You’ve heard the expression, “Pennywise and pound foolish?” Here in the States, we could say “Pennywise and dollar foolish.”
A good example is when someone is more concerned about the interest they’re getting on their savings account than the interest they’re paying on their mortgage.
Top Tips to Save Big on Interest
When managing your finances, shopping around for the best interest rates on savings is wise. However, focusing on reducing the interest on your mortgage can have a much bigger payoff. Consider the total interest paid over a 30-year fixed-rate mortgage. It's a powerful motivator to pay off your mortgage quickly.
Let's break it down. Imagine you have a $375,000 mortgage at a 7.3% interest rate. Over 30 years, you’ll pay over $550,000 in interest, bringing the total cost of your home to around $925,000. With today's higher rates, paying off your mortgage faster is more crucial than ever.
Suppose you pay an extra $300 a month on the principal. This might require some sacrifices, but it’s worth it. By doing this, you can repay your loan eight years and three months faster and save $176,000 in interest. Paying down the principal each month should be a top priority.
Here are four steps to help you achieve this:
- Create a Spending Plan: A budget is essential. The FaithFi app can help you set up a spending plan using the envelope system, track your spending, and identify areas to cut back, freeing up more cash for your mortgage.
- Identify Extra Cash: Determine how much extra money you can allocate to your mortgage. Even small amounts make a significant difference over time.
- Use Unexpected Income: Apply bonuses, tax refunds, or any unexpected money directly to your mortgage principal.
- Track Your Progress: Set up an online account with your lender to easily apply extra payments and monitor your principal balance. Watching it decrease can keep you motivated.
Starting early means more savings that you can use elsewhere. Proverbs 21:5 says, “Slow and steady plodding brings prosperity.” So, begin your journey to an early mortgage payoff now.
While at it, consider a mortgage with Movement Mortgage, a Christian company dedicated to making a positive impact. Since its inception in 2008, Movement has donated $377 million to community projects. With 775 locations nationwide, Movement offers competitive rates and a chance to be part of a greater cause. Check them out at: FaithFi.com/Movement.
On Today’s Program, Rob Answers Listener Questions:
- I purchased a home nine years ago to provide housing for my mother. I had put her on the mortgage and deed for the home to get it financed. Since then, I have paid off the home. Would it be best to have my mother sign the deed through a quitclaim deed so that I can move ownership of the home back to myself, or could I put the home into a trust I have set up? I want to ensure the proper steps are taken, and the home is handled appropriately after my mother and I are gone.
- My wife passed away in March at the age of 60. She had retired from her career as an educator but was not yet drawing Social Security. I will turn 63 in July and don't plan to start drawing my own Social Security until age 67 or later since my health is good. Can I apply for Social Security benefits now and suspend my own, instead of drawing on my late wife's benefits, so that mine can continue to grow until I need to start drawing on them?
- I will be turning 69 years old in November, and my only source of income is my Social Security checks. I have 250 acres of property that I am considering selling. If I sell the property, would I qualify for the 0% capital gains tax rate since my total annual income is below $40,000 and comes only from Social Security? The property was purchased in 2002 for $200,000, and I am considering selling it for around $500,000.
Resources Mentioned:
Remember, you can call in to ask your questions most days at (800) 525-7000. Faith & Finance is also available on the Moody Radio Network and American Family Radio. Visit our website at FaithFi.com where you can join the FaithFi Community and give as we expand our outreach.
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