January 15th, 2013 2:20 PM by Gregg Mower
It is 2013 have you checked your mortgage lately? Have you looked at the amount you are paying in rent? These numbers might surprise you. Your house payment is part of your living budget and it comes every month like it or not. But like changing your batteries in your smoke detectors when we move from Daylight Savings Time to Standard Time or vice versa you should look at you primary bill at least once a year. I know you are saying “I look at it every month” the question I raise is how to look at your expense. If you are a home owner could you lower the monthly payment by refinancing? Or could you lower the time and overall interest you pay on the home loan? If you are renting what would the same payment equate to in a house payment? Am I making more money with no deductions for taxes now that the Government has raised my taxes? These are the questions one should ask and analyze every year to stay financially fit.
Let’s start with the home owners out there. A quick look at your mortgage statement should be able to answer some basic questions. First, look at your statement and see what interest rate you are at. If you are paying more than 4.5% you have your mortgage reviewed to see if by refinancing you can save monthly by reducing your monthly payment. Second, what is the current term of your loan? On your mortgage statement it should show how much longer you have to pay on your loan probably in months. If you have been paying on your mortgage for 5 or more years and you have an interest rate greater than 4.5% then you might look at refinancing to a 15 year loan. By reducing your term you might have the same or slightly higher payment than you have now but you would save thousands of dollars over the long term to lower the term. For example if you are paying $1,073 principle and interest on a 30 year loan you took out 5 years ago at 5% a $200,000 loan amount; you could refinance that loan to a 15 year loan at 3% and pay $1,381. Your payment goes up $200 a month but you will save $73,320 and have your home paid off 10 years earlier. This is not for everyone, but you can see the advantages here. There are many ways to plan for your future but the place to start is with your largest monthly bill your house.
For you renters out there home ownership has many advantages over renting and you will probably be surprised to know how much of a house you could buy for the amount of rent you are paying per month. If you are paying $1,200 a month and that is comfortable on your budget you might be surprised to know that a $1,200 a month mortgage payment with taxes and insurance in your payment would be a $208,000 house. I am not sure where you live, except for some high cost areas like San Francisco or parts of Los Angeles, that is a decent house and in some cases it would be a move up from where you are renting now. With home ownership come tax advantages as well. You can deduct your mortgage interest on your taxes each year, actually making your $1,200 mortgage payment more like a $900 a month payment. Home ownership can also bring equity over time, which means as your house goes up in value and your mortgage amount decreases the difference is called equity. This equity is yours and is non-taxable so in the future you could sell that house take the money and buy a bigger house or downsize and retire someday. Renting you are creating equity for your landlord, and I am sure he/she is very grateful.
So get the biggest monthly bill you have looked at and maximized to fit your needs. To check it every year is not hard but could end up saving you thousands and or making your thousands. Do wait go take a close look or give us a call and we will gladly analyze it for you for free.