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It took some time, but our mortgage refinance is done. It was a TRUE no-cost refinance, which don’t come around very often. We really did not pay a penny for it or anything associated with it. The last time we got a no-cost refi was in 2008.

We refinanced from a 20-year fixed at 4.625% to a 5-year ARM / 30 year at 3.25% — dropping our interest rate by 1.375%. It also dropped our required monthly payment to around $215 a month.

Yeah, that’s a ridiculously low monthly payment. That’s part of the appeal of adjustable rate mortgages that start at very low rates, I guess.

Why we chose an ARM

While I wouldn’t normally think adjustable rate mortgages were a good idea, as with anything it’s important to consider the individual situation before making a decision. In our case, worst-case scenario is that we’ll have the mortgage paid off before it adjusts for the first time 5 years from now.

Which brings me to the real reason our payment is so low: our mortgage balance is also very low. We’ve been working hard to get it paid off completely, and it shows, because we don’t have that much left to go. We ended up borrowing $49,500.

Tying up loose ends

$1324.50 of that will be immediately applied as a principal reduction. The difference between what we borrowed and what we owed was due to a last-minute discovery. The credit union’s calculation of what we needed to borrow to didn’t take into account the fact that we’d already paid our taxes and insurance, so they needed to give us a credit (which we opted to have go straight to principal.) It pays to go over the HUD-1 form carefully and question anything you’re unsure of.

I’m happy with our refinance because we’ll be paying less in interest — and every little bit of savings helps. That will help us to pay off the mortgage ASAP, because even more will go to principal as we continue to pay our old monthly payment (+ extra amounts).