A few months ago I created a budget on a spreadsheet. After listing all of our expenses, I decided to go through the list to see where we might save money. One of the areas where I was able to realize savings was within our mortgage payment. During this process I found it helpful to maintain the following attitude: savings potential could be realized in any area. This philosophy allowed me to assess each and every cost and wonder how I might reduce it. As a bonus, it actually enabled me to grow a lot more comfortable with our recurring expenses because I learned about each one. I highly recommend this exercise for any homeowner.
Here’s what happened:
| Costs | Before | After | Savings |
|---|---|---|---|
| FHA Loan (principal+interest) | $1,534.75 | $1,383.42 | $151.33 |
| Property Insurance | $84.42 | $63.83 | $20.79 |
| Taxes (city, township, school) | $367.75 | $351.08 | $16.67 |
| Total | $1,986.92 | $1,798.13 | $188.79 |
Item Number 1: FHA Loan (principal+interest) Saved: $151.33
When we originally purchased our home, we secured a 30-year FHA @ 6%, which was a fair rate at the time. Since then, we’ve been aware that rates have been down but we were comfortable enough to put off the idea of refinancing. Because we are now in the mode of saving money, the first thing we did when we re-assessed our mortgage costs was to call our lender to see about refinancing. We were able to employ an FHA Streamline Refinance and reduce our loan rate by a full percent. The entire process took about two months, mostly waiting time. Overall, we essentially skipped a month’s mortgage payment during the transition from Loan A to Loan B. But we were required to bring $2100 to closing, which effectively amounted to a net upfront cost of $0. On the plus side, we now pay $151.33 less each month for our FHA Loan (principal+interest). On the down side, we reset our 30-year term. We were one year into our original loan, so we’ll effectively be paying a mortgage payment a year longer than we would have had we continued on with original loan. But overall we stand to save
(1534.75 * 12 * 30) – ((1383.42 * 12 * 30) + (1534.75 * 12)) = 36061.80
Note that I subtracted ($1,534.75 * 12 months) from the savings because I am considering that year’s payment a cost for obvious reasons.
Overall, this was a huge win. We saved $151.33 per month on our core loan payment and will save $36,061.80 overall.
This post is part of the How to Save on Your Existing Mortgage Series:
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