The other day I was talking with a friend about how we pay so much each month for our mortgage payment, yet maybe 10% goes towards principal.  It’s frustrating, and often makes me dream of selling my house and being mortgage free.  Of course, then we’d have to pay rent and who knows if that would be better for us.  I told her how I had been paying extra on the principal to reduce the amount of interest we end up paying and to shorten the length of our mortgage.  She had some objections, and I listened to her while taking mental notes.  Here’s what she thought about us paying extra on the mortgage:

-Because we don’t plan on staying in this house forever, she thought it would be in our best interests to stop paying extra on the mortgage and to start putting that money elsewhere.  Maybe a Roth IRA, investments, etc.  Over the long term, she thought it would be better if we invested the money over it being tied up in (maybe) equity in the house.

-There’s not really a way to get the money back that you pay extra on your mortgage unless you take out a home equity loan, and that’s not really something I ever want to do unless it was an emergency.

-Cash is king.  If we take the extra money we’d be putting towards the mortgage in a savings account, we’d have access to that in case of an emergency.

-If our house value ever dropped dramatically and we wanted to walk away from our mortgage, the less money we had into the house, the better.  I don’t know if I could ever walk away from a mortgage, but with the economy roller-coastering like it has been the past few years, who knows what will happen with home values.  I don’t want to be stuck with this house and not be able to move or sell it.

I can understand why people would walk away from a mortgage.  My parents’ house in Michigan was worth at least $240,000 at one point and now is probably worth less than $100,000.  Had they had a mortgage on the house, it probably wouldn’t be worth paying the payments on a house they probably would never recoup the money.  Of course, their house has been paid off for years, so they’re only screwed if they go to sell, which I don’t see them doing in the near future.

Do you think you would ever walk away from a mortgage? What circumstances would cause you to do so?

It seems as though the home improvement list is never ending. I thought I would share the list of projects I want to partake here, as well as details on the projects themselves as I attempt to DIY a lot of them. Anything over my head will definitely be a professional’s job. Part of me is so tired of working on this house and wants to sell it and move, and another part of me wants to stay here forever and revel in the fact that I made my house my home. Here are the things I’d like to accomplish soon:

-Make a chicken coop. I’m thinking of something like a chicken tractor that I can move, but that sounds a little complex for me!
-Paint the guest bedroom. A few years ago we painted it a nice, gender neutral light green. I hate the color, and have found which color I really want to paint it (Olympic Bamboo)
-Build a clothesline. I already have the plans, I just have to get the supplies, time, and energy to do it!
-Finish our French doors leading to the dining room. They need the hardware replaced and the hinges replaced too.
-Refinish or replace the dining room floor. It’s old hardwood right now, but not in great shape. I’d love to refinish it but that’s going to be a job! I’m thinking about replacing it with cork!
-Replace the guest bedroom’s flooring. I’ll either lay the wood floor myself, or buy new carpet. With it being the only carpeted room in the house, I kind of want to rip it up and replace it with the wood flooring.
-Clean the siding. I considered buying a pressure washer but decided I can just do it myself using a car washing brush. It will save me time and get me exercise!
-Clean all the windows. Boo.
-Organize and paint shed.
-Fix the fence that was damaged during a storm. Three years ago.
-Paint the shutters a nice deep red color for more curb appeal.

Looking at this list is intimidating, but it will feel good to cross things off it! Now I just need the time to do the projects!

Do you keep a to-do list of home projects?

I’m all for doing home improvements to help save money.  In our house, I have painted pretty much every surface in our house, replaced flooring, installed baseboards and quarter rounds, and even tiled one of our bathrooms.  I’ve become pretty good at home improvement (but definitely have made mistakes) and I’m proud of what I’ve learned and accomplished.  I think it’s funny because at our house the roles are pretty much reversed.  Mr. Money does the cooking, and I do home improvements.  I do a lot of the other domestic duties, but that’s because I enjoy doing them.  He is good at cooking and I’m good at everything else. Just kidding.

There are some projects that have been over my head, and I’ve turned to Mr. Money because they are “man jobs”: electrical, plumbing, etc.  I know that if I put my mind to it, I could probably do it, but I’d rather not electrocute myself, thanks.  I have to give Mr. Money credit, though.  He will attempt almost any project I ask him to do.

About a year or so ago we would recognize this awful smell that would be in our basement every so often.  I attributed it to the sump pump stinking, and started pouring a tiny amount of bleach in the sump pump to kill any bacteria that would stink.  We’re on a septic system so I had to be careful not to put too much in, or do it too often.  It seemed to help, so I didn’t think anything of it.

A few weeks ago Mr. Money decided that he couldn’t finish fixing the outdoor faucet that he tried to repair.  He couldn’t get one side in, so we decided to call a plumber.  The plumber came out and gave us a quote on repairing that faucet, replacing the tub trap, installing another outdoor faucet, running a gas line, and replacing some of the pipes under our kitchen sink.  We decided it wasn’t too expensive, so we told him to go ahead and do it.

The reason he had to replace the pipes under the sink was because Mr. Money had replaced them, but they were loose and leaked at certain times, driving me batty.  I’d open up the doors and there would be a bunch of water pooled, warping the wood.  So…

When the plumber was here, he got to work under the sink and realized that he’d have to cut through the bottom part of our cabinet to get to the next pipe.  When he did that, I swear it smelled like a cow had defecated and then died under there.  It smelled like raw sewage.  What happened was when Mr. Money replaced the pipes, he didn’t link the bottom one into the one underneath it so all of our grey water was draining into our crawlspace and then into the basement.  No wonder it would stink like that occasionally!  We had to put down 40 pounds of lime down to soak up the dampness and odor.  It worked pretty well, but has definitely taught us a lesson: when you’re in over your head, it’s better to hire a professional than to try to do it yourself.

I am so thankful we won’t have to deal with that awful smell again, and I’m glad all of our issues have now been dealt with.

Do you have a do-it-yourself story that turned disaster diy?

This is a guest post from Joe at SmartMoneyFocus.com. Joe is on his way to be an asset millionaire by age 41.

I remember the day that we paid off the mortgage like it was yesterday. My wife and I sat down and wrote the check to the mortgage company. It was the biggest check that either of us had ever written by far. It was for $167K. We had been saving and investing for this day for about 7 years and it was sweet. This was the end of our debt free journey. We had saved and worked hard to pay off, not only the mortgage, but also student loans, cars and credit card debt. We got there faster than I thought we would, but I did not know where our journey would take us.

After our little triumph, I knew we needed another focus to keep us headed in the right direction. We decided to focus on our three boys and their college education. They are young and we had 10 years before the oldest would hit college age. We now had the “mortgage” money to put towards college, as well as our accelerated “house payoff” fund. Again, we focused and put our efforts into this quest. I am proud to say that we have enough to send all three boys to school for their bachelors degrees. We had done this with good investments, saving and other activities that brought in extra money.

We were not done, no, we had to focus on something else. It was time for us to focus on building wealth, real wealth. This is our latest quest. We are in the process of building up a nice portfolio of assets. We are diversifying our money generating activities by saving, of course, but also by investing and creating multiple streams of income. We are not there yet, but we are on our way. We have a goal to hit the $1 million asset mark by the time I turn 41. That’s a little over a year from now. Our goal, is to have $3 million in assets by my 50th birthday and to be able to not work at a JOB. I would like to be in a position to have my own company by then and create a great place to work and help others achieve wealth.

All this has been possible because we have focused. It has taken us about 10 years to get to this point. I know that some say that we have achieved a lot in these past 10 years and others have said that 10 years is a long time to achieve where we are at. The truth is that it has been right for us. We have done it at a metered pace. We still take vacations to nice places and go out but we live within our means. I am blessed with a good job and have made great investment decisions. We are living proof that most people can achieve what they want with their money if they keep focusing on their goals. Keep at it and you can get where you want to be in shorter time than you think.

Joe Edward is in pursuit of creating wealth for financial independence. Joe believes the right focus on five key areas are a way to financial independence:
-Maximize Career
-Save, Save, Save
-Debt Free Living
-Invest, Invest, Invest
-Create Multiple Streams of Income
Joe is well on his way to be an asset millionaire by the time he turns 41. He started SmartMoneyFocus.com to help others achieve their own paths to financial independence. Follow him on Twitter: @smartmoneyjoe

We’re looking at doing some home improvements to our house: some new windows, a new stove, and just some general painting and repair.  This year we need to work on the exterior of the house since we’ve focused on remodeling the interior of the house over the past four years.  We decided that the best way to go about making all these repairs was to do one thing at a time.  That’s totally not how I like to roll, but it definitely makes more sense for my sanity.  It seems like anytime I get an idea about a new project there I am, full force into the demolition of the project and then I realize I’m way in over my head.

Some things are better left to the professionals.  I was curious to find out how much replacement windows would cost, so I requested a few companies to come out and give us a free quote on replacement windows.  Our house is unique in the fact that the front part of the house was built probably in the 1940s and the back of the house is an addition that was probably built in the 1970s.  For whatever reason, the windows in the back of the house are definitely newer than 1970, but the front part of the house three of the four windows are what I assume to be the original windows to the house.  They need to be replaced because they leak pretty badly.

We also have a couple windows up in our attic that we decided to replace because one is leaking and running down and dripping through one of the door frames.  Yeah, it’s not good.  I looked online at one of the local home improvement stores for a replacement window and we could buy one ourselves for less than $100 I think.  Then I realized that I don’t know how to replace windows myself, and that it probably would be a better idea to let a professional install windows.  I don’t need the darn thing falling out.  It’s causing me enough headache as it is.

The first company came out yesterday to give us a quote for five replacement windows.  The front three windows that aren’t very big (I think they are less than 30 inches each) would cost us $825.00 total to replace.  That includes the cost of $600 for the windows themselves, $195 for the exterior trim (?), and then a disposal fee of $30.  To replace the two little windows that are in the attic (mind you, they are about two feet by two feet) would cost us $808.  I about died.  The smaller windows cost us almost as much as three larger windows!  With the smaller windows, they would cost $658 for the windows, $130 for the exterior trin, and then $20 for the disposal fee.  Good grief!

I think that we are going to look into purchasing the attic windows our selves and then trying to find someone that knows how to replace windows, like maybe a handyman.  That way we’ll save some money and be able to better afford the other windows.  Looks like I better start saving now!

Have you ever priced replacement windows?

As I mentioned before, we need to replace our stove. The stove we currently have is ancient, and works half the time. The burners are going out and sometimes I’ll put a pot of water on for tea and realize half an hour later that the kettle hasn’t started whistling. It’s annoying. Mr. Money is a chef, and wants to replace it with a gas range with a convection oven. There are a couple problems with this: one, convection ovens are expensive!; and two, we currently have an electric stove so we’d have to run a gas line to the stove and add a hood vent.

I asked a heating and cooling specialist today about how much it would cost to do both of those things. He said that it would probably be $600 maximum. However, he would have to look at it to give me a more accurate quote. I told Mr. Money that, and he didn’t seem like it was a big deal. He was expecting it to cost more money than that. I told him he’d have to also consider the cost of the actual stove too. The prices for a new gas range are anywhere from about $799-$1699. As far as I’m concerned we have a couple options when it comes to replacing our stove.

We can replace the existing electric stove with a new electric stove. I don’t know how long we’ll actually live in this house, so I don’t feel like dropping a ton of money on new appliances. However, I do think that our house would sell faster if we had all matching appliances in the kitchen.

We can replace the existing stove with a new gas stove. Of course, we’d have to pay to have the gas line installed as well as the hood vent, but Mr. Money thinks we’ll get the money back when we sell the house. I am skeptical. I can’t see where we would, but I could be totally wrong.

Do new appliances really add that much value? My personal opinion is that they probably would help the house sell faster, but we may not necessarily be able to recoup the money that we spend to replace them. I don’t know if I want to shell out a bunch of money on a brand new gas range.

Part of me wishes that when we bought the appliances, we had just gone with plain white or black instead of stainless steel. I think we’ve spent too much money on the appliances, but I can’t go back and change it so I might as well live with it. Also, it was harder to learn how to clean stainless steel but it seems as though I’ve got that figured out now. I am hoping that when the time comes, our stainless steel isn’t inundated with fingerprints!

Do you think you can recoup the money from new appliances when you sell a house? What would you do?

Last year I shared how I can’t bring myself to pay extra on the mortgage. Fortunately, since then I’ve been able to bring myself to make a few additional principal payments on our mortgage, and I love seeing them applied directly to principal.  It’s a great feeling.  However, we have many more years to go and many more mortgage payments to make.  So far we’ve eliminated at least one mortgage payment off the life of our loan, and it feels awesome.

When we refinanced our mortgage a couple years ago, instead of going with a 28 year mortgage (the amount of time that we had left on our original mortgage), we stretched it out to a 30 year mortgage to get a lower payment.  One of our goals is for me to be a stay at home mom whenever we do have kids, so that was a huge factor to us.  We figured we can always pay extra on the mortgage if we choose, but we can’t pay less.  It’s worked out well for us so far, and that’s really all that matters.

But since we’re completely debt free now except for the mortgage, I’m thinking about stepping it up a bit and making even more extra payments and hopefully for even more money.  I’ve shared my reservations about paying extra on the mortgage before, but they mainly are these: I don’t know how long we’ll actually own this house, and what if we need the money?

I calculate the amounts for us to pay off the mortgage in so many years versus refinancing.  I don’t want to refinance our mortgage right now because we’d have to pay closing costs, we’ve already got a pretty good rate, and I don’t know how long we’ll be in the house.

-To pay off our house in 26 years (the original amount of time we’d have left if we had kept our original mortgage), we have to pay $22 extra a month.
-To pay off the house in 20 years, we’d have to pay an additional $135 per month.
-To pay off the house in 15 years, we’d have to pay an additional $308 per month.

Since one of our goals for this year is to live on one of our salaries, I’m thinking about taking a portion of my salary and applying it directly to the principal of our mortgage.  I’m thinking that $200 a month is an amount that won’t break the bank if we really needed it, and it will make a nice dent in the mortgage.  If I can continue that amount, we’ll have the mortgage paid off in 18 years.  Wow.  Of course, if I’m unemployed or Mr. Money is, we’ll have to change our plans and probably stop the extra payments.  For now though, I think it will definitely work for us, and I am happy that finally I’ve come up with a plan.

I’m going to keep plugging away at the mortgage and watching the balance go down. I can’t stand to see the thousands of dollars each year we spend in interest for the mortgage.

Do you think it’s a good idea to pay off a mortgage early?

This afternoon I had a genius idea.  I decided that I want to sell our house and buy another that will fit our lifestyle a little bit better.  The house we are in now is a perfect size (it’s about 1500 square feet and we don’t use two of the bedrooms plus the dining room) but is on a little less than an acre.  I really want to get chickens, and we actually can because there are no ordinances against it here but it would be nice to have more property to be able to put them farther away from the house.  Also, if we could get a house with more property, I could bring my horse down here, be able to have one milking goat, and any other animals I’d like.  Plus, our dogs would love having more property to run on, and I could have a bigger garden to help with our dream of self-sufficiency.  I’ve always wanted to live in a house with woods on the property and room to run.

However, I think it’s kind of silly to swap our house for another of the same price.  Of course, I went online today to do some searching and I came across a house that’s listed for less than we should be able to sell ours for that has three bedrooms plus one bath (one less than our current house) but is on almost four and a half acres.  Swoon. Of course, it looks like it needs some minor home improvement on the inside, and I’m willing to do it myself.  After all, I’ve spent the past almost four years installing new flooring, tiling, painting, and replacing trim in this house.  I can pretty much do any home improvements I want to do as long as I have the proper tools.

I love the idea of moving into a new house, especially one that has property that we really could use and start to live out our dreams.  Our current house is awesome, but isn’t conducive to our dreams.

Benefits of Selling Our House and buying a new one

-We’d be able to have a farm with animals and have a huge garden that we’d be able to grow more of our own food.  I’d be able to have a goat to milk, chickens for eggs, and bring my horse down here to live with me.

-I’d have a new challenge with painting and remodeling the house.  I could decorate it completely different than our current house if I so desired.

-I’d have property to have all the animals my heart desires!  I’d be living my dream!

-We could possibly get a lower rate on a new mortgage (with a shorter term than we currently have) and put more money down so we have more equity than we currently have.

Drawbacks of Selling and Moving

-It would cost us money.  We don’t know how much we could get for our current house.  We’d have to pay closing costs for a new mortgage which could run us $3,000 or so.

-We’d have to stress about getting this house 100% sale ready, work on showing it, keeping it clean, etc.  Then we’d be stressed about selling it.  Plus, who knows how long it would take to sell.

-I don’t know how long we’ll live in this state.  With Mr. Money’s job, we’re pretty sure we’ll be here at least another two years.  A part of me wants to make the most of the time and maybe even stay longer by buying this new house that’s more suited for our needs.  Another part of me thinks it’s crazy to even consider this at all.

Tonight I think this is a fabulous idea and I’m ready to start packing to move to my dream property.  The realistic part of me thinks of how crazy of an idea it sounds, and maybe we should not even consider it and focus on our current house instead.

Do you think it’s silly I’m thinking about selling our house and buying a new one?

Last June we refinanced our first and second mortgage (I didn’t follow my own tips for a first time home buyer) and secured a lower mortgage rate.  We signed for a 30 year mortgage in order to keep the payments low.  We wanted to know we can afford the payments so I have flexibility in my career.  You never know, I may want to be a housewife one day and I want to know I have that option!  When we refinanced our mortgage, we went with a loan that didn’t provide an escrow service for us, so we had to do that ourselves.  Not a problem; we actually enjoy saving money ourselves for homeowners insurance and property taxes.

Thankfully, the closing costs of refinancing only were $150.  The only drawback?  There is a prepayment penalty on the loan, and the only way I can avoid a prepayment penalty is if we make a large payment on the loan and then wait a day and pay the rest.  I don’t know about you, but I don’t have over $100,000 just sitting in our bank account, so we’ll eventually have to pay a prepayment penalty that will likely be over $1,000.  I was aware of this prepayment penalty when we refinanced, and we had no closing costs, so I’m not going to complain too much.  Had we gone with a conventional mortgage refinance, the costs would have been a lot greater.

Anyway, my point here in all this is that I’ve been considering refinancing again.  Mortgage rates are at a historic low, and I’d love to get a mortgage in the 3-4% range.  That would be awesome! I checked today, and we could refinance for as low as 4.32% and our payment would be about $150 less than they currently are if we went with another 30 year mortgage.  Of course, I know we’ll pay closing costs with this mortgage so I’d have to factor in about $1500(?) for closing costs, plus the prepayment penalty from our current mortgage (at least $1300).  With that alone, I’m looking at $2800 just to get a lower rate!  I’d make that up in 18 months, and we plan on staying in this house for at least that long.  However, I don’t know if it is worth it.  I’ve thought about trying to refinance into a 15 year mortgage, but I don’t know if I’d want the higher mortgage payments each month.

I think I’m just going to keep our current mortgage and maybe start paying a little extra on the principal each month as I see fit.  At least then I’d be saving myself money that wouldn’t be going towards interest.  Plus, I feel like I’m “making” 5.59% on my money then, and we know there aren’t any savings accounts or certificates of deposit that are paying that right now!

I’ll be honest: the 3-4% mortgage interest rates are really tempting, and I almost wish they weren’t that low so I wouldn’t be tempted!  It’s so hard to decide how to handle money sometimes. I think as long as we live below our means, we’ll end up fine and I shouldn’t worry about it so darn much.

Do you think I should refinance my mortgage?

Three and a half years ago Mr. Money and I decided that we’d like to settle down and become homeowners. This was back in 2007 when the market was so-so and real estate was a buyers’ market, but not nearly as depressed as we are currently seeing. We decided in our heads an amount we felt comfortable spending, and went from there. We didn’t really sit down and figure out a budget and how a monthly payment would factor into it. While we certainly made some mistakes when it came to our first time purchasing a home, I have enjoyed the time we’ve lived in the house and all the improvements we have done to make it our own. I’m going to share some tips in hopes that it will help someone else who is searching for their first home.

1. Focus on the long term. We decided that we wanted to buy a house to put down some roots and have some stability in our lives. Unfortunately, we live in a state where we don’t have any family. That’s made it hard on us and we’ve wanted to move numerous times. It’s not that easy to move when you own a house! I would say that if you aren’t planning on being in one area for a minimum of 5 years, don’t consider buying a house. Think about your career goals as well- if you live in an area that’s not conducive to your career, you may have to end up moving to find a better job.

2. Think before you take out a first and second mortgage to avoid paying private mortgage insurance (PMI). When you buy a house, if you don’t put 20% down, you have to take out private mortgage insurance. There are a few ways around it though. We ended up doing an 80/15/5, which basically means that 80% of your house’s value is on the first mortgage, there’s a second mortgage for 15%, and then you have to put 5% down. I hated paying two mortgages each month. It was such a headache, and I probably would have been happier if we had just done a first mortgage and paid for PMI.

3. Save for a bigger down payment. I think it’s great if you can save more money for a larger down payment. Of course, if it means that you drain your emergency fund, then I wouldn’t recommend that. We had saved some money and used pretty much all of it when we bought our house, draining our emergency fund. Bad idea!

4. Calculate a budget and over shoot. We didn’t sit down and think about how having a house would really impact our finances. We knew there would be a mortgage payment obviously, but we didn’t think about house maintenance and all the projects we would want to do once we moved in. Even better, the real reason we wanted to buy was because our rent was going up to $700 a month. Our mortgage was about $1125 a month. We felt better because we were “not throwing our money away in rent each month.” Pfft.

5. Don’t buy a fixer upper if you don’t have the time, money, and skills to fix it. Trust me, it is really fun and you feel amazing when you can make home improvements yourself, but when you don’t have the right tools, the money, or the skills, nothing is worse than an unfinished house.

Of course, there are many other tips out there for first time home buyers. These are just a few of my observations in the three and a half years I’ve been a homeowner.

What advice would you give to a first time home buyer? If you don’t own, what’s the best advice you’ve received about purchasing a house?