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10 good reasons to start paying off your mortgage early

Should I pay off my mortgage? Many homeowners ask themselves this question, but few know the actual benefits of doing it. The answer is different for everyone, but I feel that if people knew how much they could save, people would be more diligent about paying it off. Homes in Order the eBook will show you in detail how compound interest works and how you can save money by putting your money to work for you. As you learn in the book, it’s not a big secret. As Benjamin Franklin says, “Small strokes fell great oaks.” So, start with an extra $5 per month, then increase it. Look how the family below benefits by making payments.

There are countless ways to invest your money. I’m very partial to making your most important investment your mortgage, and paying it off. Here is a list of 10 reasons to pay off your mortgage early. But this isn’t just another fluff list. This is mathematically backed by the Homes in Order How To Pay Off Mortgage Early Calculator.

Saving money is good. But saving money and investing it is great. And it’s a lot of fun. With no further ado, here is the list.

1. You will save a lot of interest. If the typical homeowner at today’s mortgage rates were to add just $100 extra to their mortgage payment every month, they would save over $30,000 in interest. Wow.

2. You will save years of payments. If the typical homeowner were to add just $100 extra to their mortgage payment every month, they would save over 4 years of mortgage payments.

3. You will save a lot of money – Interest + Principal. Not only do you save interest (#1) and payments (#2), every time you pay an extra $100 to your mortgage payment, that is $100 of equity. It is just like putting money in the bank. That adds up! So, if the typical homeowner at today’s rates were to add just $100 extra to their mortgage payment every month, they would save a lot of money.

4. It’s easy. You just add $100 (or whatever you can afford) to your monthly payment. What if you can only spare $5? Easy. Add $5 to your monthly payment! You pick your pace.

5. It’s secure. You’ve already invested in your home. Now you’re just reducing the loan liability. You don’t have to worry about giving your money to someone, or what the market is going to do. Your rate is already committed.

6. It’s investing. Are you investing your money anywhere else? Homes in Order will show you how just a dollar here and two dollars there will really add up. Paying off your mortgage is a fantastic investment. There are a lot of investment opportunities out there, but I challenge you to find something better.

7. Power equity deposits. Every month you make mortgage payments, but perhaps only 10% or 20% of the payment goes to principal. Whatever you add over and beyond your required payment goes 100% to principal. Whether you pay $5 extra or $500 extra, that portion is 100% principal. That is your money. That is your equity.

8. It’s cheap. You don’t have to pay a financial advisor. You don’t have to pay your accountant, your real estate agent, your insurance guy, or anyone else. Just add the payment. This is easy investing. Safe investing. It’s your house.

9. The HELOC. Let’s say you paid your house off. Now what? Well, you own a house! Get a HELOC and you can borrow from your house. WARNING! This is getting into debt — but by the time you pay your house off, you’ll know that you don’t want to be in debt. But when you have access to your equity, get ready to really start investing in real estate.

10. Peace of mind. Just knowing that you have a roof over your head and nobody coming to kick you out of your house is reason enough.

Teach money skills early, while they are still brilliant

By Jeremy Washburn

How young is too young to start teaching organizational skills? Is it important that kids just have their freedom? What about cleaning their rooms? What about finances? The earlier, the better!

My wife has done an incredible job with our little girl who is 4. Every day she has jobs that she needs to do. And our little girl takes them very seriously. She is compensated for her jobs — in pennies. And she takes those very seriously, as well. She is learning about work and about saving her pennies. There is a Buddhist proverb that says

Give me a child until he is 7 years old. After that, you can do with him as you wish. Buddhist Proverb

I speak Japanese as a second language, and I speak well enough that I have worked as an interpreter. 日本語わかりますか。Somewhere in my studies, I read an interesting fact about language acquisition. If a child learns a foreign language before age 14 (approximately), they will learn to speak the language without an accent. If they learn the language after age 14, as I did with Japanese, they will speak with an accent. While I am “fluent” in Japanese, I still speak with an accent. I’m not native.

Little kids’ brains are brilliant!

There is something about their brains that literally absorbs everything. It becomes a part of them. It becomes native.

For me, I had a hard time keeping my room clean when I was 14. Sadly, I still have a hard time with organizing my home and keeping my home in order! It always amazes me to see some with abilities who are able to just naturally keep things organized. It’s native to them.

Is organization something you can teach? Absolutely. Just like you can learn a language at any time of your life. Knowing what I know about languages, I wonder if teaching organizational skills before age 14 results in a lifetime habit, a habit without accent.

Can you teach youngsters about saving? Absolutely! I firmly believe that this is very important. You probably have friends or siblings who spent money like crazy when they were young, and they probably still do as adults. Finance is a language. It is a way of communicating. And I bet, not unlike Japanese or English, skills learned before 14 are learned without an accent.

I hope so! My wife is doing a great job with our little ones!

Getting your financial track hoe back on track: Thrift & Industry

By Jeremy Washburn

When it comes to improving your financial outlook, you might want to look at an excavator as a good example of how to move forward. There are so many financial variables out there that can confuse. I spent years in business school learning about discount rates, interest rates, annuities, debits, credits, taxes, etc. In the confusing cloud of financial terms, if you dig to the foundation, there are two variables that everything else is built on.

I have done some work on mini excavators and they are amazing tools. There are 2 basic handles that control the machine. You sit in the seat, and there is no steering wheel. There are just 2 handles. The right handle controls the right track, and the left handle controls the left track. If you want to move the machine forward, you push the two handles forward. If you push the right handle more than the left, you will start turning to the left. If you push only the right one forward, you will go in a circle. If you pull the left handle back while pushing the right one forward, you’ll spin in a circle, going nowhere.

It’s the same model for finance. You have 2 handles that you can control. (Hopefully you can control them!)

Thrift
Industry

In the book, Rick tells Shawn about Thrift and Industry. He says that if there is ever a financial question, he can flip a coin and decide between Thrift and Industry. If the coin comes up ‘heads,’ that means you need to use your head and figure out how to spend less. If it comes up tails, that means you need to get off your tail and get out there and work. The 2nd variable is Industry.

Just like the track hoe, if you push both Thrift and Industry forward, you’ll start cruising forward. And just like the track hoe, if you only push Industry forward, you’ll turn the other direction and will end up going in circles. You can earn all the money in the world, but if you don’t exercise Thrift, you’ll never get anywhere with it. Likewise, you can be the most thrifty, stingy person in the world, but if you don’t have any income generated, you’ll not go anywhere.

The 3rd and underlying variable is Prudence. It’s important to be SMART about being industrious. You can’t just work hard. You need to work smart. And likewise, you can’t just save hard, you need to learn how to save smart.

Mortgage rates on the rise, what does “just” 1% mean?

By Jeremy Washburn

Historic mortgage jumped recently, but they seem to be steadying for now. This report from the Washington Post shows that rates have risen from last summer’s all time lows of 3.62% for a 30 year fixed-rate to 4.51% in mid July 2013. They have dipped a bit and are currently hovering at 4.4%.

So, what does 1% mean with interest?

Let’s suppose that you were to buy a home for $250,000 at 3.62%. If you punch that into the calculator, you will see:

Now, let’s add “just” 1% to this mortgage.

The takeaway:

All other things equal, “just” 1% in mortgage rate increase could cost you money. In this case, it would cost over $50,000. That is, of course, if you keep the loan for 30 years. Interest rates make a big difference.

Banana power: Healthy, efficient family finances

By Jeremy Washburn

A good friend of mine is a health food guru. I just had a conversation with her about starting her own blog about health food. I said, “That would be cool! Then, you could guest blog for me, and I’d get the benefit of your brilliance!”

She responded, “Yeah right, like our subjects even have anything in common!”

So, what does 1% mean with interest?

The takeaway:

Get Your Homes in Order!

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