How We Are Paying Off the Mortgage At A Faster Rate
I am no ashamed to admit that we have numerous credit cards that all have a specific duty. We have, what I call, our house card, my husband’s work card, and the last card for vacation and unexpected emergencies. I love carrying credit cards over cash and now with so many options credit cards help me pay off some other debt.
Why I love credit cards
Let me tell you the reasons I find credit cards necessary in our family’s finances. First, they are great bookkeeping records by keeping an electronic file of every purchase that my husband and I make. Store receipts typically get lost or thrown away, but I can always check back online to my credit card statements months back.
Text messages come through on a regular basis showing my balances, any large purchases, and any out-of-state purchases. Our credit cards are set up to be put on an automatic hold when a out of place purchase is made. Also, I don’t have to worry too terribly if my cards get stolen or misplaced. The company will always put a hold on my card and send me a new card. Plus, when there are new unauthorized purchases from the theft then I am not responsible for them. Cash is not so forgiving. Once it is stole, it is gone for good.
Credit cards also improve our credit score but can hurt it just the same. A credit score is a measurement that shows your trustworthiness and relationship you have with the lenders. For all intensive purposes, credit cards are a short term loan you have agreed to have with a bank. Borrowed money is promised to be paid back and on time. If done regularly, then your credit score will increase or remain in good standing.
Credit cards are also necessary in our modern society. Cards are needed for most car rentals where debit cards are not accepted. And just recently, a credit card was necessary for making dining reservations at all Disney World restaurants.
What does credit card have to do with paying off the mortgage?
Most, if not all, credit cards have a reward system. Our home card is from Wells Fargo. The same bank which holds our home mortgage. With so many options, we chose the credit card that transfers my points toward our mortgage and pays money directly to our mortgage.
Our cards work like this. We get 1% back for every purchase. A $9.00 charge at Target gives me $0.09 back in my reward account. My card also gives bonus percentages, for example, 5% back on gas and groceries. If my $9.00 purchase were all food at Target, then I would receive $0.36 back.
To further our rewards, I set up our monthly bills paid using the credit card. For example, our car insurance, internet, water and sewer, garbage, cell phone, and gym membership are paid on the credit card. We get definite money back even if we don’t use it on other items throughout the month. So we roughly get back anywhere from $25-50 a month in a credit card reward program.
Now lets do the math.
We have a $130,000 thirty-year fixed mortgage when we first bought our home with an interest rate or 4.625%. Thus, our house will be paid off in thirty years if I pay the monthly payment on time and don’t add any extra money to it.
I keep track of my payments and payoff schedule with a Mortgage Amortization Chart. It helps me look to the future of how much debt I have left. I like to play with the numbers to see when an early payoff would be by adding additional monthly payments.
Let’s say we put $1500-$1800 on the card every month and pay it off every month. As said above, we receive $25-50 a month, which is a free $300 a year on the low end and $600 on the high end that put toward the mortgage. This money goes straight to the principal, not the interest.
$300 to $600 may not see as a lot when compared to a $130,000 mortgage, but believe me, it is. If this happens every month, then I take four to six years off the mortgage.
Other ways to put more money toward the principal.
We don’t stop there. I like to round up the monthly mortgage payment to my nearest whole dollar. My monthly bill is $945 per month and I round up to $1000 which gives us an additional $55 toward the principal every month.
Lastly, I like to add more to my principal during tax time. I typically put in an extra $1,000 of our tax return which also goes toward the principal. Keeping up with this trend could shave off up to eleven years.
In conclusion, all my mortgage payment choices give me many fewer years on our mortgage note. I am on course of shaving off about fifteen years. That equals thousands of dollars of interest savings and closer to paying off an entire home. Oh, what I could do with $1,000 a month of free money.
Even if you don’t plan to stay in your home forever then at least adding more money to the principal will give you more home equity. For us these are all positive aspects and have worked in our favors for many years now. Tell us what you think and your ways of paying off your mortgage or other debts.
Here is our Mortgage Amortization Chart which we use. I have designed it for you to just plug in the numbers into the boxes and it should fill in the chart below. Each row
