12:37 AM, Dec 11, 2011
Debt and Mortgage
I'm taking tonight off from being irresponsible to get some work, Christmas shopping, and personal accounting done. Through some belt-tightening, planning, and relatively lucrative employment I've managed to pull out of the thirty thousand dollars of debt into which I plunged when I was unemployed in 2008 and 2009. By this time next month, I will be 100% debt-free for the first time since I was 22, when I got my first credit card and lost my childlike mind. So that feels good.
The next step is resolving what I see as a big financial problem for which my debt has made me incapable of addressing: my mortgage. Remember the mortgage crisis that culminated in the printing of zillions of worthless dollars in 2008 to make believe the problem had been addressed? Well, I'm one of those "toxic" mortgage customers. I took out a loan for the full buying price of my place when I bought it in 2007, and got an APR of 6.375% on it. That's bad. Especially with the dizzyingly low rates that are available to qualified borrowers nowadways. But over the past four years(it'll be five years in March!) I've made sure to always pay more than the amount due on my monthly payment, even if it was only a couple dollars. Some months were small, others were big, but now, I've managed to lop the last three months off my term and save myself about four times what I've overpaid. That feels good, but I'm still sitting with under 20% equity on my place.
So my plan is to ratchet up my monthly payments with my newfound extra money each month, with the goal being to get over 20% equity, and qualify to refinance at one of these great low rates. I have a spreadsheet on google that outlines my monthly expenses, debt, savings, and projections thereof. My plan is to increase my mortgage payment by an amount roughly equivalent to 0.7% of my principal balance each month, with the goal being to get over 20% as quickly as possible, so I can refinance for super-happy-big longterm savings.
What I've discovered though, is that I really don't have any savings whatsoever, and a monthly budget surplus seems like an ideal way to fix that. I have a couple of noticeable expenses that come up once or twice a year, and having a savings to deal with them and anything else unexpected seems like the reasonable thing to do. So here's the plan. Save up about two months' salary, then scale the monthly contributions to savings down to a trickle to push hard on the mortgage for about a year and a half.
Then I refinance, and fix my place up. Let's see how it goes. Check back with me soon.