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Coveting a Smaller Mortgage

May 22, 2009 · Filed Under Finances · 9 Comments 

I realized recently that I’ve been coveting quite a bit lately. I find myself driving through neighborhoods and looking at the different houses and often thinking to myself, I wish I had that house.

To be a bit more specific, the thoughts that go through my head are something like this, "hmmm, that house is smaller than ours, and I bet the people have lived there for a while which means they probably bought it before house prices started to drastically increase…..I bet their mortgage payment is a lot lower than mine."

That’s right, I’ve started coveting other people’s mortgage payment (or at least what I guess to be their payments with the underlying assumption that it is less than mine).

To be fair, I don’t have a ridiculous mortgage payment.  In fact, the entire payment (principal, interest, taxes, & insurance) is less than 26% of our take home pay (18% of our gross).  Those numbers are much smaller than most mortgage lenders were willing to lend three years ago when we bought it.  So, we didn’t go crazy when we bought our house, but I’d still like to be paying less each month for it (but who wants to be paying more for someting!).

A few things to remember when buying a house

You decide how much you can afford, not your agent or mortgage lender

When buying a house and deciding your price range, do not let the mortgage company tell you how much house to buy (unless it’s lower than you were planning, of course).  I feel that people sometimes think, "well, the mortgage company approved us for $X, so I guess that’s what we can afford."  No, No, NO!  Sit down before you start looking at houses and figure out exactly what you say can fit into your budget.  And make it a comfortable number that you can live with for 15 or 20 or 30 years.

Plan for contingencies

Remember that things may change in the future too.  If you’re married, you might eventually have kids and you or your spouse might want to stay at home and raise the kids.  I don’t like to say that this is no longer working (just ask a stay-at-home mom if it is a full-time job) but your income will drop drastically if you do this.  Or maybe you’ve always wanted to start your own business.  Make sure you can still afford the house if you decide to do this or make some other change.

Know your real monthly payment (all the other payments too)

Another thing to remember is that the costs of home ownership do not end with your monthly mortgage payment.  Besides the principal and interest portion of the mortgage payment, you will probably also need to pay into escrow for home owner’s insurance and real estate taxes.  This will most likely add thousands of dollars to your yearly expenses, so plan for them.

Beyond the mortgage payment, there are many other costs as well to keep up your house.  Stuff gets old and breaks, pipes freeze , work needs to be done…this can add up quickly so at least keep it in mind when deciding how much you can afford for your house.

Consider a shorter mortgage term

If possible, opt for a shorter mortgage term.  Of course, each monthly payment will be more (sometimes substantially) but over the long run a shorter mortgage can save you tens or hundreds of thousands of dollars!  Usually, shorter mortgages have lower interest rates as well.  Play around with a mortgage calculator to see the long-term difference this can make.  As a real quick example, consider a $250,000 house at 5.5% interest.  Even at the same interest rate, a 15 year mortgage will save you about $143,000 in interest payments!

I didn’t intend this to be a comprehensive list of all things to consider when purchasing a house…just a reminder of a few things.  In today’s market, mortgage lenders appear to be much more strict on the mortgages for which you can qualify and I think that is a good thing.  At the end of the day, though, you are still the one who must pay the mortgage and the upkeep and other expenses for your house , so go into the process with your eyes open and learn as much as you can before proceeding.

House poor

In today’s uneasy economy (with decreasing house prices, possible job losses, and general uncertainty), buying a house that you can’t afford can certainly show you the meaning of this verse:

The rich rule over the poor, and the borrower is servant to the lender.  Proverbs 22:7 (NIV)

Say you and your spouse bought a nice house a few years back that was a bit too expensive for you to afford (but hey, the value would keep increasing – it always does!).  Now you’re having a child and one of you wants to stay at home and devote yourself to raising that child.  Unfortunately, you can’t afford the house payment on only one salary and you currently have negative equity in the house because of the decrease in real estate prices.  Well, in that lamentable situation, your freedom is drastically limited by that mortgage debt.

House prices have been coming down recently, so you could argue it is a good time to be in the market for buying a house.  If you are, be smart, be realistic, and plan for some contingencies in the future.

Photo Credits: woodleywonderworks

Weekly Bible Verse – Do Not Put Your Hope in Wealth

May 18, 2009 · Filed Under Weekly Bible Verse · 5 Comments 

Command those who are rich in this present world not to be arrogant nor to put their hope in wealth, which is so uncertain, but to put their hope in God, who richly provides us with everything for our enjoyment.  1 Timothy 6:17 (NIV)

This week’s Bible verse provides two charges to the wealthy reader (and if you’re not sure if you are wealthy, check this site out) – to not be arrogant about their money and to not push God aside and rely on their wealth.  Both of these are very easy to do in our affluent societies.  But this is not actually a new problem.  We see throughout the Old Testament that when things were going really well financially, the Israelites would tend to forget that their blessings were from God.  There are also numerous occasions recorded in the New Testament where Jesus discusses the trappings of wealth (but I’ll save those for other weekly bible verses).

In our current economic climate, however, things are not going so well for everyone.  Maybe you’ve experienced or seen the truth of the statement above that wealth is "so uncertain."  Hopefully this has helped you to remember that our hope should be in God and not in our possessions and wealth.  But if you have not really been affected financially or when the economy recovers and things start going better again, continue to remember this verse and its truth – all the money in the world won’t buy you immortality, you need to rely on God for that.

Monthly Net Worth Checkpoint: May 2009 (Up again!)

May 12, 2009 · Filed Under Net Worth · 2 Comments 
Cash + Money by Terence Chang

Woohoo, for two months in a row our net worth has gone up!  Just like last month, the increase this month is due mostly to the stock market.  As a result, since I don’t think the economy has recovered yet, I’m not expecting the market to keep going up from here on out.  I’m expecting more volatility in the future and with that will come more net worth volatility for us.  I certainly can not predict the future though, so we’ll just have to stay diversified, keep saving and investing regularly, and hold on and see what happens.

Our assets increased 1.8%

Our liquid assets and home values decreased, but everything else (since the rest had stock market exposure) increased last month.  Our stocks and mutual funds increased 15% last month (I must somewhat sheepishly admit that this is driven mostly by my stock purchases of a few months agomy portfolio of particularly battered stocks has more than tripled since I bought it).  Our 529 plans are up almost 20%, my stock options value increased 15%, and even our retirement accounts are up almost 7% (in fact, my 401k has bounced up 42% in the past two months though it is still not as high as the middle of last year).

Our liabilities decreased 0.5%

Another month and another decrease of 0.5% for our liabilities.  I have still not moved on accelerating our mortgage prepayment.  We’re in a bad spot now because we owe more money on our mortgage that what our house is apparently worth now…so that makes me a bit nervous.  There is not really much to do about it right now though, other than keep saving up in case we need a bunch of money to refinance or sell the house (man, would that stink to have to pay money just to sell the house!)

Our net worth increased almost 6%

The net of all this is that our net worth increased again this month by 6%.  That is nowhere near the crazy 15% increase of last month, but I will certainly take it!  These days, anything in the positive direction is fine by me.

The plan continues as is…I will keep saving each month and continue to buy company stock, low cost index funds, fund our 529 plans, and put money into our diversified 401ks.  We’re still relatively young, so the majority of our investing is done in stocks with just a bit of bond exposure.  The only potential change going forward is to put more money into Vanguard index funds.  We are finished paying my daughter and son’s school tuitions for the year, so I will probably look to start investing most of that while the market is still quite low compared to years past.

Weekly Bible Verse – The Paradox of Generosity

May 11, 2009 · Filed Under Weekly Bible Verse · 1 Comment 

One man gives freely, yet gains even more; another withholds unduly, but comes to poverty. A generous man will prosper; he who refreshes others will himself be refreshed.  Proverbs 11:24-25 (NIV)

Ahhh, yes, this is exactly what I’ve been trying to work on lately – being generous.  Besides the help that generosity provides for others and the good is does for you (like getting your focus off of yourself, reminding you how fortunate you are compared to others, etc), this verse teaches that giving can actually cause your wealth to increase.  Now that’s a "Win-Win" if I’ve ever heard of one!

Is this verse from the Bible to be taken literally?  Of course, I don’t know the definitive answer, but I interpret it as such.  Have you ever heard the term "blessed to be a blessing?" I know I’ve heard that bandied about, but I do believe that if you are faithful to pass along to others some of what you’ve received from God, God knows that He can use as a conduit to bless those around you.  In turn, God can give you more so you will bless more people around you.  In contrast, if you just hoard everything you get, what’s the point of blessing you further?  Obviously this is a very simplistic view of this (for instance, I don’t think that being generous simply because you are greedy and want to force God to give you more money will work!), but I like to keep things simple as much as I can!

God bless and have a great week…

My 40 Day Journey to Generosity is Complete…but are we there yet?

May 7, 2009 · Filed Under Giving · Add a Comment 

If you remember, I actually made a New Year’s Resolution this year .  The main focus of the resolution was to internalize the quality of being more generous as a person.  Ever since my wife and I got married, we have given a set percentage of our income to our local church, various missionaries, and other ministries.  But even with doing that, I am not a naturally generous person.  I find myself having to remind myself that it is a good thing to be generous with my time and money.  So, now I am on a quest to try to smooth off my rough edges in this area.

A few weeks ago I wrote about my first tangible effort to start smoothing….a 40 day devotional I was going to try .   I signed up and I started receiving the emails and now I have already completed the entire 40 days of learning.  S0, it is time to debrief the program and my experience.

GiveWithJoy.org’s 40 Day e-devotional focused on generosity

So it turned out that this program was basically a review of finances from a Biblical perspective.  Well, it wasn’t just about finances.  To give you a flavor for the myriad topics touched upon, here are some examples:

  • God is the owner of everything
  • Don’t trust in your riches, trust in God
  • Don’t live for this life, but for your heavenly home
  • Beware of greed, hoarding, or selfishness in your life
  • God blesses you financially so that you can be a blessing to others
  • God will reward you for your faithful generosity and diligent labors
  • Realize that God can use anyone and any resources to provide for His work
  • When you help the poor and needy, don’t do it for public recognition

Obviously, these are but a few of the topics covered (there are 40 days after all)

There was a lot of good stuff in there

I’m not sure which I found most useful each day – the numerous verses related to the topic of the day or the inspiring stories from people who saw awesome things happen in their lives as a result of adopting God’s view on generosity and giving.  The site also included a daily cartoon…but frankly I didn’t think those were all that funny most of the time!

For me personally, however, it was a little off the mark from what I was expecting.  This devotional was geared more towards generosity in relation to giving to your church and other ministries.  I was hoping it would be more focused on increasing my interpersonal generosity (is that a phrase?).

That being said, it was still very useful and I enjoyed reading through it.  Now, some of it was review after reading Your Money Counts but there were many new verses that were great ones to read and reflect upon.  And the daily anecdotes were quite inspiring as well to see how God works in people’s lives when they trust Him fully.

If you are looking to investigate how God views money and giving and trusting Him and numerous other topics, then I would recommend that you sign up at GiveWithJoy.org .  You’ll get an email each morning for the next 40 days that links to a page on the website.  I’m sure that you will learn quite a bit from the Bible and hopefully you will be inspired to get serious about your giving and your generosity in general.

To answer the question posed in the title – I’m definitely not finished with this journey yet.  As I mentioned, this didn’t really scratch my personal generosity itch.  I am better off for doing the 40 days of study, but me as a naturally generous person: that is still a work in progress unfortunately (I’ll keep trying, I promise!)

Photo Credits: lepiaf.geo

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