One thing we knew would happen when we purchased our new, bigger house was that our monthly mortgage payment would go up. Not only is our starting mortgage balance higher by about $25k over what our previous starting mortgage balance was but our interest rate is higher too! OK, so our previous interest rate was only 3.00% since it was a 5 year ARM that reset LOWER. Our new 30 year fixed interest rate is 3.934%. Now, that is a fantastic rate, I KNOW! But, it's still higher than 3.00%! So, combine those two items together and you get a bigger monthly mortgage payment. Add in taxes, insurance, PMI (we didn't have 20% to put down since we had to pay to get out of our other mortgage) and it all adds up to about $300 more per month that we're paying for our mortgage. Yippee...not. Anyway, this $300/month is a big chunk of change and it's hurting how much we're able to save each month. I still have us saving about $1500/month on average from our net pay in 2012, but that is spread between the emergency fund, house fund, tuition fund, Christmas savings, 529's, etc. That $300 would be really nice about now to go back towards the emergency fund!
Anyway, I have a question for you. Our new mortgage payment due each month is $1841.50. With our interest rate so low, I'm sure some people would tell me to NOT pay ahead on my mortgage each month. Instead, I should be socking every penny into the emergency fund until it's fully funded. In my head I know that makes sense but I just can't seem to do it. For January, our first payment, I sent in $1900. I just had to round it up! And by sending in that $58.50 in extra principal this month, according to my calculations, I saved us about $130 in interest over the life of the loan. That interest savings is peanuts compared to what we'll eventually pay in interest but I just can't NOT pay ahead on the mortgage. After the emergency fund is fully funded and C graduates from nursing school I'm sure we'll attack the mortgage at a more aggressive rate (after ensuring our retirement accounts are maxed out, etc.) but for now I just feel the need to round up, even if in leaner months I only round up to $1850. What would you do? Would you round up or pay the minimum?
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3 comments:
I would definitely round-up. Even very small extra-payments add up, over time. I've knocked almost 3 months off of the life of my 15 year mortgage (in less than 2 years) by simply applying a bit more to each principal payment. (Great job on the fixed, low rate!) Rock on! -NCN
I'm like you, I always round up, even on just regular bills. Especially since it'll save you $$$ in the end!
I personally would round it up. We are doing that on ours while we continue to build our EF. None of us know where these home values will go and to owe less in my opinion can never be a bad thing.
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