Amortization Action

So here’s the thing, I’m kind of cray cray about maximizing my dollar bill. Some people call it cheap, some call it stingy, I call it ME! By the way, next time your around a friend or family member that’s a tight wad, the pc language is frugal, just FYI πŸ˜‰ I think one of the reasons I was so drawn into the concept of home ownership was because I came to view it as a mechanism for saving our money in a bank account we could live in. For someone that’s obsessed with saving a wad of cash and creating a lovely little abode, it was the perfect marriage. So when we were youngin’s, I got it in my head to buy house with the hubster. Let’s take a trip down memory lane, shall we?

Cape Cod Bungalow

When we bought our first house, we scraped all our dollar bills and put $13,490 down. Not a lot. Not 20%, but it was something, and we were proud of it. At the time, it felt like everything we had in the world, I mean, it pretty much was, save a few hundred dollars as an emergency fund after we moved in. I was about to start grad school so we also had that expense looming. It was a wad of dough.

But after two and half years at our first house, I started to get that tell tale itch for a new house. I wanted a new challenge and with interest rates crazy low (3.5% when we purchased), we could finally afford a house in our target neighborhood. Pinch. Before we knew it, this was happening.

Sold Sign

Since inventory was so dang tight where we live we had to go and live with the parental units for 3 months. Shout out – hi Mom and Dad!! This landed up being a huge blessing for us, since we were able to scrape together some extra simoleons for our new joint. See, as soon as I narrowed in on purchasing the house we live in now, my new obsession became being able to put 20% down. Happily, Jay joined in on the hunt for cash, and we got super motivated to make it happen. And we did. It felt so, so good. We felt like we were building something that was truly ours. We also got to avoid pesky things like PMI, which would hit us with about $80 a month in banking fees. When you’re already paying more interest than principal on your loan, the last thing you want is to tack on an extra $80, ya know what I mean?

Cape Cod Bungalow

So being the long term financial thinkerΒ obsessor I am, I started to play around with what an extra $100 each month would look like, long term, on our principal balance. Low and behold, it took 3 years off our payments, and saved us over $23,000 on the life of the loan. $23,000.Β Holy smokes! This game was getting fun. So I decided to try typing in $200. That scenario would have us paid off in full 7 years early, and would take $39,512 off of the loan in interest. That’s when I started to get motivated to make some changes. Sure, we would feel the $200 that wasn’t in our pockets each month, but we’d also feel the progress we were making paying off the house and getting one step closer to total financial security.

Since I love to make game plans, I got my business proposal together and approached the husband with my new idea. I knew taking away some of his slush fund would take convincing. So this is what I proposed. Drum roll pa-lease. In addition to putting the $200 extra on the loan each month, I suggested taking $1,000 from our tax return each season (since I view that as free money anyway), and lob that on the loan as an extra bonus as well. My point of negotiation was that we could split the remaining tax return between us and buy whatever our hearts desired. Being the totally laid back dude he is, he agreed!

Doing this will allow us to have the house paid off in less than nineteen years. 1-9. Oh and forget about knocking 20k off the interest over the life of the loan, this scenario would take almost $60,000 off. Whhhaaaattt. That is exciting. Knowing me, there is no way that we will stay in this house for twenty years (I mean, I was in the first one for 2.5) but I also think we will be hunkered down here a bit longer this time around, so we want to start things off right and make sure we are able to take advantage of that extra time to pay down the loan.

How_To_Pay_Off_House_Loan_Quicker In the short term, the things I am the most excited about include being able to have more money going toward our principal than our interest as early as 2015. That’s a hop skip and a jump away, and once you start to build that momentum, it just continues to roll ya down hill. My biggest financial dream (as far as houses are concerned) is to pay cash for one of our houses down the line. I’m sure it won’t be happening any time soon, but it’s a goal, and I love having a super stretch goal to keep me motivated, and to keep me dreaming. Maybe I’ll buy this house. πŸ˜‰ Dreaming BIG here.

Raleigh Real Estate

When we bought our first house, we could only afford to put an extra $50 or so on the loan balance, but we did it religiously from the day we bought it, and incrementally, it made a difference in the amount of money we had to put down on the next place. Although I know that some financial goals are much longer term than other (this definitely falls into that category), I’m so pumped to be on a trajectory that will get us another step closer to being financially secure.

Looking for other ways to be thrifty, and save lots of dough? Check out the Thrifty Thursday link party over at Living Well, Spending Less. Lots of great ideas over there to keep yo money, in yo pocket. The best place for it to be! πŸ˜‰

Thrifty Thursday Link Party

 

15 thoughts on “Amortization Action

  1. God, Jack and I are terrible with money. LOL. The good news is, we know we are terrible with money so we are careful not to sign up for credit cards, and we only buy big things (cars, couches, etc) in full with cash. We just can’t seem to figure out the “saving” thing though. The other day we went grocery shopping and came in $20 under budget. We were all “YAY! LETS BUY WINE AND ICE CREAM!” lol. Can I hire you!?

  2. Years of working as a loan collector has me preaching what you have said about paying extra. Some people can’t afford an extra $100 a month, but literally every little bit counts. On my car payment, I round up to the next zero. So, if my car payment is $221.95 I’ll pay $230. It’s easier on my math, too.

  3. These are really great tips! My husband and I are looking to buy our first home and by learning money saving tips now it will help us out in the long run. Thanks! Great post!

  4. Great post! It’s amazing how pinching pennies and paying a little extra now can save you in the long run. πŸ™‚ I just found you through Living Well Spending Less, and I’m excited to check out more of your site. Happy September!

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