Friday, May 27, 2011

The Most I've Ever Saved!

Mortgages, that's right... I have been able to save our family a TON here. Actually, more than I even thought!
This might be a family's biggest expense each month, but there's a way to save built right in! First thing I will say, though, is check with your mortgage company to make sure that there isn't an early pay-off fine/ fee/ charge/ etc. If there is, you have to weight it against how much you could save.

From the start, when I first bought our house, I knew I wanted to pay it off early, because the math-nerd in me knew it would save me money in the long run. Well, as I sit at home sick today, I went online to pay our mortgage, and got to wondering how much we've actually saved in interest. First, I wanted to know how much we've paid in just interest: just under $18,500. So then I figured out how much we've saved interest. The number astounded me: over $31,000! Let me explain how...

When I knew how much we were borrowing and the terms of our mortgage, I went online and printed out an amortization schedule. Each month when I made our monthly payment, I would make an extra payment that would be the amount of the next payment's principle. For us it started out around $130 extra a month, saving us about $650 in interest for the next month. Now it is up to about $190, saving us about $590 in interest. (Less money going to interest, more going to the principle... that's a good thing!) Doing that alone, will be able to save you about half of your total interest paid over the life of your mortgage. (For example, if you would have paid a total of $100,000 in interest, you would save $50,000 of that.)

That was my goal... until, I lost my job 15 months after buying the house. We stopped making the extra payments each month thinking we might need the money to buy groceries and what not. We became even bigger penny-pinchers than we already were. We didn't eat out, go to the movies, or as the hubbs jokingly put it "have any fun at all." (Of course we found cheap or free ways to have fun: eating out using gift cards from the points on our credit card, renting movies from Red Box using their free codes, etc.)

When I found a job, we started making our extra payment again each month. Plus on top of that, all the money we had saved by becoming bigger penny-pinchers, we split up between our two Roth IRA's and the mortgage. By putting that big chunk of change towards our mortgage, we were able to knock off a little over 2 years worth of payments, saving us almost $17,000.

Being the new teacher at my school, I might be loosing my job again this year. So we have stopped making our small extra payments, and started being bigger penny-pinchers again. Hopefully, I will find out soon that I will have a job again next year, and we will be able to start up our extra payments again. Maybe we will even be able to put another big chunk of change towards it too, but we'll see with the baby on the way what our budget will look like... For now, I will be happy with having lived here for 3 years, but having 8 years of our mortgage paid off!

1 comment:

Ashley said...

We refinanced and are saving like $150 a month.