Paying off loan early can be wise

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Not everyone fell for the lure of easy money flowing in Sonoma County this decade. Take vineyard worker Martin Orozco and his wife, Maria, for example.

Ten years ago the Orozcos bought a modest home in Cloverdale for $120,000. They put 20 percent down, and they took out a 15-year, $96,000 mortgage. Their monthly payments were $883.

“I have older brothers who are very smart. When I bought my first house I went to them for advice and we went over the numbers, and they told me it was a good investment,” said Martin Orozco.

Today Orozco is a foreman at Vinepro Vineyard Management. His wife is a seasonal worker at Asti Winery. They have two children, ages 11 and 17.

In recent years, they were aware that many people were refinancing, to take out some of the equity that had built up when homes in Sonoma County were appreciating almost 20 percent a year. But the Orozcos weren’t interested.

“I didn’t want to take on a larger debt,” Orozco said. “That’s not good business, to bring on bigger debts than you can handle.”

Instead, the Orozcos followed the advice of their Santa Rosa mortgage broker, Anna Macias De Leon, and made one extra mortgage payment a year, so they could pay off their home more quickly. When they saw how fast their loan principal declined, they made more payments. A year and a half ago, they paid off the loan.

The wisdom of their actions was reconfirmed three months ago when another member of his family, Martin’s sister, lost her home. She didn’t have a full-time job when she took out the loan and couldn’t make her monthly payments, he said.

“My sister never asked our advice. She just got into a loan that was too much for her,” Martin said.

Meanwhile, Martin has been watching the weakness in the Sonoma County real estate market. A few months ago, he decided it was a good time to start looking for a bigger home. The Orozcos looked at houses selling for between $500,000 and $600,000, but last month(October) they chose one for $338,000 because it was “more affordable.”

They made a 20 percent down payment. They took out a 30-year, fixed-rate loan with monthly payments of $2,097. Their first home, which they now own free and clear, they will turn into a rental.

“They didn’t go out and buy expensive Suburbans or BMWs. They were very conservative with their spending, and instead they put money aside. Now they’re taking advantage,” said their broker De Leon.

Staff Writer Martin Espinoza contributed to this report.