We want a home that we can pay off in under 30 years.
Take your current age. Now add 30. Do you still want to be paying a mortgage at that age? If so... disregard. But if not this post is for you. We're not delusional, we won't be getting social security. At 65/55 Andy and I want to have our home paid off. I want to be one of those old hippie grandma's that cooks like old school Paula Dean, and spoils her grandkids. I don't want to be stressing about finances. I'm sure we'll both be working still but I'd like flexibility. You don't have flexibility when you're house poor.
I love the Navy Federal Mortgage Calculator. It tells you your approximate monthly payment based on interest rate and the number of years your mortgage lasts. No escrow*** included. With a 50k loan, for 15 years at 4.5% interest (average) our monthly payment would be 382.50. Now this information you can get with most online mortgage calculators but what I like about Navy Federal is their calculator tells you how much interest you will pay based on the number of years you finance for. When I initially plugged in our information, I used a 30 year mortgage. I noticed that 30 years nearly doubled my purchase price. I actually ended up paying 98k+. That's 48 thousand dollars in interest alone! If you can afford a 15 year mortgage, do it. If you can't, a 30 year won't kill you. You have options. Many people who get 30 year mortgages take advantage of the low monthly payment and double it a few times a year when they get extra cash.
According to MSN Money, adding an extra $50 to your mortgage payment can help you pay it off 2.5 years early. Adding $100 can help you pay it off 4.5 years early. Getting an inexpensive home with low monthly payments enables some to double the payments and pay it off in closer to 10 years!
Not all of us can double payments every month but many of us can add that extra $50.
Paying your home off early sticks it to the man. Less time paying for a home= Less interest paid.
It is easy to try and purchase the home that is closest to your maximum spending limit. There is something to be said for not having to suffer with pink kitchen countertops for months while you renovate your home but in many cases, buying a less expensive home is best. Life is full of surprises and buying below budget provides added financial security.
**Escrow is a form of bank account that is paid into throughout the year by the home owner in order to cover yearly taxes and insurance. Because it is added to your monthly mortgage, many home owners choose to pay these themselves without the help of the lender. The benefit of an escrow account is it helps to avoid tax liens and foreclosure in the event that one forgets or is not able to pay their taxes by spreading them out over the entire year. Estimate your yearly home owners insurance by dividing the total cost of your home by 1,000 and multiplying that number by $3.50. Property taxes vary by location and are usually a percentage multiplied by the tax value of your home.
A Few Resources:
Figuring Escrows - Complex. Not for the feint of heart.
Many inexpensive homes are distressed properties.
Some good advice for those interested in pursuing that route
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