Ladies,
My husband and I had a deep conversation this morning about our home mortgage, and we'd like to know what the norm is. Do most people get a 30 year loan for their house? Do they pay any extra each month? We know that by paying extra each month, or making two half-payments per month, one could save a lot of money in interest, but we don't think that most people do that. What do you do in your household? What do you think the average American does regarding their home loan? We are Dave Ramsey listeners and also really like Crown Financial Ministries.
We have always paid extra on our mortgage until we took the Dave Ramsey Total Money Makeover. Dave says that you should put any extra money you have toward your other debt (credit cards, car payment, etc.) before paying extra on your house. So we now pay extra toward our other debt, once that it paid off we will pay extra toward our mortgage again.
I would highly recommend the Total Money Makeover check it out www.DaveRamsey.com
Reba: Your husband is correct however it will take many years. I'd love to chat about a program I represent called U1st Financial. This program will take most 30 year mortgages down to 8-10 years, saving thousands in interest. It is a remarkable program. You can go to my website and view the video about the program: www.propertiesnmoore.com. Also, if you are interested, I could meet with you. The best thing to do is to do the FREE ANALYSIS. It doesn't ask for any personal information like SS# or Bank Accounts. In fact, this program never touches your money. It teaches you what to do and when to do it.
Thanks for your time.
Jerry Moore - a grammy to a 3 1/2 yr. old and 11 month old!
I LOVE Dave Ramsey.
And Mary Hunt.
Love them, Love them, Love them.
My husband and I are renting now, so prepaying the mortgage isn't an issue, but in order of the most important things - financially:
NO MORE CREDIT CARD SPENDING
1. Contingency Fund (3 - 6 month basic living expenses in a liquid asset)
2. Savings (and investments)
3. Giving (10% to what you believe in)
4. Pay off Non tax benefits debt (everything but house and student loans) - Mary Hunt's RDRP is awesome for this visual.
5. Pay off the house.
6. Pay off the student loans if you still have any.
Your husband is correct, but you have to actually have some extra money to do that. We have a 25 year fixed rate and recently refinanced(before the economic crisis)for a much lower interest rate.
My friend & her husband paid extra each month which went toward the principle & they paid off their house in 16 years instead of the 30 it was org. financed for. They sold their house 2 years ago, took the money from the sale of the house (which they doubled from the purchase price) and had a home built, used some of their retirement and the new home on 20 acres is paid for. Since they are now in their mid to late 50's, this is great for them as they both still work & have a nice income. They paid so much less on the house by doing this as they got out of paying thousands in interest.
Paying extra toward your mortgage each month can save you tons of money in interest. But, if you have any credit card debt or car loans, put your cash towards those first. Then, when you are out of debt except for your house you can put any extra money toward your mortgage.
Something else you may want to do is check with your current lender, or any lender for that matter about a refinance. Depending on your current interest rate, a refinance could lower your monthly payment quite a bit. Rates are really low right now and it is a great time to refinance. That alone would free up some money to go toward another debt.
I also highly recommend Dave Ramsey and his Financial Peace University. You can find a location near you at his website.
We do not pay extra per month.
When we built this house in 2000 our interest was 8% on 30 yrs (YIKES). Within a short time, rates dropped so we refinanced and when we did, we PAID DOWN the mortgage.
We did this 3 times to get the rate we have now at 5 3/8 and we are closely watching the rates now. Each time we did a refi, we PAID DOWN the mortagage. Our broker thought we were crazy and now she she thinks differently about our outlook! The focus is to PAY DOWN the mortgage when you refi to make it worth it.
My 4000+ sq ft house payment is lower than most apartment or rental homes but it comes with PLANNING and PREPARATION. I am in a high end neighborhood with one of the higher priced homes/lots and my mortgage payment is less than the average person. We are very deliberate with our expenses, we still have a lot of frills, we are simply planners. My hubby is a numbers man and good at forecasting.
Find a good broker to work with you that you trust.
We are closely watching now and have a broker on call to set a date and time for a new re-fi if rates hit a new low.
We don't have any other debt such as credit cards, loans, etc so instead of making payments on things like that, we PAY DOWN the mortgage when we re-fi.
Hi Reba,
I make 2 extra payments per year on my mortgage, which reduces the interest and pays my 15 year loan in 11 years! For me, that's a perk!
Debra
I used to make an extra payment every year on our 30 year. Then when rates dropped we re-fi to a 15 year.
Then with the current economy we re-fi back to a 30 year.... so our payments would be much lower... that way if one of us loses a job we figure we can make it. But we can still pay what we were paying so it's like a 15 year loan. I don't know if that was the right thing or not, but that's what we felt comfortable doing.
And that's what you and your husband need to decide. What you feel comfortable doing. If you can afford it, it will save you tons of money and is very worth it.
Reba, if money is already tight then a 30 year fixed mortgage is probably the way to go. 15 years would be better but only if you can afford it. Yes, making only one extra payment a year will save you lots of money over the term of the mortgage and will allow you to pay off a 30 year mortgage years sooner. I recommend you do some research using resources available on the web to increase your knowledge. Your husband is right on target!
If you make a 13th payment every year and make that payment go strictly to the priciple loan amount then you can pay it off in a lot less time. that way you dont have to make extra each month just send in one extra payment every calendar year but mark that it goes to the principle only.
We have a 30 year fixed loan but we only make the payment each month...
HTH
April J
If your mortgage is your lowest interest rate of all your debt, then pay your credit card or car loan balance off first. Your mortgage interest is tax deductible, so you get that benefit as well. As far as loan term, it depends on your age. The last time we refinanced was 4 years ago and was fortunate to get a 5% rate and could afford the payments going with a 15 year mortgage, so I will be 55 when the mortgage is paid off. If you have a 30 year mortgage and this puts you past retirement age or when the kids start college then work with your loan's amortization schedule to figure how much extra you have to pay to pay off the loan earlier. Your mortgage company should be able to provide you a mortgage amortization schedule or you may be able to pull one off their website. If you want an excel file to play with email me privately your personal email and I will send you one. If your funds are tight it may be more beneficial for you to start a college fund with what extra you have or have a house repair savings account. It just all depends on what your family's goals are.
We pay ours every two weeks so effectively we have one extra payment a year. We also will send in extra money when we have some. So yes, we pay extra every month on our 30 year mortgage.
I wanted to add that we have no credit card debt and only pay one car loan, the other car we paid cash for.
Most people get 30-year loans and if you plan on staying in that same home more than ten years, then it is very wise to pay a little extra each month, even just $100. You can save tens of thousands in interest.
If he can show you an amoritization schedule, it will show you just how much interest you will NOT pay for your house when your home is paid off. And even if you sell before the 30 years, you will have 10X the equity in your home if you consistently pay extra each month for over ten years. We were doing that with this home but now have decided to move, so it's not helping as much as it would have if we'd stayed.
It basically just goes towards interest at first but then if you skip ahead in the schedule, you can see how it starts chiseling away at the principal and that's when you notice that you're owing less and less on your house.
You can pay off a 30-year mortgage almost 10 years early if you pay about $100 more on an average size mortgage. The schedule will show you that instead of paying $250,000 over 30 years for a $150,000 house that you'll pay 198,000 (or whatever the #s are), then you'll see how it's worth it.
Hi Reba ~
We bought a new home in 2008. We decided to go with a 30 year mortgage, but we pay enough extra on the payment as if it was a 15 year mortgage. This way, if times are tough or we have an unexpected financial crisis (like my transmission went out a month ago & we wanted to pay cash for it)...we are not absolutely committed to the higher payment.
We have already paid our mortgage down $4000 more in the last 9 months than if we were just making our normal payment amount.
Hope this helps...it works for us!
Laura C.
Reba,
We just bought our house and we did a 15 year mortgage and I try and pay 200 more a month. Not only will paying even 50.00 more a month save on intrest it will also cut your loan time down...instead of a 30 year loan you could turn it into a 28 or 29 year loan which will definatly save you money.
We bought our house in 2004. Like Sara T, we used to pay every two weeks until I lost my job. Our mortgage company set us up on a bi weekly program where 1/2 of our mortgage came out of our checking account every two weeks when we got paid. So two months out of the year, we were making 1.5 payments. This worked out to an extra mortgage payment every year. It cut down lots of interest. Now that we are a one income family, we took ourselves off of the bi weekly plan. We are only making our regular payments now and not saving near as much interest but we got a good headstart the first 4 years. If you can afford to do it, it is definitly worth it!
Please call me and I'll tell you what I know about this. Yes by all means you want to pay your mortgage every 2 weeks and that will be the same as making an extra payment each year. Also make a payment each month separately that goes just towards the principle. You can get your house paid of in as little as 7 - 10 years. I know someone who is Paying their home off in 4 years doing this. The mortgage companies and banks don't want you to know about this. Most people don't know this and that's why they don't do it. My name it Taylor O'Connor 214 - 549-2175.