Wednesday, August 20, 2008

$72 Saved On Our Mortgage

About a year ago, I created an Excel spreadsheet that I enter our mortgage payments into every month. I used directions in this post from Trent at The Simple Dollar to create the spreadsheet. There are instructions in the comments on adding an "Additional Principal" column, which I also did.

I have really enjoyed using this spreadsheet over the past year. My husband and I round up when we pay our mortgage each month, and I get immense satisfaction in putting that $7.xx in the "Additional Principal" column (I know, I'm a geek!). The spreadsheet automatically adjusts our final payment (which is about 10 years from now) with each additional $7 I enter.

Since my husband and I both get paid bi-weekly, we end up with two months each year that contain an "extra" paycheck. This month happens to be one of those months, so we decided to apply an additional $100 to our September 1st mortgage payment, just for fun.

I went into my spreadsheet the other night and typed $107.xx into the "Additional Principal" column. I then checked our final payment to see how much it was affected. Our final payment went down by $179.xx! How fun is that?!?

That, my friends, is $72 our mortgage company will never see. :)

*sigh* It's the small things in life!

5 comments:

Terry Sherman said...

Thats awesome! We do a similar thing and round up as well each month. That round up lately has been $75-80/month...

We've got a 30yr mortgage and that additional round-up amounts to shortening our loan period by 7 years! Woohoo!

Another thing we did is get a credit card just before we started making all our wedding and honeymoon purchases. Its from our mortgage company and it pays 2% back on all our purchases toward our mortgage! So far we've had $300 paid toward our mortgage this way (for those good at math that's $15,000 spent to earn that $300...) And an added bonus its 0% until mid next year so no interest charges on any balance we carry on the card.

HisHersMoney said...

I was very lucky when I got my first mortgage that someone told me to ask what the payment would be for biweekly as well as what a 25 year and 20 year repayment plan would be. I was surprised to find out that an extra $100 a month would take about 8 years off my mortgage and put it at 22 years.

An extra $100 doesn't seem like a lot but 8 years sure was a lot!!!!

Becky@FamilyandFinances said...

Terry, can I ask who your mortgage company is? That credit card deals sounds like an awesome program!!!

Mueller said...

I also round up... a lot. A couple of hundred extra dollars each month will equate to something like 12 years off our mortgage. Awesome.

What is everyone's opinion of paying your mortgage off as early as possible? I ask the question because I've heard different opinions that all seem to have some sound reasoning.

One opinion is to pay it off as quickly as possible because your building equity and paying less interest in the long run. This seems to be the simplest for me to grasp.

Another opinion is to pay it off as slowly as possible because the interest is tax deductible and paying it off slowly means your paying your mortgage off with inflated (or deflated?) money (the dollar is worth less and less as time goes on because of inflation). Also you can then invest the money that you would have paid extra towards your principle.

It would seem to me that I wouldn't be able to invest enough to make up the extra interest I would end up paying. Opinions?

Becky@FamilyandFinances said...

@Mueller

I'm kind of in the middle on this one. I like to pay a little extra, but I have other savings goals that are taking priority right now. If I suddenly received a $100,000 inheritance (yeah, right!), I would pay off my mortgage and then invest the remainder. I like the peace of mind of owning my home outright.

Here are some other PF bloggers' opinions:

http://www.thesimpledollar.com/2008/02/04/investing-versus-paying-ahead-on-your-mortgage-which-makes-more-sense/

http://www.getrichslowly.org/blog/2008/02/12/mortgage-prepayment-made-easy-own-your-home-in-half-the-time/

The comments always provide lots of alternative opinions!

Any one else have thoughts on this?!?