It has been 3 intense weeks since I decided that we needed to refinance our home 🏡 out from under an ARM (Adjustable Rate Mortgage). As a 5/1 ARM indexed to the LIBOR (London Interbank Offered Rate) exchange, the rate would be fixed at 4.125% for 5 years after which an annual adjustment would be made against the LIBOR index at the time of adjustment.

With a jumbo loan balance like we have, even a slight 50 basis-point bump would translate to an increase in our monthly payment of over l6% (roughly 36x the current rate of inflation). A normal adjustment like this could quickly spell insolvency for us if rates were to rise further in the future, which eventually they will.

Hence, the personal drive to close on a 30 year fixed mortgage in this low-interest environment. The Fed has given a grim outlook for the future of the economy by zeroing rates, and the strong indicator is a sign for everyone to reduce and restructure their debts before the long winter ahead.

The home improvement list was prioritized to minimize time and maximize value-add. We rebuilt the backyard deck and finished the basement in our home to bump the finished square footage of the home ($100 increase in property value for every $1 spent per sqft). Although it was a physically demanding project and the value outcome was not guaranteed 🤞, the appraisal came in right where we needed it. To assist the appraiser, I had also provided a CMA (comparative market analysis) outlining comparable homes that had sold nearby in the last 6 months. I was strategic in pointing out that the house across the street had sold for a low value but the layout was not comparable to our home and it was a rental operated by a solo absentee owner (conditions were student grade, not homeowner).

With a strong FMV (Fair Market Value) on record and a strong credit score, we now had options that would save us 18% off of our monthly payments. A deal that can provide peace of mind against an increasingly uncertain economic future.