Not Paying Extra on Our New Mortgage

We’re relocating from Arizona to New York because my husband found a good job there. While we’re happy to move, we’re sad to leave behind our house payment in Arizona. We had a 3.375 percent interest rate and a smaller mortgage than we’ll have when we move. In New York, our interest rate will be approximately 5.5 percent, and our mortgage will increase by 1/3. Ouch. However, we’re not paying extra on our new mortgage any time soon.

We will pay 20 percent down on our new house to avoid paying private mortgage insurance.

Why We’re Not Paying Extra on Our New Mortgage

When we received the proceeds from the sale of our house, we were tempted to pay more than 20 percent down on our new home. Doing that would have left us with a smaller monthly mortgage payment and less interest to pay over the life of the loan. However, we decided we could better utilize the money in other ways.

Increase Our Emergency Fund

Currently, we have a 1.5-month emergency fund, which is inadequate, especially in the current economy. By using some of the proceeds from the sale of our Arizona house, we’ll be able to bump up our emergency fund to a full six months, which makes me feel more financially secure.

Buy Basics Needed for the House

Not Paying Extra on Our New Mortgage

Because we’re moving to a different climate, we will need to buy some items for yard maintenance that we don’t currently own like a lawn mower and a snow blower. We’ll use money from the sale of our house to pay for these items.

Save for a New Car

My automobile is 18 years old and has 232,000 miles on it. We are saving approximately $700 a month for a new-to-me car, but right now, we only have $4,300 saved. We can add more to this fund with the proceeds from our house, hopefully allowing us to avoid a car loan when we finally buy a new vehicle.

How We Plan to Pay Down the Mortgage in the Future

However, we do have a plan for how we plan to improve our financial situation further as it pertains to our new home.

Refinance When the Interest Rates Are Lower

We plan to keep a close eye on the mortgage rates and refinance when the interest rates are lower. This will result in a smaller monthly mortgage payment. When we do that, we’ll keep making the same mortgage payment we were making in the beginning, allowing us to painlessly pay extra on the house in a few years so we can pay it off quicker.

Final Thoughts

Even though we were tempted to put as much money on the house as we could when we closed, we ultimately decided we’re not paying extra on our new mortgage. . .for now. Instead, we’ll use the proceeds from our Arizona house sale to improve our financial security and avoid debt in the future.

Read More

5 Money Challenges for Couples Trying to Save Up

Our Experience Prepping Our House for Sale

Is a Mortgage a Liability or Asset?

Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her reading a good book, cooking, or traveling. She resides in New York where she loves the natural beauty of the area.

MANAGE YOUR MONEY TOGETHER

Here are some simple guidelines for DINKS to build wealth:

1) Collaborate: Meet regularly to talk about money, set goals together, track and monitor them.

2) Understand and respect your partner. Take time to understand your partners values about money.

3) Watch the numbers. Get a budget, monitor your spending and track your net worth.

4) Max your retirement. Maximize contributions to your tax deferred retirement accounts.

5) Invest in stock. Stocks perform better than bonds or cash.

6) Avoid high interest debt. Credit cards and title loans are financial cancer.

7) Diversify. Don't put all your eggs in one basket.

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