Since refinancing my house in February of this year--- when I had to put another percentage down towards my mortgage in order to qualify--- I have replenished half of what I had paid out for the process. I've managed to accomplish in three months what I expected would take me one and a half years to achieve.
For those who have never refinanced a home, the owner must have a certain percentage of the mortgage paid off in order to qualify for the opportunity to get a lower interest rate. Since I've only owned the home for three years, I hadn't reached that amount yet. However, interest rates are bottomed out right now, currently at half of the already low rate where I started. For me, it was worth paying a lump sum towards my mortgage in order to get the lower interest rate. It's all equity for my home, and as soon as I replenish my emergency fund with the amount I spent to do this, I'll be saving money. Initially, though, this was no small amount of cash, and my life savings took a major hit.
Based on my salary--- and the fact that I am now a solo homeowner whose mortgage takes just over half of my monthly income--- I worked out a budget plan that involved setting aside the highest percentage for savings I could muster every month. If I did this obediently, I calculated that it would take me about three years to recoup the refinance costs. Even if it took that long, I'd still have over 20 years of mortgage payments where I'd be saving money.
However, the journey to replenish my emergency fund has gone more swiftly than expected. When I received a tax refund, I put that into my savings (minus the amount to pay for my homeowner's insurance). I've been selling stuff--- mostly childhood toys--- on eBay, mostly for the sake of minimizing and simplifying my life. Profits from sales, no matter how marginal, are put into savings. Commissions from freelance work goes directly into savings. Any money saved because I come in under my budget for the month also goes into savings.
Honestly, sometimes it's really difficult to restrain myself. Going out to a restaurant or getting a new haircut sounds awfully appealing without having to budget for it so meticulously. But then I'd be no closer to reaching my goal, and I'd have very little to show for my lack of discipline. It's not about forgetting to have fun; it's about priorities. Believe me, I have plenty of fun without having to buy alcoholic beverages every week.
Hey Kelsi, I just wanted to say that I love your title. I often get bothered by how society links wealth with money. Growing up I had a dad that made good money. But what he always told me, he would say, "I am rich but my richness has nothing to do with money."
ReplyDeleteI also had to comment because I see we follow some similar websites (Zero Waste Home, And Then We Saved and Becoming Minimalist). I love everything to do with minimalism and am happy to find someone else who does too. Who also values the importance of the intangibles (the experiences, family, friendships) not the tangibles (home, stuff, money).
I really enjoyed reading this post. I've never owned a home before so I honestly don't know much about refinancing. My husband and I are planning to build an Earthbag/Cob home and be mortgage free.
What I love most about this post is your honesty.