So, now that you’ve paid all of that consumer debt off, saved up for those emergencies and large purchases, put 15% of your money aside for retirement, and started the college fund for the kids it’s time to take the remainder of that money and put it toward paying off your home early. As you know from reading earlier blogs, my wife and I paid ours off, and it feels amazing!
Obviously this is a pretty simple concept. Let’s say that after putting 15% of your money away into retirement, and funding college to whatever degree you feel is necessary, you have an extra $500 per month left. If you have $150,000 left on a 30 year mortgage at 4% that originally was taken out for $180,000, your payment would be $859.35 per month. If you left well enough alone, and just paid it as normal until it was paid off, you would pay $129,364.17 in interest, and it would take a total of 30 years.
If you put that extra $500 per month toward the balance at that point, for a total of $1,359 per month, you’d pay roughly $91,225 in interest, and be able to pay the whole place off in just about 11 and 1/2 years after starting to pay that much on it, for a total of 20 years. To be honest, you’ll probably be able to do more than that if your income is good. My wife and I were only making $80,000 per year combined when we put $48,000 on our home in 9 months. It CAN be done, and you can save even more than this example points out!
The point here is that, if you follow the math, you’d pay your house off 10 years earlier than scheduled, and save around $38,000 in interest payments. That’s a LOAD of money that can be used for better purposes than giving it to the bank!
Tomorrow will be our last day together. Speaking of better ways to spend your money than giving it to the bank, I’m going to talk about the freedom that exists in Baby Step #7, and what it does for your spirit. Don’t miss it!
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