Tips like these helped us pay off $127K in debt. You can read our story in Slaying the Debt Dragon: How One Family Conquered Their Money Monster and Found an Inspired Happily Ever After.
Welcome to 31 Debt Free Missions! This year on Queen of Free, during each day in January, we will provide 31 concrete debt free missions or challenges for you to take on to #SlayDebt and take charge of your finances this year. Each mission will take you less than an hour (some will only require 15 minutes). Whereas, 31 Ways to Kick Debt in the Teeth (which I’m reworking this year and reposting in January, too) focused on some of the philosophical changes you need to make in order to be successful with money, 31 Debt Free Missions are action steps to put into place after you have your thinking straight. Even better, during the month of January, we’re revisiting each of these challenges in order to sharpen our money saving and debt slaying skills.
The King of Free is back with the final debt free mission of the month, sharing some wisdom with you.
Are you ready? Your mission is as follows:
Day #31: Refinance Your Home
During our Debt Slaying Journey (DSJ), we lopped 7 yrs off of the Debt Dragon’s cousin Frank, The Mortgage. While a brief stop to the DSJ was hard, it was worth the minor delay for a huge long-term gain. We went from having 22 years left to 15. Assuming we go the full term of the loan, we’ll save around $50K. We don’t plan on going the full term, but we’ll still save a bundle. We paid some upfront costs related to closing, but those dollars, over time, were well spent. Here are some thoughts we took into consideration and maybe can help you if you’re thinking about refinancing:
CHECK WITH YOUR OWN LENDER FIRST
There is legend that sometimes your lender will charge you minimal closing costs for your first refinance through that particular company. Legend. While I went ahead and attempted this, it has failed twice. Once with my previous lender and once with our current. “Just gimme a better rate” = not an effective negotiating tactic in the mortgage lending world.
SHOP FOR RATES ONLINE
We didn’t use an online lender. I’m more comfortable looking someone in the eye that is handling a deal with that many zeroes attached to it. However, you’re darn tootin’ that I compared the rates being quoted to me with those being quoted online to ensure competitiveness.
FIND A BROKER
Ask your friends who have refinanced recently who they used. Inquire about their experience and whether they would use the same broker again. You can also get a referral from your professional network. Ask a realtor, lawyer, or accountant for a referral. These professionals are picky about who they refer clients and friends to and brokers don’t want to damage their professional network.
GET A DEAL
Can you get a deal with a refinance? You betcha. Or it least it doesn’t hurt to try. A loan is worth something to a mortgage broker, so see if the broker will lower the costs (can’t do much with the rate) surrounding the loan. If not, there are other brokers. Check around. Timidity does not a dragon slayer make. This is your money, your future, your life. Don’t worry what someone else thinks of you. Be polite, but don’t be afraid to ask for a deal. Your local bank may offer crazy low closing costs, but watch the interest rates and total cost (see next paragraph).
DO THE MATH
Maybe a refinance is not for you. I mathed our refi to death. Use a site with helpful tools like CNN Money’s Mortgage Estimator. Calculators like that one help you determine which loan is best for you and how long it will take to recoup your closing costs. It is crucial to look at those numbers especially because closing costs seem so large. Remember, this is an investment over time. If your rate lowers 1% – you are saving roughly $1,000.00 ($2,000.00 if 2% saved) for every $100K owed each year. What you’ll also find is that if you are not planning on being in your home for much longer, a refi may not make any sense for you no matter how tempting those low rates may be. Or in our case we don‘t plan to refi again even though rates have somehow dropped another 1% lower. We refinanced last year and we don’t plan on going the full term of the loan so its not the best choice for us right now.
15 YEAR. 15 YEAR. 15 YEAR.
The best mortgage is no mortgage. So go with the 100% down plan. If you can’t – DO. NOT. GO. 30. YEARS. It’s just too long. Do the math with a calculator like the one mentioned above. You’re robbing your family’s future by going with a 30 year.
JUST THE HOUSE
The refinance is not a way to consolidate other debts . I suppose technically it can be. It’s just not a good way. Yes the interest rate is better, but take into consideration the risk. Your house. Your home. Your abode. Especially do not roll your student loan debt into your home loan. Superspecially (a word for double especially), don’t roll student loan debt into a refinance if you are married. If the individual who owes the student loan dies, it’s normally wiped clean. However, if the student loan gets rolled into the mortgage, the surviving spouse is left holding the debt against his/her home for a very long time. This also does not help with the grieving process.
Did you see the previous Debt Free Missions? Knock them all out this month!
- 1. 31 Debt Free Missions: Take the Restaurant Challenge
- 2. 31 Debt Free Missions: Run Your Credit Report
- 3. 31 Debt Free Missions: Set Up a Tax Box
- 4. 31 Debt Free Missions: 5 Memberships to Ditch
- 5. 31 Debt Free Missions: Adjust Your Withholdings
- 6. 31 Debt Free Missions: Quit Using Credit Cards
- 7. 31 Debt Free Missions: Go to the Library
- 8. 31 Debt Free Missions: Eliminate Cable
- 9. 31 Debt Free Missions: Pantry Prep
- 10. 31 Debt Free Missions: 3 Phone Calls to Pay Off Debt
- 11. 31 Debt Free Missions: The Bank Field Trip
- 12. 31 Debt Free Missions: Make Your Own Laundry Detergent
- 13. 31 Debt Free Missions: Hit Unsubscribe
- 14. 31 Debt Free Missions: Stop Money Leaks
- 15. 31 Debt Free Missions: Maintain Your Car
- 16. 31 Debt Free Missions: Save Money on Prescriptions
- 17. 31 Debt Free Missions: Kill the Fees
- 18. 31 Debt Free Missions: Change Car Insurance
- 19. 31 Debt Free Missions: Reorganize the Game Closet
- 20. 31 Debt Free Missions: Build your Budget
- 21. 31 Debt Free Missions: Appliance Maintenance
- 22. 31 Debt Free Missions: Saving Money on Gasoline
- 23. 31 Debt Free Missions: Start 5 Savings Accounts Today
- 24. 31 Debt Free Missions: Sell Something (NOW)
- 25. 31 Debt Free Missions: Organize Receipts
- 26. 31 Debt Free Missions: Switch Phone Service
- 27. 31 Debt Free Missions: Start a Cash System
- 28. 31 Debt Free Missions: Find a Group
- 29. 31 Debt Free Missions: Organize Coupons
- 30. 31 Debt Free Missions: Earn Extra Income
My book is now available: Slaying the Debt Dragon: How One Family Conquered Their Money Monster and Found an Inspired Happily Ever After. You can also check out Inspiration to Pay Off Debt: 30 Days of Encouragement from the Queen of Free
This post contains an affiliate link. That means when you get a great deal or maybe even something for free, you also help our family pay off our mortgage early. And for that, we royally thank you!
