Found Money Staring Us in the Face

31 Jan
by Jenny, posted in Money Honey   |  5 Comments

I’m not sure why we waited so long, but Kirk and I finally refinanced our mortgage to secure a lower interest rate. We have been trying to figure out how to pay off our mortgage sooner, but we didn’t want to lower our retirement contributions to get there.

Refinancing our mortgage allowed us to reduce our interest rate by 1.375%. We went with a 30-year fixed rate loan again, however, we’ll be paying the same amount we were paying before refinancing – even though our new mortgage payment is lower.

Since we’re paying the same as we were before even though we now owe less each month, we’ll actually be paying an additional $220 towards the principle of our loan each month. This will shave nine years off the term of our loan – even if we never raise our overpayment.

So, by not paying anymore than we have been each month, we’ll get through our loan nine years earlier. Like I said earlier, I’m not sure what took us so long to refinance with low rates like these!

Found Money

Even though I thought we shaved every possible unneeded expense from our budget, I overlooked the enormous savings to be had by refinancing our mortgage to lock in a lower rate.

Sometimes it’s the most obvious things that need reevaluated in our budget. Maybe it took clearing out all of the smaller clutter from our budget before we could see the single biggest opportunity for savings.

How about you? Is there a major beast sneaking under the radar in your budget too?

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5 Responses to Found Money Staring Us in the Face

  1. Wow, that’s a lot of savings. Like you said, sometimes you’ve got to clear out the clutter to see the big picture. Check out my post of mindful spending at Zen Presence – Money and the Future.

    Dan

    • Hi Dan,

      I know, I only wish I would have realized sooner. I just checked out your Money and the Future article and I loved it! You are right on with your message.

  2. Jenny, we did the same. And at the end of each month, whatever money we had left over after paying our bills went toward the principal. It really added up…and our mortgage was paid off in 15 years rather than 30. (The idea that you’re benefiting by using the tax break is a fallacy. Pay off your mortgage and free yourself!)

    • Hi Deb,

      Yes, you are the one that first planted the mortgage freedom seed for me. I honestly never entertained the idea of paying off our mortgage early until hearing about how and why you paid off yours.

      Thank you for that. :)

  3. Amanda

    I just found your blog through nonconsumeradvocate and I will definitely be coming back!

    Congrats on the refi that will save you nine years of mortgage payments. I wanted to suggest another strategy as well. Instead of paying extra on our mortgage each month, we put cash into an investment account. Invested conservatively in a low fee account, that money has been and will continue to grow at a rate higher than our mortgage rate. When the balances are equal we will pay off the mortgage balance. We will have to pay capital gains tax on the some of the money, but it will allow us to pay off the mortgage even earlier than if we just let the mortgage company have our extra cash for free each month, meanwhile we have an extra emergency cushion of cash should we need it.

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