Real Estate the Ramsey Way - Our Mortgage Rate Keeps Going Up

Episode Date: April 14, 2025

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Dave Ramsey here and welcome to another episode of Real Estate, the Ramsey Way, where you'll learn how to make smart home decisions, avoid costly mistakes, and navigate home ownership with confidence. Sean is on the line in Denver, Colorado. Sean, how can we help? How are you guys? Doing well, sir. What's going on? Good, good. So my question is, my wife and I, we had a couple issues with the bank and our mortgage. And our mortgage. rate is actually increasing to a point that this is the second time. It's increased. And it's getting to a point that the monthly payments are getting a little steep. And so we do have about 35 grand in savings. Not sure if that's usable in this case, but not quite sure what to do next. Is this an adjustable rate? It actually started out as a 30-year fixed. We were at 3.8%. And the bank

called us a couple days before closing and said, hey, we accidentally wrote up your loan documents for a stick-bilt home, and you guys have a manufactured home, so we're going to have to rewrite those. So they did, and we had to sign again, and that was about a month's difference, so our rate went from 3.8 to 4.5, and then about a day before closing, they called and said, well, you know, our bank sells these mortgages, and nobody wants to buy this one, so we're going to have to drop you guys again. But they had a third solution and my wife actually works for this particular bank. And part of the employee benefits package is they help you get into a first home. Okay.

Which sounds good. And so what they did is they said, okay, we'll go ahead and we'll get you guys a mortgage. We'll keep it the four and a half percent. Okay. And in two years, or excuse me, in three years, you guys can go ahead and refinance with us. We'll keep your rate and we'll lock you in for 30 years. It'll be great. Okay. And so it's the end of those three years now and should have read the loan documents a little closer. They, they aren't going to keep the rate. It's actually going up 2%. Oh, man. So it had to lock in at whatever the rate is. Like, is that the current rate?

Yes. Yeah. Yes. Oh, man. So, I mean, we're still at the point that it's, it's, you know, affordable. Well, tell me, tell me numbers-wise what it's gone up. It went from what to what? So we were paying $2,500 a month, and now it'll be $3,500 a month. My guy. Wow. Okay. Yeah. Yeah, you're feeling that. So the $1.000 would the $35,000 even help you because you're going to have to refi, theoretically, can you? Yeah, and so this is only good. What they did was they came back and said,

hey, you know, we did make a mistake in the beginning for you guys. So what we'll do is we'll only raise you 1% this year and then 2% next year. and we'll extend your loan for two years. I tell him the pound sand. That's like, it's like said, I made the mistake, so I'm only going to penalize you on my mistake this much. But you're still going to feel it. They're just spreading it.

It's like spreading out your punishment. You get one whoop in today, and then you get one weapon. Is there something with your house? Is there something with the type of house because it's a manufactured house that that's why nobody wants these loans? I think so, yeah, because, you know, there's only one buyer this bank that buys manufactured home loans

and they ended up being, you know, they were full at the time. They couldn't take any more loans. So that's what happened as well. Do you have any equity in this house at all? You know, it looked like it, when I look at the estimate online, it says it's gone up about $100,000

from when we purchased it two years ago. If it was me, now, Jay, tell me if I'm being too aggressive here, but I'd get out of this house. Instead of keep messing with this, if it's true that he's only got one lender, who will play ball with him, he's going to keep getting jacked around here. Well, I have a couple questions.

At the end of this three-year term, whether they do it all at once or over the three-year, you get slapped a little bit each year, is that the end? So we only have two more years, and then we have to, that's it. The loan's matured, and we either need to refinance with them or with somebody else. I mean, preferably. Do you love the house? Do you love the house? Yes.

Okay. Your choices are you find a way to get $1,000 more in your income because you can't, if you don't do that, this is going to drain everything. So if you don't find a way for you and your wife to bring in $500 a piece every month that's sustainable, you can't keep this house because... Sell it. Yeah. I'm all for selling it, man, and rent for a while and get yourself a house that doesn't have these kind of limitations. Or maybe it's you paying off debt and freeing that up in monthly payments. Yeah.

I, I, oof. All right, let's go to St. Paul, Minneapolis area. McKenna is there. McKenna, how can we help? Hi, thank you for taking my call. Sure, what's up? So my husband and I have completed Babysadri last fall. We've been kind of cash flowing to weddings we've been going to since then

and investing in retirement. And at the end of this month, we're going to get ready to start thinking about our next home. We have a mortgage on a townhome currently. So my question would be, at the end of this month, we're going to start showing out some money into a savings account. We just don't really know if that's like a money market account, a high yield, or if that is investing in the market, if we're not planning on moving for another five years, if that's enough time to, like, ride out the market. Yeah, five years would be the minimum for me to be investing in the market versus a shorter-term goal

where you have your money parked in a high-yield savings account because you increase your chances of making money versus losing it, you know, when you start to extend the timeframes out. the bigger question is why not just pay extra on your mortgage and then sell the property, roll all the equity over to the next house? That was the first thing that we were thinking of. What's the town home worth? So it's about worth probably 265 to 270. We have 239 remaining on it.

And according to like an amateurization, it would be about seven years to pay it off. Okay. Well, I'll tell you what my wife and I did. We got a town home at the time was $300,000. The loan was I think $165. and we just aggressively attack that, and we got it paid off and rolled 100% of the equity into our next home, and we just kept doing that.

And so I would encourage you to do the same to create a forced savings plan, because when you don't, here's what will happen. You'll call back and say, hey, we're thinking about keeping this townhome as a rental and taking on an even bigger mortgage for the next home with very little down. That's the temptation that happens when you don't just force the savings plan into the mortgage. So that's the way I would do it. I feel like you've...

like you've taken that call before because you went into a head voice there. Oh, wow. I didn't realize that. You did an impersonation of what that call might be. Yeah. I just feel that. You're a little whiny, little whiny. They love the idea of keeping it as the rental. That's always the move. I know. And boy, you had a little disdain in that. I just think there's a time and place for it. I think you're right, by the way. Taking on two mortgages. I think you're right. I just like how you went there. I think you've had that call one too many times. It gives you a little indigestion. It lives rent-free in my head. You don't like it. I want to evict it. Is that you cover that in your book? Breaking Free from Bro? I do, actually. Thank you. Get it wherever books are sold.