Guys I have a problem.
It might just be me, but EVERY single time I make a mortgage payment I argue with myself for at least 30 minutes.
I have a little voice on one shoulder going, "Why dont you put an extra $30 on that payment... or an extra $100. It would pay it off so much faster."
Then another voice is going, "Oh no. Don't pay extra, your trying to build up a savings fund. It would be silly to put more on a mortgage when you have so many other things to save for."
And I go back and forth and back and forth. Im serious! I have trouble writing out the amount every time, and Im sooo tempted to add a little extra.
How do you guys fight this? Is it okay to pay a little extra every once in a while to get some satisfaction? Or am I just crazy for even considering this when I haven't completed my Emergency Fund?
What do you guys do? Do you ever add a little extra payment just to feel like your getting somewhere?
In other news, my Mortgage is now $51,241.45
Battle of the Mortgage
November 5th, 2013 at 03:26 pm
November 5th, 2013 at 03:38 pm 1383665934
November 5th, 2013 at 03:42 pm 1383666124
I like my numbers even, as in $100, $200, $300 etc. I have rounded up additional principle payments as small as $9 to have the double 00s at the end of the balance. Everyone once in awhile I will make an additional month's principle (usually $500) but that is rare.
November 5th, 2013 at 03:45 pm 1383666301
November 5th, 2013 at 03:58 pm 1383667092
But I do realize that I should have a fully funded Emergency Fund before paying extra. Which is why I have not. But it's just hard to keep telling myself that. I am glad to hear it from other people though.
But now if I had my EF complete. Would it then be okay to pay extra on the amount, even if other saving goals are not met?
November 5th, 2013 at 04:10 pm 1383667825
November 5th, 2013 at 04:41 pm 1383669691
This is a quote from an article about prepaying low rate mortgages:
Let's run the numbers: If you have a 30-year, $100,000 loan at 4 percent, your monthly payments will be $477.42 (none of the examples includes extra for real estate property taxes and insurance), and you'll pay $71,868 in interest over the life of the loan.
If you make one extra payment a year, you'll pay off the loan four years earlier and save $10,000 in interest. But if you make a double payment each month, you'll pay off the loan in 11 years, and only pay $23,195 in interest.
Why don't you get a bigger bang for your buck? Prepaying works better the higher your interest rate. If the same 30-year loan was priced at 7 percent, your monthly payment would be $665.30 and you'd pay $139,511 in interest over the life of the loan.
If you made one extra payment per year, you'd pay off the loan six years earlier and save roughly $36,000 in interest. If you made a double payment, you'd pay off the loan in just nine years, and pay only $31,000 in interest — a savings of $106,000 in interest over the life of the loan.
So you're already saving a ton by having a lower rate. Try to focus on that, and appreciate the fact that you're saving all that money to work FOR you, whereas in 20 years after 20 years of inflation and raises and better jobs, that mortgage payment is going to be a tiny portion of your income and you're not even going to notice it.
So unless you are the sort of person with the mentality that ALL DEBT IS EVIL AND SHOULD BE ELIMINATED AT ALL COSTS, as some Dave Ramsey people are, just pay your mortgage as planned and use the rest of your money for your other goals.
I do "prepay" my mortgage in that I round up to $2,000 for mortgage, interest, and taxes escrow which leads to a $168.88 prepayment every month, but I'm not doing it to save money, I'm doing it because it's easier to do my math with round numbers!
November 5th, 2013 at 05:41 pm 1383673276
So instead of stressing about it every month, maybe just make it a "once per year" kind of decision?
I am also a strong believer in "emergency fund before all else". It makes life easier, in my opinion. I do throw little bits at our mortgage every month, but all our other financial goals are taken care of (emergency fund and retirement). Mortgage paydown is our only other financial goal of any note, so it gets all the snowflakes and windfalls right now.
November 5th, 2013 at 05:55 pm 1383674132
Our rate is current 6% and we will be refinancing next year.
So maybe after I'm comfortable with my savings and my retirement I'll start throwing some money at it. That will probably be a while down the road though.
November 6th, 2013 at 04:07 am 1383710857
November 9th, 2013 at 09:37 pm 1384033037