Our mortgage company sent us another offer to refinance. They claim because there was a recent government policy which allows people who have paid their mortgage on time each month, but owe more than their home is worth to refinance their home without cost. So according to the letter we received in the mail, there would be no cost for us and no appraisal. After a quick discussion with my husband, we decided to go for it. Up until recently, I had thought I wanted a 15 year mortgage with a slightly higher payment. However, it is also nice to at least have the option to only be obligated to pay a lower amount in case our finances ever take a turn for the worse. We can still pay extra on it in order to pay it off early. I think we could have gotten a lower interest rate at 15 years, but in this particular offer they only gave us 2 options: 30 years or 25 years. Both options were 4.5% which honestly isn't great considering I've seen some offers below 4, but it's better than the 5.75% we are paying now. We decided on the 25 year mortgage (which would actually take off almost a year off our current since we are just over 4 years into it). Here is math to show how this should benefit us:
Current mortgage: $1,133.01 for 25 years 11 months (311 months)
Proposed: $1,017.59 for 25 years (300 months)
Total payments of our current mortgage vs. the proposed new mortgage:
Current: $1,133.01 x 311 = 352,366.11 total payment
Proposed: $1,017.59 x 300 = 305,277.00 total payment
Savings: $47,089.11 (or approximately 20 months of my income - before tax!)
So now we are just waiting for them to get back to us in order to take the next step. Hopefully we don't get our hopes up like last time.
Thursday, December 29, 2011
Sunday, December 11, 2011
Year in review and replacements
I just wanted to take a moment to reflect on the last 12 months. I was about a year ago when I started this blog. When looking at my first post that I made on December 7, 2010, I see I've improved my financial life quite a bit. A year ago we owed $210,000 on our house, we now owe around $183,000. I fully funded my Roth IRA for 2011. And I still managed to do make these improvements despite having some of the worst luck this year.
I would love to pay down our house even more this year and fully fund my Roth IRA again. However, I'm on the fence about doing so. Don't get me wrong, I'd love to those things, however our stuff is getting old. By "stuff" I mean both of our vehicles have over 100,000 miles on them, we need to replace most of the carpet in our house and my husband would really like to replace our siding and windows on the house soon. So since I can see that these things will need replacing in the next 3 years or so, I will need to keep a lot of cash on hand in order to not go into debt. It just wouldn't make sense to pay down our mortgage which has a tax-deductable interest rate of 5.75% and have little savings and then one of the cars dies and we have to take out a car loan. I also have a feeling I'm going to get pressured to get the windows and siding done next summer, and since I don't want to take out a loan to do so, I better start saving now. It's driving me crazy that a new year is beginning and I'm not rushing to get money in my Roth IRA. But since I have all year, I feel the best financial decision is to wait and save up as much money as we can and maybe next fall re-evaluate if I still can put money into the IRA or pay down the mortgage.
When I think about how much money we will need just to replace what we already have, it's depressing. Here are some rough numbers.
Amount needed to replace 2 vehicles: $30,000 to $35,000
(We'll get reliable cars that are a couple years old around for around $15K to $17K each)
Amount needed to replace siding and windows on our house: $15,000 to $25,000
(This is just a guess since we have not got an estimate yet)
Amount needed to replace carpet: $2,000 to $5,000
(Depending on how many rooms we replace)
Cash needed in the next few years: $47,000 - $65,000
Ignoring my emergency fund, I have about $4,500 saved up, so even if we spend closer to the low end of the estimates, I still have less than 10% saved. The sad thing is my income is so low, and after taxes, I probably only take home $20,000 a year if I don't work any overtime. So it'll take another two years to raise the money to replace this stuff and that's if we're lucky and can find deals.
I would love to pay down our house even more this year and fully fund my Roth IRA again. However, I'm on the fence about doing so. Don't get me wrong, I'd love to those things, however our stuff is getting old. By "stuff" I mean both of our vehicles have over 100,000 miles on them, we need to replace most of the carpet in our house and my husband would really like to replace our siding and windows on the house soon. So since I can see that these things will need replacing in the next 3 years or so, I will need to keep a lot of cash on hand in order to not go into debt. It just wouldn't make sense to pay down our mortgage which has a tax-deductable interest rate of 5.75% and have little savings and then one of the cars dies and we have to take out a car loan. I also have a feeling I'm going to get pressured to get the windows and siding done next summer, and since I don't want to take out a loan to do so, I better start saving now. It's driving me crazy that a new year is beginning and I'm not rushing to get money in my Roth IRA. But since I have all year, I feel the best financial decision is to wait and save up as much money as we can and maybe next fall re-evaluate if I still can put money into the IRA or pay down the mortgage.
When I think about how much money we will need just to replace what we already have, it's depressing. Here are some rough numbers.
Amount needed to replace 2 vehicles: $30,000 to $35,000
(We'll get reliable cars that are a couple years old around for around $15K to $17K each)
Amount needed to replace siding and windows on our house: $15,000 to $25,000
(This is just a guess since we have not got an estimate yet)
Amount needed to replace carpet: $2,000 to $5,000
(Depending on how many rooms we replace)
Cash needed in the next few years: $47,000 - $65,000
Ignoring my emergency fund, I have about $4,500 saved up, so even if we spend closer to the low end of the estimates, I still have less than 10% saved. The sad thing is my income is so low, and after taxes, I probably only take home $20,000 a year if I don't work any overtime. So it'll take another two years to raise the money to replace this stuff and that's if we're lucky and can find deals.
Christmas Challenge - November Results
Lately I've been feeling a bit overwhelmed with everything. I just feel like I don't have any time lately. It must be the holidays. The dishes and laundry are piling up and I have lots of errands to run. Maybe I need to start cutting into my sleep to get things done. Since the weekend of Thanksgiving through next weekend, I've had to go to family events out of town 3 of the 4 weekends in a row. If I leave right after work on Friday and we don't get back until late afternoon on Sunday, then the whole weekend is lost. So, this is the only weekend in a 4 week span I don't have to go somewhere. However, I was finally offered some overtime at work this weekend, and I also had a holiday party last night so I didn't have a lot of time this weekend either. Then the weekend after next is Christmas weekend, and the plan is to stay in town, but we'll still be busy. So with my busy schedule, some things have slipped through the cracks. Another thing that was put on the back burner was this blog. I don't know if anyone really reads this on a regular basis, but if you care, I finally got around to it and here are the results for my Christmas Challenge for the month of November.
Part time job: $42.11
Blog advertising: $149.80
Amazon affiliate: $4.77
Total for November: $196.78
Total made since start of the challenge: $1,282.08
Last month I said my goal was to make more than I did the previous month. I did not accomplish this goal. I made $246.26 last month, and this month I only made $196.78. I'm a little disappointed in myself for that. I guess I was a little lazy, I'm running out of stuff to sell, and some of it is just based on luck. But as I mentioned above, I'm just too darn busy with everything else.
This is the last month of the Christmas Challenge. I'm not sure what I'm going to do starting next month. I could start working towards paying for Christmas of 2012, but I don't know how much I'll be motivated by that in March.
Part time job: $42.11
Blog advertising: $149.80
Amazon affiliate: $4.77
Total for November: $196.78
Total made since start of the challenge: $1,282.08
Last month I said my goal was to make more than I did the previous month. I did not accomplish this goal. I made $246.26 last month, and this month I only made $196.78. I'm a little disappointed in myself for that. I guess I was a little lazy, I'm running out of stuff to sell, and some of it is just based on luck. But as I mentioned above, I'm just too darn busy with everything else.
This is the last month of the Christmas Challenge. I'm not sure what I'm going to do starting next month. I could start working towards paying for Christmas of 2012, but I don't know how much I'll be motivated by that in March.
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