Wednesday, January 20, 2016

Mortgages

You thought I'd moved on, didn't you? Nope. Just got real quiet while I kept worrying at it.

This is advice for the young people, who don't bother to read anyway, so I guess it's really for me to get off my chest.

I grew up listening to Larry Burkett of Crown Ministries on the radio on the drive to school. RIP, Larry. I'll hug you long and hard when we meet in heaven.

When I bought a house, I knew to get a fixed-rate (as in the interest rate remains the same through the whole life of the mortgage instead of going up and down with interest rates in the market) mortgage and pay extra on principal with every payment. I also knew to specify "principal" when I paid, so the money didn't get applied somewhere else, like interest. I knew to buy less house than the bank said I could afford because the bank is only in it to get the interest, and the bigger the loan, the more I pay the bank in interest over the lifetime of the loan.

I bought my house with a 30 yr, fixed-rate mortgage and paid extra principal on every payment. Not crazy extra but as close to $100 per month more as I could get by rounding up.

I hadn't met Dave Ramsey, also a Larry Burkett student, before I bought my house. I started listening to him years later, and it took a while for him to make sense. I get it now.

Dave says to put at least 20% of the cost of the house down in cash to remove the PMI (mortgage insurance) which is a huge portion of those initial mortgage payments.

I didn't have 20% at the time I bought the house, but God was kind, and between what I paid down with extra principle, and the house value going up, I was able to refinance in 5 yrs with a lower interest rate and no PMI.

I kept paying that extra principal, knowing the sooner I paid off the loan, the less interest I would end up paying the bank. I felt good about myself.

More tomorrow.

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