 (sorry, just paused for a big morning hug from my 6yo). Our loan is higher because all of the closing costs were wrapped into the loan so that our initial cash outlay was minimal.

Was this wise? According to our new idea of “debt is not an option”, no it wasn’t. I can justify the reasons why we purchased the new home till I’m blue in the face. We definitely felt led by God to go through with this purchase. It was a very fast process and a month prior to closing, we weren’t even looking for a home. The Lord very often moves fast with us in our lives and through confirmations from well respected friends and family, we moved forward with this purchase.

Here’s the down side, we were paying only $600/month in our previous residence. My family was “eating” the other $700/month (in other words, they were subsidizing our living for us). It was agreed upon from the beginning and all parties were amenable to the entire thing. We all knew it was a short term (2-3 year) situation and it was considered part of a “salary package” when we decided to be a part of the family business, not a hand out or lifestyle subsidy.

So, by purchasing our home, our mortgage payment goes to the full $1300/month which in essence means we are taking an $8200/year pay cut by moving into the house. That’s no small number, but we walked into it with eyes wide open. We are resourceful and knew that should we need more income, we know many ways to add a couple hundred dollars each month to our income. The only reason we need more income is because we’ve gotten ourselves into stupid debt – which is the point of this whole process, to get out of it!

So there it is: our new home, our mortgage balance and our monthly payment.

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Copyright 2009, Freedom and Happiness

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