Guest Column--Could We…Should We Pay Off Our Home Early?

“It seems like we will be making house payments forever. We owe $140,000 at 6% interest and are paying $1000 a month. How much sooner could we pay it off if we started paying an extra $100 a month?”

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The above is a hypothetical question, but it could be you. There are two answers: the quick one and the dig deeper one. By clicking a few buttons on a financial calculator we discover the quick answer is 21 months; paying an extra $100 will reduce the payoff from 20 years to 18 years and 3 months.

COULD you pay off your house early? Sure. But SHOULD you?

Let’s dig deeper. Do you have other debt? Do you have any savings? Do you have an emergency fund? Are you on target with your retirement investments? Do you have children who will need some help with college funding?

Being as this is a hypothetical case, let’s say you are paying $300 a month at 12% APR on $5,000 on credit card debt and $500 a month on $8,000 on an 8% car loan. You have $2,000 in a savings account, nothing set aside for emergencies, you are on target with retirement investments and you have two children, ages 4 and 8. Your challenges are to not only get your house paid off, but also get out of debt, build an emergency fund and make plans for your children’s education. Don’t get overwhelmed. You can accomplish all of these and still pay your house off early by setting priorities and taking things one step at a time. Let’s develop a plan.

Books I Plan To Read...Please tell me if they were helpful!!!

How to become mortgage free in ten years or less without extra paymentsThirty-Three and Mortgage-Free

Learning To Say NO...

We actually said 'no' to the kids just now...unbelievable. Miracles can happen.

The kids wanted a video tape to make a movie with..I don't want them using all of my home movies, and we haven't invested in the that new digital camera stuff. LOL...anyway, we already put off hair cuts until Friday (payday) as we are trying not to use the credit card and get whatever we want. IF WE DIDN'T PLAN FOR IT..WE DON'T GET IT THIS WEEK! Hopefully, this new way of life will eventually work into planning for the month, but a week will do nicely right now.

Plus, we have to save the cash to pay for the real estate taxes which are due Feb 22, so we have to secure that portion as well. We even put off a trip to the bookstore to buy a single book on investing today. So, that is 3 budget-blowing events we steered clear of in one day. Amount saved = $10 for the tape, $30 for the haircuts for all three guys, $50 at the bookstore since we can't just get one book! Total saved = $90 by saying NO to ourselves and the kids.

Now, I did promise my son that I would get him the video tape, so I am going to use some of my Walgreens rolling rewards dollars to get one for him, but I don't consider that an expense, per se...okay, call me a cheater. I don't care. :-) If he can become a young George Lucas, then my expense will be worth it.

Here's a good book if you are new to this "NO" concept.

2010 Fantasies

Here is my list of dreams, hopes and fantasies for 2010:

1. that I could become a top-notch cook
2. that all the little odd jobs we need to do in finishing this house would get done (like painting the outside railing, installing the tile backsplash, landscaping, etc)
3. that I could lose 50 lbs
4. that I would never have to go to the grocery again. LOL
5. that we wouldn't owe anybody any money!

Budget Craziness Is Upon Us!

We have spent the past week or so at basketball games and working on paying Christmas..credit cards are the devil! It never fails that we pay the stupid thing off, and it's right back up to $1000 before we can blink..MUST GET RID OF IT!

I am working on my couponing right now..there are actually women out there who only spend about $500 per month on food for the whole family! I now have that same goal. Spent quite a bit of time at Kroger..two different trips actually..got some great steals like these:

**Mix or Match Promo***
-Buy any 10 participating items and get $5 off at checkout ($.50 off per item)

Price below is final cost after promo savings.

Birdseye Steamers, 12 oz — $1.49
-$.50/1 Birdseye steamers, SS 1/10 insert
Final Price: $.49

Hunt’s Can Tomatoes, 12-15.25 oz — $.50
-$1/4 Hunt’s Canned Tomatoes, All You magazine Dec ‘09
-$0.45/3 Hunt’s Tomatoes, SS 01/24 insert
Final Price: As low as $.20/ea wyb 3

Quaker Chery Granola Bars — $1.49
-$0.55/1 Quaker Chewy Granola Bars, RP 1/3 insert
Final Price: $.95

I am not a coupon queen, but I am working on it. You can find more info about what coupons will 'match up' with the store sales to save the most money. I basically got 22 cans of diced tomatoes almost free today!!

Check out faithfulprovisions.com for more...

Well the news isn't good..I went through every single mortgage calculator I could find, and each one said that I have to somehow send an additional $800 on top of the $650 we are already sending in extra each month. So, in effect, we would have to send a payment of $2600 per month to pay the thing off in 10 years! I just don't know how we can do this without me going back to work.

Of course, I am perfectly willing to work, but my being at home really helps with the intensity and uncontrollable nature of Tom's job. I keep the ship sailing in the right direction while he keeps it floating. ;-) If he gets called into work at midnight, we don't worry because I will be there to take care of the house and the kids until things get back to normal. It is a nice system, and I hesitate to mess with it. What would I do with the kids if I needed to be at work, and one of them is sick?

For now, I am going to work on ways to cut our expenses to the bone and send all the extra money I can save to the mortgage. I will share each idea with you as I go along as well as tell you if it worked or not.

Ciao!

Here We Go...No More Mortgage!

We are sick to death of paying the bank every month for our house! We are terribly grateful for the loan to build, but now is the time for us to own it by ourselves instead of co-owning it with Wells Fargo.

Here is a picture of our dream house that we built in 2006..we moved in in January of '07.


We are very happy here with our two little boys. We have a little bit to do here and there, but we contracted this ourselves and plan to finish the little details as money and time allow. Saving money to get what we wanted was the bottom line for us.

We currently owe on a new 30 yr mortgage that we just refinanced at 5.125% through a free program from Wells Fargo. This has probably saved us more than anything else we will do in the life of this loan since we didn't have to pay anything to get the lower rate. Our original rate was 5.875% so we aren't saving a ton, but comparatively..it's fab!

Currently, our payment is $1224.79, and it is paid twice monthly through the free program for early payoff through WF..so cool. Yes, we could do this ourselves, but it is all done via the bank account, and we don't have to think about it.

Plus we have an extra $550.21 sent to principal each month. With all of this, we are on track to payoff our mortgage in about fifteen years...

If you add $650.00 to your monthly payment, you will pay off this debt in 166 payments instead of 351, and you will save 118,457.67 in interest charges. This savings translates into a guaranteed, tax-free, average annual return of 109%. And that's not even considering the emotional returns you'll get when you pay off this debt 185-months (15 years, 5 months) ahead of schedule!

but that just doesn't seem good enough..call me crazy. What would we have to do to pay it off in 10 years??