If you hang out at this site for any length of time, you’ll find that I write quite a bit about housing, mortgages, and lifestyles. I believe that we can very easily set ourselves up for financial failure simply by setting unrealistic expectations, and then using debt to fund those expectations.
photo credit: freedigitalphotos.net
Mortgages, for most of us, are the single biggest recurring payment in our monthly budgets. The houses we live in demand lots of time and money from us, easily the equivalent of thousands of hours of our life energy spent on purchasing and maintaining the box we live in. What would it feel like to not have the burden of paying that large payment? What would change in the way you think about your life, your responsibilities, your obligations? How far would your income go if you owned your house with no mortgage to pay?
A few years ago I decided to pay down my mortgage instead of investing my extra cash, so I started playing around with an amortization spreadsheet to see what the effect would be of adding just a little bit of money to each mortgage payment.
What I found out was unbelievable to me! For only a few extra dollars a month I could take years off of the end of my mortgage. For a few dollars more I could cut my mortgage in half! I began to look at my extra money much differently, that’s for sure.
Extra Payment Calculator
For any of you who are interested in trying this out, you can see the same numbers applied to your own mortgage using one of these two tools:
- On the right side of this page is a small “extra payment” calculator, which allows you to enter your current mortgage amount, the time you’ve been paying it down already, and how much time you would like to spend paying it off. The calculator will give you the amount of money you’ll need to pay extra in order to accomplish that goal. For example, if you’ve got 28 years left on a 30 year mortgage, you can enter “20 years” as the new target and see what it would take to take 8 years off your mortgage’s life.
- Here’s a link to the very same amortization spreadsheet that I used several years back. It’s really simple to use, and the bonus is that you get to see every individual payment listed out on the spreadsheet. Would you like to see the effect of irregular extra payments? Simple! Just change the payment amount in the corresponding cells! Got a lump sum you’d like to pay one time? You can see that too, it will instantly remove payments from the end of your loan’s life. (I actually keep one of these handy, that I update every month, so I can closely track my early payments and expected payoff date. It’s awesome.)
What I Learned From This Process
It took me several years to understand just how weighty mortgage debt is. A lot of financial gurus I read are of the opinion that a mortgage is “good debt” and that you shouldn’t worry about your mortgage. While that may be relatively true, I’m have come to the realization that mortgage debt is still debt! It’s a big decision that we often make before we truly understand just how much of our life energy we’re about to sign away. If I can live comfortably in a $100k house instead of a $200k house, the massive amount of debt I will avoid will make a HUGE difference in my financial stability and ability to go after my goals. I only wish I had understood this better earlier in my life.
Please let me know your thoughts on mortgage debt, and also how you like the calculators! Did they say exactly what you thought they would, or did you learn something new about your mortgage?
This post was included in the following carnivals, thanks everyone!
Yakezie Carnival hosted by Money Life & More
Finance Carnival For Young Adults hosted by Degrees and Debt
Carnival of Financial Independence hosted by Savvy Scott
Carnival of Financial Planning B hosted by The Skilled Investor
Carnival of Financial Planning hosted by This That And The MBA
Carnival of Money Pros hosted by Money Wise Pastor