The benefits of extra mortgage payments outweight the effort. Making extra mortgage payments might seem like a small effort, but it can significantly impact your financial future. Whether you’re planning to stay in your home long-term or thinking about selling within a few years, adding even a small amount to your monthly mortgage payment can bring huge benefits. In this blog, we will explore the advantages of making extra mortgage payments, providing both short-term and long-term perspectives.

Save Money on Interest

One of the most significant benefits of making extra mortgage payments is the potential savings on interest over the life of the loan. Let’s consider an example: suppose you have a $400,000 mortgage with a 30-year term and a 7% interest rate. Your monthly payment is approximately $2,661. If you decide to pay an additional $100 each month, the savings can be impressive. There are so many online calculators that can help you visually see the benefits.  Bankrate.com has a user friendly calculator – try it out here!

Over the 30-year term, this extra $100 per month will reduce your interest payments by around $64,800. Furthermore, it will shorten your loan term by nearly 3 years, allowing you to pay off your mortgage in about 27 years instead of 30. This means you’ll be mortgage-free sooner and have more financial freedom to allocate your funds elsewhere.

Build Equity Faster

Making extra payments helps you build equity faster. Equity is the portion of the property you truly own, which increases as you pay down the principal balance of your mortgage. When you sell your home, the equity you’ve built can be a significant financial resource.

For example, if you decide to sell your home after seven years, the additional $100 payments will have reduced your principal balance more than if you had only made the minimum payments. This results in higher equity, which can be used as a larger down payment on your next home, or for other financial goals such as investing or paying off other debts.

Increased Financial Security

Building equity faster provides financial security. In times of market fluctuations, having a larger equity cushion can be reassuring. It also gives you more flexibility for refinancing options, potentially at better rates or terms, if needed.

A larger equity buffer can protect you against potential downturns in the real estate market, as you owe less compared to the home’s value. This increased financial security can provide peace of mind, knowing that you’re in a stronger position regardless of market conditions.

Flexibility for Future Financial Goals

Even if you don’t plan to stay in your home for the full term of the mortgage, making extra payments is beneficial. Most homeowners sell their homes after about seven years. By making extra payments, you will have a lower principal balance, which means you’ll have more equity when you sell. This can translate into a larger down payment for your next property, reducing the amount you need to borrow and potentially securing better loan terms.

Improve Refinancing Options

If you ever consider refinancing your mortgage, having made extra payments can improve your options. A lower principal balance and higher equity can make you a more attractive candidate for refinancing. Lenders may offer better interest rates or terms, which can further reduce your monthly payments and save you money over time.

Peace of Mind

Finally, making extra mortgage payments can provide peace of mind. Knowing that you are reducing your debt faster and saving money on interest can alleviate financial stress. This proactive approach to managing your mortgage can help you feel more in control of your financial future.

In summary, making extra mortgage payments, even as small as $100 per month, can save you a substantial amount of money in interest, help you pay off your mortgage sooner, and increase your home equity faster. This financial strategy can benefit both long-term homeowners and those who plan to sell within a few years. So, consider adjusting your budget to incorporate these extra payments—your future self will thank you.

If you found this helpful, be sure to check out my other articles for more tips on managing your finances and maximizing your investments.

Check Your Forgotten Expenses

Forgotten expenses can cause problems to your monthly budget. Managing a household budget can be tough, especially when unexpected expenses pop up. While most of us plan for rent or mortgage, utilities, and groceries, some costs often slip through the cracks. Here are five commonly forgotten expenses to keep in mind when setting up your budget:

Home Maintenance and Repairs 

Regular maintenance and surprise repairs can add up fast. From a leaky faucet to a broken appliance, these costs are part of being a homeowner. To avoid being caught off guard, I suggest setting aside a bit each month for maintenance and repairs. A good rule of thumb is to save 1-2% of your home’s value each year.

Vehicle Maintenance

Beyond gas and insurance, cars need regular maintenance and the occasional fix. Oil changes, tire rotations, brake replacements, and unexpected issues can really hit your wallet. It’s a good idea to create a fund just for car maintenance so you’re ready when these expenses come up.

Medical Expenses

Even with health insurance, out-of-pocket medical costs can be significant. Co-pays, prescriptions, dental visits, and vision care often get overlooked. I advise saving a part of your budget in a health savings account (HSA) or a dedicated medical fund.  This can help ease unpredictable expenses.

Subscriptions and Memberships

Streaming services, gym memberships, and other subscriptions can easily be forgotten. These small, recurring expenses add up over time. I highly encourage you to review your subscriptions regularly and eliminate services you no longer use.  You can take this one step further and cancel subscriptions that you do not truly need.

Gifts and Celebrations

Birthdays, holidays, weddings, and other occasions are fun, but these often require gifts. When you plan for these expenses, it can make the celebration less of a financial strain. It’s a good idea to keep a gift fund to cover these happy, yet costly, events.

By keeping these forgotten expenses in mind, you can create a more accurate and realistic household budget. Planning ahead for these costs can give you financial peace of mind and help you handle unexpected expenses without stress.

Refinancing a mortgage can seem like a tempting idea, especially when interest rates drop or your financial situation changes. It’s a move that could potentially save you money or offer more financial flexibility. However, like any major financial decision, it’s essential to carefully consider the pros and cons. Let’s dive into when it’s smart to refinance your mortgage and when it might be better to wait.

When to Refinance a Mortgage

Interest Rate Drops

One of the main reasons homeowners choose to refinance their mortgage is to capitalize on lower interest rates. If rates are significantly lower than what you’re currently paying, refinancing could mean big savings over time. Even a slight decrease in rates can lead to substantial long-term benefits, especially for those with large mortgage balances.

Change in Financial Position

Life can throw curveballs, and your financial situation might change over time. If you’re in a better financial position than when you got your mortgage, refinancing could improve your long-term financial outlook. For example, if your credit score has gone up, you might qualify for better loan terms like a lower interest rate or smaller monthly payments.

Eliminate Mortgage Insurance

Now, let’s talk about FHA loans. They come with mortgage insurance premiums (MIPs), usually ranging from $800 to $1,050 annually for every $100,000 borrowed. Unless you make a down payment of more than 10%, you’re stuck paying these premiums for the entire loan term. Yes, you heard right—until the loan is paid off! That means the only way to ditch MIPs is to refinance with a loan not backed by the FHA.

But what about PMI (private mortgage insurance) on conventional loans? PMI is required if you put down less than 20%. Removing PMI isn’t a standalone reason to refinance. Unlike FHA MIPs, you don’t need to refinance your entire loan to get rid of PMI. You can ask to cancel it once you’ve built up enough equity, usually around 20%.

When to Hold Off on a Refinance

Short-term Ownership

However, refinancing isn’t free. You’ll have to cover closing costs and other fees, which can add up to thousands of dollars. If you’re planning to sell your home soon or think you might, refinancing might not be the best move. The costs could outweigh the potential savings from a lower interest rate, especially if you won’t be in the home long enough to make up for those expenses.

Current Loan Terms

Before you jump into refinancing, take a close look at the terms of your current mortgage. Some mortgages have prepayment penalties or fees for early repayment. Also, if you’ve got a fantastic fixed-rate mortgage and current rates for similar loans are higher, refinancing might not be the best financial move.

In conclusion, refinancing your home can be a smart move under the right circumstances. But it’s crucial to weigh the costs before making any decisions. Before you act, evaluate your current financial situation, consider your long-term goals, and carefully review the terms of your existing mortgage. This way, you can make an informed choice.

Credit card debt have you feeling weighed down? Hey, you’re not alone! But listen up, because there are ways to take control and break free from that financial funk. Credit card debt strategies are like your secret weapon, empowering you to navigate your money matters with confidence and a bit of swagger. With the right moves, you can kick those debt shackles to the curb and strut into a future filled with financial freedom.

So, where do you start on this debt-crushing journey? Well, it’s all about getting real with your finances. Grab a pen and sit down to tally up all those pesky debts. Get the lowdown on balances, interest rates, the whole shebang. Once you’ve got the scoop, it’s time to play strategic commander-in-chief. Whether you’re all about the debt snowball (starting small and working your way up) or prefer the debt avalanche (tackling high-interest beasts first), having a game plan is key to coming out on top.  David Ramsey has a fantastic debt calculator.  Access it here.

But wait, there’s more! It’s not just about throwing cash at your debts; you’ve gotta get to the root of the problem too. Take a good hard look at your spending habits. Are there areas where you can tighten the purse strings a bit? Maybe it’s time to bid farewell to those daily fancy coffees or rethink your takeout addiction. Crunch the numbers, create a budget you can actually stick to, and watch those debts shrink faster than you can say, “adios, debt!” So, what are you waiting for? Let’s kick that credit card debt to the curb and strut into a brighter financial future!

Psst… Need a guiding hand on your journey to financial freedom? Meet Laura Sawicki, our resident finance guru with an MBA in finance and a knack for helping folks like you make smart money moves. Connect with Laura today to discuss how to tackle debt and save for a house!

Lock in a high safe return CD now.  Are you looking for a smart money move to secure your finances? If so, you should run, not walk to find a Certificate of Deposit (CD) with a safe return of 5% or more for the next 12-18 months. And yes, you should go right now!

CD’s are a safe investment vehicle.  You can currently invest in a CD at a bank or credit union, with a guaranteed rate of return of at least 5% for a year or longer. Keep in mind, not every institution offers such great rates.  Do a quick internet search for “high yield CD rates” and you will see a variety of options. (Edward Jones, Charles Schwab, are a few with great rates.)

Why should you invest in a CD RIGHT NOW???  Because these high rates won’t be around forever.  Once you buy a CD, you’re locked in for that rate for the period of time you select.  Use this strategy to help save money for your new home.  Check out my financial calculator for more info.

CD rates are coorelated to the Fed Funds rate, so when the Fed increases rates, as we’ve seen over the last couple of years, CD rates will increase as well.  However, if you’re following any financial news, I’m sure you’ve heard the Fed hinting at dropping the rates.  This is why it is so important that you lock in a high rate CD as soon as possible – right now would be perfect!  Check out the CD calculator so see how much money your smart money move can earn.

Don’t miss out on this opportunity to secure a safe high return CD. The Fed has signaled that this deal won’t last much longer. Lock in your rate now before it’s too late!

Tips and Strategies to Save Money for a Home

Let’s talk finances… Are you dreaming for the day when you can proudly call a place your own? The path to homeownership is an exciting one, but it often comes with its fair share of financial obstacles. In this short guide, you’ll find tips and strategies to help you save for a house.  Following this roadmap will bring your dream within reach.

Set Clear Goals

Begin by defining your homeownership aspirations. How much do you need for a down payment? What is your ideal monthly mortgage payment? Having concrete goals will help you stay focused and motivated throughout your savings journey.

Create a Budget

Next, comes the budget.  A budget is your roadmap to financial success. Take a close look at your income and expenses to identify areas where you can cut back and allocate more towards your house fund. Every dollar saved brings you one step closer to your goal.

Automate Your Savings

Make saving for your house a priority by setting up automatic transfers from your checking account to your savings account. This “set it and forget it” approach ensures that you consistently contribute to your house fund without having to think about it.

Reduce Debt

High-interest debt can weigh you down and hinder your ability to save for a house. Prioritize paying off credit card debt and other loans to free up more money for your down payment and future mortgage payments. David Ramsey has some great debt reducing strategies. Check them out HERE.

Explore Down Payment Assistance Programs

Many local and state governments offer down payment assistance programs to help first-time homebuyers overcome the initial financial barrier. Research available programs in your area and see if you qualify for any assistance.

Increase Your Income

Consider ways to boost your income, whether through a side hustle, freelance work, or advancing in your career. Every extra dollar earned can accelerate your savings progress and bring homeownership closer within reach.

Save Bonus Money

Instead of splurging on luxury items, move unexpected windfalls such as tax refunds, work bonuses, or inheritances directly into your house fund. These additional funds can significantly bolster your savings without impacting your regular budget.

Be Patient and Persistent

Saving for a house is a marathon, not a sprint. Stay disciplined, remain patient, and celebrate small victories along the way. Remember, every penny saved is a step forward on your journey to homeownership.

In conclusion, saving for a house requires dedication, discipline, and smart financial planning. Follow my tips and strategies, and soon you can turn your dream of homeownership into a reality. Start today, and before you know it, you’ll be unlocking the door to your very own dream home.

When you’re ready, head over to my financial calculator and work the numbers.

And remember, buying and selling isn’t tricky when you’re with Sawicki.