Monday, December 19, 2005

Fifteen year morgage vs. a 30 year morgage

Fifteen year morgage vs. a 30 year morgage

Well it only took me buying my 3rd home to convince myself that I needed to bite the bullet and get a 15 year morgage vs. a 30 year morgage. We have been here for 5 years now and I am really glad that we did it. I actually enjoy getting my statement each month because 2/3rd of the the payment is actually going to principle.


One of the most important lessons that I learned later in my house buying history is the power of the 15 year morgage. Whether it is your first house or last house try to buy the house that you can afford with a 15 year morgage. You will be so much happier after 5 or 10 years and you decide to sell. Your principle on the loan will be so much greater. Here a few examples.

A $100,000 loan on a 30 year term at 6.25% interest.

Monthly payment: $632
Principal portion of payment: Under $95 each month for the first year
Interest portion of payment: Under $536 each month for the first year

Ok now lets take the same loan on a 15 year term.

Monthly payment: $871
Principal portion of payment: Under $350 each month for the first year
Interest portion of payment: Under $521 each month for the first year

Of course the 15 year loan will cost you $239 more per month. However, your really should consider it savings because each month you will be contributing $350 to your principle. So after the first year you will have paid off $3500 on your house vs. $1200 on the 30 year loan. If you can't afford the 15 year loan either buy a less expensive house or put more money down. The chart below shows you how after just 8 years half of your payment will be going toward principle.

I found a great morgage calculator that allows you too compare 15 and 30 year morgages all on one chart. Click here to compare

Another excellent source for morgage rates check our


Note: Morgage intentionally misspelled to assist in your search. Morgage is properly spelled mortgage.

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Sunday, December 18, 2005

Special Saving Account Christmas Club Savings

Special Saving Account, Christmas Club Savings

Do you struggle with paying for Christmas? Do you have an annual property tax bill that sneaks up on you every year and you don't know where the money is going to come from. One of the best tools that I have found to handle these types of annual expenses is a special savings account or Christmas club savings account.

Most banks or credit unions will set these up for you and it allows you to specify an amount of dollars each month that will be taken out of your savings account and put into the special savings account. Most of the time you can get to the money either through and online transfer or by going to the bank and transfering the funds. There are no penalties for early withdraws and it is a great way to budget your money.

It is a great feeling when you have put away $200 per month for Christmas and the bills start rolling in and you simply transfer the money from the special savings or Christmas Club to the checking account to write the check to pay off the credit card.

What are some of the expenses you could start a special savings account for:

  1. Christmas is probably one of the most popular special savings accounts. Even $50 per month will give you $600 to help pay the bills next Christmas. Goto the bank now and setup the account to start in January.
  2. Property taxes: If you do not have an escrow account than you need to pay your own house property taxes and insurance bill. I always hate getting these bills and they always seem unexpected. However, they always come at the same time every year. Do the math, divide the annual property tax by 12 and set aside in the special savings the amount per month you need. You really don't need more that one special savings account but you do need to account for all the different bills that you are saving for.
  3. Vacations: Another big expense that people usually just put on the credit card is the vacation. Why not save for it automatically instead of paying it off over time at 18% interest rate.

I realize this sounds like an easy concept if you have the money and a tough concept if you don't however, try it on one expense at a time. After you have paid of that expense with one years of savings you will be looking for other items to add to the special savings account. You really don't even need a years worth of savings. Even 6 months helps, start an account now for that summer vacation, when you can increase the amount to help save for Christmas.

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