Monday, August 16, 2010

In and Out!

What a great title for one of my posts!! I'm going to be hard to get a hold of this week. DJ starts high school. We are doing a lot of last minute packing for Anna and I'm praying that we don't have a repeat of our last trip to EIU! I would say that there is no way that it could be worse than our last trip but then you all know my luck and I won't be saying that!
I have a question that may start a serious fight. I am NOT saying that I'm going to do this, we probably will not. It is just something that I have been pondering for a while. Is it really a good idea to be paying 3 extra house payments a year? If you need a refresher on our budget, go here. Our budget is as tight as you can get it. It is to the penny. That said, I often leave out the fact that we max out on Den's retirement and we make 3 extra house payments a year. We are so broke because we choose to put every last penny towards the "right things." We also have a really good plan if Den becomes unemployed.
I'm not saying that we will be able to keep up the extra 3 payments a year. It is looking like we will be burying the focus pretty quickly. And we will eventually need another car. But until then we will continue to pay extra on the house. But is it wise to pay extra on a house that is losing its value. We owe $125,000 on it(the same that we bought it for, yuck!) we have been here 15 years and have had to refinance it a few times. We rolled in some debt and here we are. If I had to do it over again, I would not do it the same but here I am. At its peak, this house was worth about $200,000. Now not so much. A house right down the street from us is going for $139,900. So is it wise to sink money into something that is losing its value? We plan on staying here so I guess the answer is yes, it makes sense to pay off this bill. But wouldn't I come out ahead if I put that money in savings?
This is just a question but I think that it is worth looking into. Try not to stroke out when leaving a comment! I have such smart people stop by that I figured if I wanted a correct answer, this would be the place to ask it. You all are like my magic 8 ball!!!
Thanks for stopping over,
SonyaAnn

10 comments:

Annie Jones said...

I'm not an expert, and I'm sure others will disagree, but I think that if things are really tight, maybe you should not be paying as much extra on the house for a while. Maybe just one extra payment a year, or maybe not even that.

If you have any other debt, like credit cards, bank loans, etc., I'd make sure those are paid first.

Building up a good emergency fund is a very good idea. It would keep you from having to get a loan (or as big a loan) to replace your Focus, etc.

Howeverm as for interest rates and sheer numbers, you're probably paying more in interest on your house than you could hope to earn from a savings account. In that regard, you're better off paying down the mortgage.

There are so many other things to consider that I hate to make any blanket statements. For example, how your debt-to-income ratio might affect Anna's financial aid (or DJ's eventually). Whether or not you itemize taxes is another thing to consider. I think that paying down the mortgage is more important, in the long run, than having the interest deducted from your taxes. But if you still owe that much after this long, you might still be paying lots of interest, making it worth it to NOT pay down the balance.

Isn't you BIL or someone in your family an accountant? I'm sure they could advise you better than I could.

SonyaAnn said...

Annie Jones-God bless you woman!
We don't have any other debt but the loan, knock on wood. We do have a slight EF but half of our money is tied up in the house payment. But that is our own doing.
To be honest, I HATE this house. HATE IT! But it isn't really my house either, its Den's. He doesn't really care about the bills as long as they are paid.
Anna ended up getting $4450 a year in help for college. We just got the "real" bill and it was $20,000 a year so she got almost 25%. I think that is pretty good. I doon't think that she will be able to get any more than that though.
I'm sure one day when the house is paid off I'll be grateful that I worked hard to pay it off but right now there is never any wiggle room.
My FIL is a CPA and I did ask him but he just shrugged so I left it alone.
This might honestly be more of an emotional question than a financial one. It might be resentment for working so hard for Den's house. Or it just could be that this is life and the grind is getting to me. Either way, thank you for caring!

A.Marie said...

Hi there! Annie Jones said it all...I totally agree with her. She is one smart cookie!! :)

Frances said...

Why is this Den's house and not yours? Or did I miss something.

I agree with Annie Jones, if the budget is really tight, I might cut out the extra payments. But if you are managing with doing them, then it sure won't hurt to keep making them.

To see if it will really make a difference for you all, go here:

http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx?ec_id=m1024868

and plug in your numbers to see what difference the extra payments make to your final payoff date.

SonyaAnn said...

A.Marie-I agree with you!
Thanks for stopping over!

SonyaAnn said...

Frances-And another smart cookie!
It is Den's house. He has the job and this house has been a thorn in our marriage since the beginning. Everything is in his name so........
The budget is super tight but we are making it because I plan for all of the other extras. But I wonder if it is worth it. It is losing its value quickly. We are struggling but not more than before. I'm just wondering if it doesn't make sense to loosen up the purse strings and say the hell to it. Or I could just have frugal burn out?
We will shave 13 years off of the mortgage if we keep up this pace. SO that means we will have it paid for in 15 years. That would make Den 51 and me 53. Other wise if we just paid the payment it would be another 28 years. If we pay the 28 years Den will be 64 and I'll be 66.
I guess its something to think about. Thank you so much for taking the time to try and work out this mess!

Frances said...

Cr@p, SonyaAnn, why is the house only in Den's name? I forgot that Illinois is not a community property state.

I think maybe I had better not go there on this issue.

Shaving 13 years off the mortgage is a great thing and you will both still be pretty young when you have it paid off. BUT, I do not see suffering in order to do that.

If your budget is comfortable, then keep doing what your are doing. If it seems too tight, especially with Anna in school, maybe you could drop the extra payments for a while.

You just have to do what makes you comfortable.

And I just have to say that if I did not live in a community property state, there would be no way that I would be supporting the purchase of a house in just my spouse's name. No way, no how.

SonyaAnn said...

Frances-I knew that I shouldn't have said that. To clarify, it is in our names but he works. It is his house. I don't know how else to say it. I get to stay home with the kids. His dad is the same way, everything is his. My mother in law lives in his house. I can't change any of it. Den isn't a mean person, he just wants his way. I'm just very grateful that he raised Anna as his own and I see that as my trade off. Crazy but it works in my head. I make no decisions about the house from paint color to tiles. I just take care of the budget which I like. It is what it is.
I think that we are at the point that we will have to back off a bit with the house payments but I won't know for sure until Anna gets into school and we see the damage.
Thank you with all of my heart for so many things! Kiss!

slugmama said...

OK Lady....you just KNOW I have to open my big fat mouth on this, don't you?lol

I tend to agree with both Frances and AnnieJ....what you need to do depends on so many variables plus there is the emotional stuff and the stuff in your marriage to weight here.

If things are tight(and going to be more so because of the Anna stuff), and you don't have much of an EF and you need to replace a car soon, here is what I'd do.
IF you are making the 3 extra payments a yr. that's great! But if you 'may' need that money for something else important(like the car), I'd stash the money for the extra house payments in a separate acct.(something very liquid) and NOT touch it! Then at the end of the year or something, re-evaluate when you'll need to buy the car(does it need to happen now or do you feel it's 6 months off in the future?). If the car is still a ways off, take a chunk of the money and throw it at the house OR just keep the money where it is and use those xtra house payments for a car replacement fund.
Either way, you need to spend that money and it's going toward a car or the house, right? So either way you knock off some interest on the house loan or you get to pay cash for the car(or pay more as a down payment and have a smaller loan on it).
Just don't let Den use that money for something else.
And if it's a choice of house or car payments, I'd pay MORE to the car than the house since interest on the car is NOT deductible but mortgage interest is.

And if you aren't going to be selling your house in the next 5 yrs., don't worry about it losing value! The real estate market is just correcting itself and eventually prices will start gaining again. I'm old enough to remember the real estate 'crash' of 1982. Rates were 18% then & it drove home values to record lows for the time because nobody could afford a mortgage at those prices. Things will improve. You bought the house to live in, not to flip and make a profit on so don't even worry about that.
I won't even talk about rolling debt into refis.....bad bad girl!lolol
That's why you still owe so much and you know that already.

There are lots of folks in this part of PA who still operate in the hubs is the head of the house/woman aren't worth anything notion....especially if the wife is a SAHM. You have to have a job and a penis to be taken seriously here too. It's a cultural thing and it's very hard to break that attitude. That's why I don't fit in very well here and we won't be staying once hubs retires.lol
With Den's family's attitudes I'm surprised he lets you handle the money...but I'm sure he is glad that you do. ;-)

I didn't realize you were so young....yes, I called you young.lol
With all that is going on in your life, once you get Anna and DJ back in school and have time to breathe again and can squeeze a few extra dimes out of the budget, I'd seriously sit down and think about doing some college courses online when you aren't writing. It's never a bad thing to prepare for the future, especially if you aren't sure where that future will lead. ;-)
Hugs!!!

SonyaAnn said...

slugmama-LOL, are you sure you don't write books for a living?
First off thank you so much for trying to straighten me out! Why don't you just move in next door and council me at all times? I think I need it!
Things are very tight but they are because of my making. I just want to plow through the mortgage.
Our money is saved up in my very odd method of accounting. I have "funds" for everything. But in an emergency I rob them. Honestly, and this sounds like an excuse, there just isn't enough money for everything. While Den makes good money for this area it is very low. Does that even make sense? If anyone saw what we made they would think that I had no clue what I was doing. But our house payment still after all of these years eats up half+ of our income.
Yeah, I know what we did wrong in the beginning with rolling everything the problem was Den loves to spend. He wouldn't come home because he had spent his day after work shopping. And he would spend more than his check. There was just nothing that I could do about it. We fought but it just took years of nagging to get him to understand. Mind you it hasn't happened in years, I'm still cleaning up. He just comes from a family where they are spoiled. It's just years of overcoming what had been taught. My inlaws are generous to a flaw and are helping Anna with school so I can't say to much. It's just that Den had no idea how to pay bills or be responsible and it made for a miserable marriage.
A lot of the problems here are my fault too. We have been under a lot of stress lately but I can feel everything slipping away. Even when we talk, it is strained. I just love my kids so much and don't want to hurt them. I just hope that this is something that will pass. It is a really hard time in our lives and we are taking it out on each other. I guess only time will tell.
Thanks for caring!