Posts Tagged "mortgage"

House Hunting Dealbreakers

Posted by jefferson on Mar 16, 2012 in Eliminating Debt | 13 comments

via ListingBook

One of my wife ‘s favorite channels is HGTV, and it seems like they are always airing a show called “House Hunters”.  In this show, a couple tours three different homes, talks about the positives and negatives of each, and then picks which one of the three to purchase.  Every time I have ever watched this show, my reaction is “Keep looking! None of the three are good enough!”

Back when we were shopping for a home several years ago, I think we might have set a record.  We probably went inside of sixty different houses before we finally found one that we felt was worth putting an offer on.  Without a doubt, our real estate agent wasn’t thrilled with us.

The house that we ended up picking  is not perfect, by any means, but it suits us well.   I talked a bit about our home in this post.   Like all homes, our house needs some TLC.  We paid a bunch of money to renovate our kitchen last year, and we certainly love our home more because of it.  There are a dozen or so other large projects that we would love to tackle if we had the funds (checkout Michelle’s big list).  But there are other things about this house that are not perfect, and that we will never be able to fix.  The only way to get a house that is perfectly suited to your likes, is to build one yourself.  If you do that, it will most likely have to be further away from the city, which will lead to much longer commute times going into work, and thus making the house not perfect at all.

Thinking back to our great house hunt of a few years ago, sometimes there were little things that caused us to pass on a house.  But many times there were major issues, that would immediately disqualify a home.    Sometimes, you could spot these things on the online listing, but just as often, we didn’t notice until we were actually inside of the house. I thought it would be fun to share a few of those things:

My List of House Hunting Dealbreakers:

An Above Ground Pool

I still don’t get why anyone would do this; An above ground pool is too deep for little kids to play in, it smells bad, it attracts bugs, and it looks terrible.  If you buy a house with an above ground pool, you can’t even plan on removing it, because they probably poured cement underneath it.  Most people don’t want a parking lot in the middle of their back yard.  In-ground pools are fine, as long as you have the time to take care of them.  With our house, we actually did even better when it comes to pools, as our neighborhood has a pool (and swim team!) that is only a five minute walk away.

Pet Smells

There is certainly nothing wrong with having pets.  We had a cat for many years, and have been discussing getting a dog in the near future.  But you can’t let your animals stink up your house.  There were several houses that we walked into and were immediately hit with various zoo aromas.  We just turned around and walked back out.  If the family cat has “marked his territory” somewhere in your house (ours never did), then you will certainly need to replace flooring and possibly even drywall.

 Busy Streets and Steep Driveways

We are lucky enough to live in a subdivision, instead of on a main road, but I still wish that the street in front of our house had less traffic.  I worry about my kids playing ball or riding their bikes in front of the house, because cars sometimes drive by at 30-35 mph.  But honestly, it could be so much worse.  There are some houses that have trouble even pulling into their driveways because of  traffic.  I can’t imagine letting my kids play in the front yard, if I lived on one of these thoroughfares.

Similarly, I am glad that our home doesn’t have a driveway with an extremely steep grade. There are homes nearby who have to park at the end of their driveways, if there is any possibility of snow in the forecast. If they forget to do this, they will be trapped by their own driveways!

 Environmental Factors

There are a variety of environmental factors that would lead to me eliminating a house from contention;  HV power lines overhead, an interstate highway within ear range,  proximity to the airport (we lived directly in the flight path when I was a kid in Atlanta), and worst of all, having a large drop-off (a cliff) nearby.  Basically,  If I am not comfortable with my kids playing outside around a home, I don’t want to live there.

Changeables

I am not a very handy guy.  I admit it,  I am terrible at fixing things.  If a house needs a ton of work, it is not the house for me.  But even with that being the case, you have to look at potential when examining a house.  Anything related to paint color, floor choices, appliances, or decor should not be a deciding factor.  For example, I loathe laminate flooring.  I just hate the way that it feels on my feet.  But if everything else was perfect– I would buy a house with laminate, because  I know that I could rip it out and replace it with hardwood if I so choose.

With our current home, we have had to repaint everything, replace a bunch of flooring, put in a brand new kitchen, and we have been slowly but surely replacing all of the 25+ year old appliances (I think we have replaced them all now).  And of course, there is always more to do.

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What about you all?  What are your House Hunting Dealbreakers?

The Great Mortgage Money Shuffle

Posted by jefferson on Feb 24, 2012 in Eliminating Debt | 3 comments

For as long as I can remember, I have been paid bi-weekly.  This has generally worked out well, because I could pay half the bills early in the month with my first paycheck, and the other half of the bills with the next paycheck.  However, with a huge mortgage payment of almost $1400 due on the first of each month, it can put a wrinkle in the whole process.

The obvious solution is to leave about $700 in the bank from the first paycheck (Don’t spend it!), and then go ahead and add another $700 from my second paycheck and send the mortgage payment in.  However, when your family has well-documented issues with tracking their spending, keeping $700 in the bank can be quite challenging.  When we first bought this house, I tried that method for several months, but we always seemed to be completely broke after making the mortgage payment at the end of the month.

Many mortgage companies will let you send in half a payment, twice a month.  Their systems are intellegent enough to figure out that the two payments together will take care of your principal and interest.  Some of these companies actually encourage this by allowing the first (half) payment to lower your total amount due, and thus leading to a smaller interest calculation.  Unfortunately, my mortgage company doesn’t offer this option.  Instead, they direct their customers to something called the Equity Accelerator Program.  I utilized this program for a number of years until we refinanced last fall.

The Equity Accelerator Program advertises itself as a way to pay your mortgage down more quickly.  Basically, they will withdraw money from your account on scheduled intervals, and will hold the money for you in a “staging” account.  The selling point of the program is that in addition to the amount needed for your mortgage payment, they withdraw an additional 1/12 of a  payment. The net effect is, over the course of a year, you will be making 13 payments instead of 12, and you will drive your principal down more quickly.  This concept certainly isn’t a bad idea, but there is a major catch to the way that they implement it.  They charge $50 to start the program, and then $9 per transaction!  Those are some hefty fees for something that you could just as easily do yourself.

Back before we had our financial epiphany and started this website, the idea of spending a little bit of money to save a little bit of money seemed like a reasonable thing to do.  But the new Jefferson decided that instead of utilizing the Equity Accelerator program, I was going to make my own.  I opened a second checking account with ING Direct, and set up automatic transfers from my day-to-day checking account to my ING “staging” account each payday.  Of course, one of the beautiful things about dealing with ING, is money that is sitting in my checking account actually collects interest.  I then set up my mortgage account to automatically pull from this ING account on the first of the month when the mortgage was due.  The great mortgage money shuffle had been set into motion!

After experimenting with this for a few months, I realized that this was working out very well.  I decided to increase the amount of money being automatically transferred on payday by half a car payment, and half a credit card payment.  A little spreadsheet tracking ensured that the math would work out, and I would have the correct amount of money in my account at all times to cover these payments (see below).

In the end, I elected not to “accelerate” my mortgage payments, and to instead just pay the amount due each month.  It seems pretty foolish to spend extra money paying down the mortgage at 5% interest, instead of directing that money to a credit card payment at 20% interest.  Once we are out of credit card debt, then will be the time to start accelerating those mortgage payments once again. And I can easily direct the $350 automatically being thrown at credit cards towards mortgage principal, if I am so inlcined.

Below is the specifics of how my “shuffle” program works.  The balance shown in the right column is what will be in the “staging” account at any given time: