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1 Jul 2014

How to Beat the Living Crud Out of Your Mortgage – Round 1

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by Jesse Mecham

I (Jeremy) almost put the word “easily” in the title of this post, as in, “How to Easily Beat…” For most of us, however, it’s gonna be a fight. Don’t sweat it, Champ. I’m in your corner, so let me show you how you can dodge a blow or two while setting up the knockout.

If you want to put the hurt on your mortgage, you gotta punch it in the principal.

[squinting and using my surly boxing coach voice] “Keep chippin’ away at ‘im! He’s big, but he’ll go down just like all the others. You gotta keep hittin’ where it hurts!”

The principal is the amount you initially borrowed. Let’s pretend we borrowed $100,000 just to make the math easier (we are boxers, after all) at a 4.5% interest rate. Mortgage payments are structured so you pay mostly interest at first.

Before you pound your fists and growl, “Why I oughta…!” at your local banker, remember real people and real money are involved. If a stranger borrowed a few hundred thousand dollars from you, wouldn’t you want to get a return on that risk as soon as possible? (If you answered “No,” please contact me directly and right away.)

As the principal gets paid down, however, it flips. In our $100,000 loan scenario, the monthly payment would break down like this:

Monthly payment: $506.69 Principal Interest
First Mortgage Payment $131.69 $375.00
Last Mortgage Payment $504.79 $1.89

The more shots you land on your principal, the closer you get to knocking out that last payment. Capiche? It’s gonna be a formidable fight. No two ways about it.

Trust me, this is not a fight you want to lose. You want to absolutely rock this one, and you can. Spit in the bucket, tighten the laces, and find places in your budget you can slim down to attack that mortgage with intensity. Your YNAB training partners are cheering for you.

Next time I’ll share three of my favorite strategies to give brass knuckles to your mortgage payments. Rip off! Tell me now! I don’t mean to tease, but unless you’ve seen for yourself how impactful paying down principal is, the greatest strategies in the world won’t tip the fight. Check out this link, plug in your own numbers, and see for yourself. Until next time.

Your Next Step

Remember, budgeting is not restrictive. You won’t be spending less, you’ll be spending right. You can do this! Today. Right now. What do you have to lose? Except all that debt and stress. (Ok, so kind of a lot.)

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