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3 Secrets to Save $102,533.35 on Your Mortgage…That Banks Don’t Want You to Know About

3 Secrets to Save $102,533.35 on Your Mortgage...That Banks Don't Want You to Know About

Two and a half years ago, I was looking at the amortization/debt schedule of my dream home that I was about to buy. It was mind boggling how much money my family would pay in interest over the course of a 30 year loan! Even at the pretty low interest rate we had secured we would end up paying $134,739.01 in interest. That is 67% of the cost of our home. When I realized that I would be paying for our house more than 1 & 1/2 times over again including the interest utilizing a 30-year loan I asked to see a 15 year schedule.

On a 15 year loan the interest would only be $62,537.65 (31% of the cost of our home). But to save even more I asked to see a 10 year loan schedule. On a 10 year loan our interest would only be $34,525.68 (20% of the cost of our home) and over $100,213.34 less than a 30 year loan.

What did we decide? Ultimately, because we didn’t know what the future held, and for more financial security, we decided to go with a 15 year loan but we pay an additional couple hundred dollars a month towards principal. We are on track to have our home paid off in about 10 years. This will save us $100,213.35 in interest alone. 

 Not only that but if, after our mortgage is paid off, we took the same amount of money we paid for our mortgage payment and invested it instead of paying it to the bank for the 20 extra years (at 4% interest) it turns into: $714,674.00. If you add that amount to the interest we saved by going to a 10 year loan: $100,213.34 + 714,674.00= $814,887.34 saved/made in the same 20 years that we could just be paying off our house.

Isn’t your payment much higher you ask? It sure is. On the 15 year payment it was about $500 more a month. On our 10 year payment plan it is about $950.00 more a month. But we found a way to make an additional $1,000.00 a month and instead of spending it we apply it to our home loan.

I am willing to sacrifice $1,000 a month to have our home paid off 20 years early to save $100,213.35 in interest AND more than likely make $814,887.34 in the same time frame.

(Keep in mind this is on a $200,000 house with about a 4% interest rate. If your house is worth more and/or if you have an interest rate higher than 4.0% your savings and what you could make by investing will be much HIGHER!)

Even if you can only find an extra few hundred dollars to apply to your mortgage principal you will shave YEARS off your mortgage. Other ways to save are to stick to a spending plan and whenever you get extra money through your tax returns, bonuses, or selling things, etc. put them toward the principal on your mortgage as soon as you get them. You can also subscribe to learn other saving and money making tips.

If you don’t have an extra $950.00 to apply to your mortgage each month I understand. We have had to sacrifice some things and get creative. When I stopped working full time to stay at home with our baby things got REALLY tight. Even with my couponing and saving about $300 on food a month (as shown here), making money by selling stuff online (see how to do that here), and saving with phone apps, etc. it is sometimes tough. But saving over 100K on our mortgage and being able to invest afterward for retirement, etc. is worth it.

Below are 3 Secrets that the bank doesn’t want you to know.

1- The banks don’t want you to know that they make LOTS AND LOTS of money in the first 12 years of 30 year loans and refinances. The first 12 years of your mortgage payment schedule is really heavily weighted in interest. It is not until year 22 that you pay more toward your principal than to the banks. If your monthly loan is $1000.00 a month on a 30 year loan with about a 7% interest rate, the first year you pay the bank about $930.00 a month in interest and about $70 goes to the amount you borrowed. Each year it goes down a little and finally once you hit year 22 then you are paying the bank about $500 and the other $500.00 goes toward principle.

3 Secrets to Save $102,533.35 on Your Mortgage...That Banks Don't Want You to Know About

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Knowing this the banks TRY TO ENTICE EVERYONE to continue refinancing or selling their homes (the average American does one or the other about every 8 years). Why do they try to entice you to sell or refinance? If the banks can get you to refinance or sell before you hit year 12 on your mortgage they can continue making 80-97% in interest off of every single 30 year home loan they have!!!  If you are thinking about refinancing this free report I’ve written is a MUST READ… But the main reason not to refinance is that if you start your entire loan over, your amortization schedule starts over (you go back to paying super high interest rates again).

 Further, refinances cost about $3-$5,000 each. So don’t restart your loan based on the intention of paying it off faster—unless your interest rate drops significantly. Just set up a payment plan that takes out more than the monthly payment and MAKE SURE TO SPECIFY THAT THE EXTRA FUNDS GO TOWARDS PRINCIPAL ONLY. If you don’t specify some banks will use the extra as an additional payment and you will be paying that huge portion of interest with  those extra dollars.

3 Secrets to Save $102,533.35 on Your Mortgage...That Banks Don't Want You to Know About

As noted by reader and loan officer Chris

“A lot of mortgage companies use a third party to collect bi-weekly payments. These companies tend to charge a large fee for their service and your payments are not actually applied to your mortgage balance bi-weekly. Due to foreclosure laws, mortgage companies do not typically accept partial payments so these companies wait until they have collected 2 half payments before they send it to your mortgage company. You can accomplish the same thing on your own by depositing 1/2 of your monthly payment every other week into a separate checking or savings account (and save more by not paying a third party). Once your have a full payment in that account, make your payment to the mortgage company. Just be sure that it is a full payment (and specify that it goes to the principal balance only) when you send it.”

2- Banks don’t want you to know that there are 7 ways to cancel private mortgage insurance. Mortgage insurance or PMI is another huge cost to owning a home. If you have less than 20% down you will be automatically charged PMI. If you end up having to pay PMI it is expensive.

For example: our home was a HUD home so we had to come to the table with a lot of cash over the appraisal. As a result we didn’t have enough for the required 20% down loan to value. For the first year our PMI was $580.00 a year (which is actually VERY low compared to most PMI payments). After we purchased the home we made a lot of updates to it and the market went up. We had an official appraisal done that increased the appraised value of our home by $70,000.

As a result, I was able to get the mortgage insurance taken off of our home.

PMI Rates can range from 0.5% to 6% of the principal of the loan per year based upon loan factors such as the percent of the loan insured, loan-to-value (LTV), fixed or variable, and credit score. Rates may be paid in a single lump sum, annually, monthly, or in some combination of the two (split premiums). So to save money it is best to avoid it altogether by saving up 20% of the loan  before purchasing your home. If you have already bought your home, you can still find ways to cancel expensive PMI and potentially put $50-$400+ (depending on the price of your home) back into your pocket each month.

 I explain the 7 ways to cancel your PMI here.

7 Ways to Cancel Your P.M.I.

Total savings of mortgage insurance for 4 years that we would’ve had to pay it had we not gotten the appraisal done: $2,320.00

3-Banks often want to repossess. On repossessed homes banks not only make a huge amount of interest on your first years of faithfully paying the loan but they also get to keep the property and resell it again (making much more than if you had kept up with your payments). Guard yourself and create a good savings fund that is not touched except in dire circumstances. I talk about more about how to create a savings fund here.

Foreclosure

Doing these three things can not only save you $102,533.35 on your mortgage, but you will also have a considerable amount of money that you can invest and/or save. Even if a 10 or 15 year loan is un-affordable, applying a few hundred extra dollars a month toward your principal and eliminating mortgage insurance will still save you thousands, even tens of thousands!

Thinking about whether to sell your home? Are you renting and wondering if you should rent or buy? I’ve published a book about these questions answered in detail. Find answers in my book:

book-projection2

If you have an Amazon account and a Kindle or the Kindle app, click here to own the Book. (Have an Amazon account but no Kindle? You can get the Kindle app for free here). Paperback and audio are available here as well.
No Kindle/Amazon Account? No worries. You can still get the eBook delivered to your phone, tablet, or computer, by clicking here.

Need help getting and staying out of debt yet want more interactive help? No problem. Just take my 31 Day Financial Fitness Boot Camp Course (by clicking here).

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Other articles that may be of interest to you:

How to Avoid Debt

Your Seven step plan to avoid debt

How to calculate your real debt and determine the quickest least-expensive way to pay it off

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Pros and Cons of Refinancing

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65 Responses to 3 Secrets to Save $102,533.35 on Your Mortgage…That Banks Don’t Want You to Know About

  1. Megan says:

    We currently have a HUD home and have mortgage insurance. As mentioned in #2 of your list, you said you got your home appraised and got the mortgage insurance off. How did you go about that? we got our home appraised and with the new appraisal we would be at least 78% loan to value. I just don’t know how to submit the appraisal and get it dropped off.

    • Anita Fowler says:

      Megan- You need to contact your mortgage loan company (i.e. whatever bank has your loan). Ask them what department you need to send the appraisal to. As long as they get all the necessary paperwork they should be able to immediately remove the PMI. That is what ours did. That’s awesome that you were able to get a HUD home and that the appraisal came in high enough to save you money!

      • Shannen says:

        These answers are not true. Most bamks will not accept an appraisal that was not ordered by them. You need to check with your individual mortgage company before you spend the money on an appraisal

        • Anita Fowler says:

          Shannen- I agree that each person wanting an appraisal should check with their mortgage lender first but our certified appraiser was not one endorsed by our bank but since he was certified and official they took the appraisal as accurate. So I’d recommend checking with your loan/mortgage lender first and asking what the rules are just to be sure.

      • Lisa Provasi says:

        I called my bank and they told me its current loan to value, not market value, meaning my current loan would have to be less than 73% of the original loan. So I can pay 30k in order to have the PMI removed or wait 11 years!

        • Anita Fowler says:

          Thanks for the comment. Perhaps the person you talked to lied or didn’t know the law. Or perhaps you didn’t clarify that you would have the home officially reappraised. Market value doesn’t hold water with banks. They need a certified official appraisal to change the value of your property.

          Or there is a chance that the laws have changed and mortgage companies are not required to change the home value based on an official certified appraisal. Here is the link to an update government form.

          http://www.federalreserve.gov/boarddocs/supmanual/cch/hpa.pdf

          IF mortgage companies are no longer required to adjust a home value based on a certified appraisal then perhaps refinancing on the high appraisal amount putting 20% down would be worth it to cut your PMI.

          I recommend researching and then calling and talking to a few different people. Good luck to you!

        • Sophia says:

          I think the person lied to you. Find out the laws in your state first, don’t trust what the bank tells you.

    • Sukina says:

      Call whoever has your mortgage and they will tell you how to submit the appraisal for review. Keep on them until it is off! Trust me that is what I did. Also, they may tell you that the PMI has to be on your home for a least 5 years then they will reevaluate but you just keep on it and monitor your value and pay extra toward the principal and it will get off but you have to keep requesting it because they will not take it off unless you ask.

  2. Michelle says:

    This was very helpful since we will be buying a home this year… thank you!

    • Anita Fowler says:

      Michelle, Thanks for the comment. I’m glad it was helpful. Good luck on your home buying. I’ll be doing a little more in depth post on things to do before buying a home. But one of the most important ones is to make sure all your Credit cards are at a zero balance for at least a month before allowing the credit bureau to pull your credit. thanks! Anita

  3. […] off a whole house can sometimes seem overwhelming.  Live Like Your Rich has a really great post on 3 Secrets to Save $102,533.35 on Your Mortgage that you will not want to […]

  4. Dan says:

    One concept you fail to neglect is the time value of money. The price you paid today, adjusted for inflation, is probably 1/2 of the cost of today’s dollars even though the value may be the same. If you were to take all of the cash you used to pay down your mortgage and reinvested over time, the power of compounding interest would have outweighed the gains of paying off your mortgage. A payment plan to increase the amount you put down every month is smart, but constraining your cash flows to pay off your mortgage early certainly has an opportunity cost to it. I used to this too, but a few classes in corporate finance will teach you how silly it is to pay off your mortgage too early.

    • Anita Fowler says:

      Dan, Thanks for the information. Yes I understand the amazing power of compound interest. My parents and grandparents are millionaires. I’ve been taught about investing since I knew what money was. We invest a little every month. We also save every month. My dad has his mortgage paid off in 7 years. It allowed him the security to start investing more which my husband and I plan to do.

      I do have the ability to invest with him in hard money lending and earn a much higher than 4% interest rate. The reason why we only invest a little right now and are paying off our mortgage early has everything to do with security. I’d rather own my home and know that no matter what happens with my investments I have a home to live in.

      The numbers do work out that if we were to invest the difference of $950.00 we would be wealthier than paying our mortgage off early and investing after, but as mentioned the main reason why I do this is for financial security. I don’t know what the future holds and my husband has lost his job once since we have been married. So we invest a little save a little more and use the rest to secure our home situation.

      Further, most investments that people enter into have a less than 4% interest rate earned. I invested in the market in some great funds for 5 years and lost and earned and lost and earned and eventually lost money over the course of those 5 years. In the market and 401Ks most people have their principal at risk. My old bosses dad lost 500,000.00 in 2008. Unless the investment is VERY SECURE I would never recommend investing instead of paying off a mortgage early.

      Thanks for your comment. Different strokes for different folks. As a woman I prefer security first, investing a little now and a lot later.
      What kind of investing do you do?
      -Anita

      • D.Patrick says:

        Anita,

        That was a great explaination in real world application for personal finanace. While Dan does make a point for ” classroom” theory. it is just that, limited to the classroom. In the real world of finance you have many varibles and risks that may trump your lecture taught for the day, and at the end of the day you’ll have to live with the financial decisions you make, but hopefully you’ll come out on top. It is only the poor student who stays where the teacher left them. But its incumbent upon us to further our knowledge to better our position for managing , protecting and prospering in personal finances.

        Thanks for posting

  5. jennifer says:

    We have a 30 year mortgage currently, but pay bi-weekly. Our bank encouraged us to do so. As it stands, it shaves over 4 years off the mortgage.
    With my husband in school currently, we don’t have extra to pay but once he is back in the work force full time, I expect to knock out the mortgage in about 15 years.

    • Anita Fowler says:

      Jennifer,
      That is a great idea. Paying bi-weekly does help a lot! That is great that you are going to pay your mortgage down once your husband starts working full-time. Thanks for commenting.
      Anita

    • Libby says:

      Does your bank charge you extra to make those payments? Our bank encourages us but after seeing how much money they were charging it was not worth it. We just pay extra each month.

  6. […] Food Mom on a Budget {Top 6 Simple Ways to Save at the Grocery Store } 5. Live Like You are Rich {3 Secrets to Save $102,533.35 on Your Mortgage} 6. The Thinking Closet {101 Creative Date Nights on a Dime} 7. Feet Grounded on the […]

  7. Jenna says:

    I know I am getting to this post a little late, but you popped up in a search on how to save money on your mortgage! I can’t wait to start using your tips! Thanks

  8. Sukina says:

    Love the tips! I think I was about 28 when I realized what a problem it was to be in debt up to your eyeballs! lol I will be 31 in July and I have managed to pay off my car note, all credit card bills, buy a cute little house cash and I have about 30k but I started with 78k. Sallie Mae is worse than the mortgage people and also you should do a post on debt consolidation. It is the devil spawn if you ask me. I wish I would have negotiated my interest with each individual student loan that way when I took 20k I would have eliminated one altogether. But no worries I tell myself it will all be done sooner than I think. Thanks for post!

    • Anita Fowler says:

      Sukina- Congratulations on paying down so much debt! That is really awesome. great suggestion on debt consolidation, I’ll do a post on that. Thanks again and congrats again!

  9. Lynn says:

    We have an FHA loan and our pmi is over 300 per month. I know our home has increased in value, if we were to get an appraisal and met the percentage, does it work the same for the FHA loans?

    • Anita Fowler says:

      Lynn- Yes it works with FHA loans. I know this because my loan is an FHA. Before you just order an appraisal (because they are a bit pricey) do some good research on your area and the market price your house will get. Run some comparables (ask a real estate agent run comps). If you are going to come in well over the 78% equity vs loan then YES get an appraisal. If its not looking like your house may not come in high enough then I recommend paying down your principal for awhile and watching the market. Once you are pretty sure an appraisal will get rid of your PMI go for it! 🙂 Thanks for your question.

      • Chris McGaughey says:

        As a mortgage lender of 22 years, I would like to chime in that HUD changed it’s mortgage insurance premium for FHA loans. In June 2013, all new FHA loans will have mortgage insurance for the life of the loan, regardless of the current or future appraised value. I would advise everyone to check with their mortgage servicing company to see what the rules are for their mortgage.

        Also, I should mention that a lot of mortgage companies use a third party to collect bi-weekly payments. These companies tend to charge a large fee for their service and your payments are not actually applied to your mortgage balance bi-weekly. Due to foreclosure laws, mortgage companies do not typically accept partial payments so these companies wait until they have collected 2 half payments before they send it to your mortgage company. You can accomplish the same thing on your own by depositing 1/2 of your monthly payment every other week into a separate checking or savings account. Once your have a full payment in that account, make your payment to the mortgage company. Just be sure that it is a full payment when you send it.

        • Anita Fowler says:

          Chris-
          Thank you, this information is very helpful for those out there wondering about FHA PMI and bi-weekly payments. Thanks so much, I’ll add it to the article.

          Anita

  10. Jackie says:

    Hi Anita…
    Thank you so much for enlightening me on this subject!!! Can you please post information about investing? Currently I only have 401 through my employer.

    Thanks again,
    Jackie

    • Anita Fowler says:

      Jackie- Yes, for sure, I will do some posts about investing. Please subscribe and you will receive those posts. Until then (it may be a few weeks) I can tell you, where I learned pretty much most everything I know. From my grandpa, dad, and brother (all self made millionaires) and my brother is offering a free consultation and his free best selling book to my readers who want to speak with him or a trained rep at his company. I couldn’t recommend them more. I learned a TON about where to put my money. And a 401k is dangerous to have as a sole retirement plan because it grows and drops with the market. My brother’s business partner, Ethan’s dad lost over $500,000 in the market drop of 2008 :(. He was set on buying a new home and traveling etc. Now he is back at work. Its really sad that someone’s retirement and years of hard work can just vanish like that, but it happens all the time. Here is the link to my brother’s company, just fill out the form and they will call you for a consultation. Thanks for asking! Anita

  11. Camilliagregory says:

    Something to note on the mortgage insurance…
    They are required to remove the mortgage insurance once you reach 78% loan to value but you can request to have it removed once you have reached 80% loan to value. By asking for it to be removed before you hit the point where they are required to remove it, you can save even more money.

  12. Maria says:

    Hi, we are building our home and it will be done in June 2014, but I had no idea of all these topics you are talking bout. Our payment will be about $970.00 n I guess we will be having pmi and makes me want to not buy our home 🙁

    • Anita Fowler says:

      Maria- My advice would be to look over the terms of your loan and see if there is a way you can pay off enough to get out of paying PMI. Most people do pay PMI and a high percentage of interest. You aren’t alone, but if there is anything you can do to save money, that would be great!

  13. Shawna says:

    You’re lucky you don’t live in California. My 1104 sf condo cost us 300,000…all this talk and paying off in ten years is a pipe dream for us!

    • Anita Fowler says:

      Shawna- Yes California is VERY expensive! I wish you the best in your home ownership! I do know that most Californians make a whole lot more than the majority of people here in Utah (the average income is much higher because cost of living is as well). It’s tough to get started there from different states though, that is for sure!

  14. renee says:

    Anita, my huband and I are getting ready to purchase out first home and it is quite nerve racking. I found this site on Pintrest and I am so happy I took the time to pin and go back to read it. I love all the advice you have shared with use and I will be asking my broker/banker a whole lot of questions. Anita, thank you.

    • Anita Fowler says:

      Renee- Thanks for the kind comment! I’m glad you read it and came back to read it! I love Pinterest for that reason as well :). Good luck with the purchase of your home. I wish you the best!

  15. Marlon says:

    Thank you Anita for your wisdom. My wife and I recently bought a house in January and have a 30 year mortgage. I am so glad you opened my eyes to the 12 year thing as well as paying as much as possible on the principal only after paying the mortgage! We are aiming to pay off our mortgage in no more than 15 years!!!

    Once again,
    Thanks Anita!!!

    • Anita Fowler says:

      Marlon- Thank you so much for this kind comment. Totally made my day! I’m so happy to have been able to have helped. Good luck and congrats on your plan to save SOOO much on your mortgage! Reinvest that extra cash you saved and you will have a good nest egg to retire on 🙂

  16. Kaylie says:

    We recently bought a home with 30 year loan. Should we pay more to the principal if we are planning on building a new home and selling this one eventually in around 5 to 10 years?

    • Anita Fowler says:

      Kaylie- That is a great question. It really depends on your financial situation. If you need to save up for the property and materials to build the home, personally I wouldn’t pay more on the principal. But if you already have the funds secure, I would pay more down on the home. Equity brings more financial security and it is nice to have equity in your home if you are planning to sell it. In a case like yours it really is important to weigh the pros and cons for each thing. What is the most important thing for you? Having equity in your home and saving on interest? Or having the funds for the home you are planning on building? You will also want some savings to fall back on in case your home doesn’t sell if you plan to start construction before selling it. That is what I’d advise thinking about and then really deciding on the points you come up with. Good luck and Thanks for the question!

  17. […] Food Mom on a Budget {Top 6 Simple Ways to Save at the Grocery Store } 5. Live Like You are Rich {3 Secrets to Save $102,533.35 on Your Mortgage} 6. The Thinking Closet {101 Creative Date Nights on a Dime} 7. Feet Grounded on the […]

  18. Ness says:

    This is great information…thank you! Did you also ever publish the article on investing? I would love to read since I currently only have a 401k plan

  19. Amanda says:

    Though I understand this is written from an investment stand-point, I must say that life is SHORT and your time on this earth is not an absolute. I would not feel comfortable missing out on amazing life experiences because I was house-poor for over 12 years of my short life. If you are willing to take that gamble and all goes to plan, this is wonderful but I just could not bring myself to sacrifice so much of that time and money just sitting within 4 walls. Just a different perspective!

    • Anita Fowler says:

      Amanda- I can understand your point of view. Thanks for sharing it. It is good to have a different perspective but perhaps you misunderstood mine. We are not house-poor as you say. We enjoy life. We travel often (granted we do so frugally). We have lots of family time, and make time for hobbies, passions, etc. that we enjoy. We are able to do a lot for less because we are thrifty, but we aren’t miserable. Mainly the point is we are saving hundreds of thousands in interest. If that is something you don’t want to work towards it is your prerogative. Yes we could live more luxurious of course and accumulate more, but the goal is to save hundreds of thousands of dollars . We have already saved about 30k in the 3 years of owning the house in interest and have not had to live poorly. It is up to each person to ultimately decide what their priorities are. Also, about your point of life being short. If I were to pass or my husband were to we do have life insurance that would pay for the house outright so the other wouldn’t need to worry about making a mortgage payment ever again, so in case of death we are covered. I’m not sure what gamble we are taking by paying our house off in 10 years rather than 30. Again, I appreciate your concern but I do not feel ‘house-poor’ or like I’m suffering, we are just paying more towards principal and less on other things than most do.

  20. Amy says:

    I am a mortgage lender at a community bank. I am interested to hear where the information came from on the 3rd point. I am sure that could be true for the mega banks, but all of the bankers that I know (there are more than half a dozen banks in our small town) do everything in our power to keep from foreclosing on property. It is rare that we make a profit from a property that we repossessed. Community banking is a completely different animal than corporate banking and lumping us all together is really giving our industry a bad rep. I’m sure there are lenders/bankers out there that meet the description in your third point, but I would venture to say that they probably aren’t part of community banking environment.

    • Anita Fowler says:

      Amy- Thanks for your comment. You are right not all small and especially local banks have the people’s worst interest in mind. I speak from experience of knowing people who the mega banks have foreclosed on who made it difficult if not impossible to keep their land. They do profit greatly from certain types of foreclosures (i.e. homes that have been paid on for years). Thanks for sticking up for the smaller local banks. You are right.

  21. Amanda says:

    While I understand why you are sharing this information, it is important that people know how to save money and I’m all for them doing the research on being informed when they choose to get a loan, however, I’m also bothered by the fact that your post makes banks out to be the bad guys. My husband is a hard working loan officer and yes he gets a small, very small commission when he gets a customer to get insurance, but that’s his job! He is not some bad guy, wheeling in dealing in his office and out to take away everyone’s money and repossessing his customers things. Honestly it upsets him to have to do that but again it’s his job and he advises all of his customers before loaning out anything to think of every possibility that might occur and make them not be able to pay. He brings home the majority of our household income and is a honest man who choose to help others obtain the things they need by being a banker. Don’t assume everyone is out to get the other. There are still good people out there who are just trying to make a living for their families as well.

    • Amanda says:

      Oh and FYI, the majority of the time when he does have to repossess something, let’s say a car. He is responsible for selling it, usually at a loss which there in effects his salary and our family income so believe they do not all LOVE to take your things back and sell them again! They are really losing money!

      • Anita Fowler says:

        This soley depends on the situation. IF someone defaults on a newer car that they have only been paying on for a year or so then yes perhaps the banks get a loss (depending on down payment, depreciation of the property, property damage, resell price, etc.) But if someone has almost paid off their car and loses it then the bank typically comes out ahead (having made money not only in interest, in payments, and then reselling the vehicle for close to book price). This is situational but I can say that there is a reason why banks are the biggest most profitable companies in the world… and much of that income comes from the profit they make on repossessions. Again, I have nothing against your husband who works for a bank, I don’t have anything against people who are paid to repossess property that has been defaulted on. If you read the article you’ll see I simply warn against not having an emergency fund so that you don’t lose what you’ve worked so hard to pay for. I hope this is clear. If I didn’t make payment on my vehicles I’d expect them to be repossessed. It’s having a savings for difficult times that comes in handy to avoid this.

    • Anita Fowler says:

      Amanda- Not all banks are inherently bad. But many do not have the individual in mind. Credit unions do a much better job of this. And it’s true they can’t control people’s spending habits. When people default, they default. I just know that when a bunch of banks defaulted they didn’t go under and lose everything… the government bailed them out. So its really a hypocritical thing. They also have lots of political influence and are in bed together with government officials and have skilled lobbyists. I have nothing against anyone who works for a bank. It’s the CEO’s and owners of banks that are unethical that I have problems with… and if you really do research you will see that what I’m saying is true for a lot of huge banks.

  22. […] I saw an interesting post on mortgages last night on Pinterest. It was a rant of some kind about how much mortgage banking actually costs you to finance a house. Yes, as I commonly say, the American Dream is to be in massive amounts of debt. Also, no one is going to lend you an insane amount of money for free. If you find someone who does, you send them over to me. Thank you in advance. […]

  23. Rachel R. says:

    I truly cannot fathom being able to pay double our house payment every month. Despite a variety of attempts to cut the budget in a number of ways, expenses just keep going UP. And I think we figured up that if we scrimped and saved absolutely, positively EVERY penny that doesn’t absolutely, 100% have to go to something else (like food or the electric bill) we could pay off our house something like 3 years sooner than we will at our current rate. As someone else pointed out, we just don’t find that worth the difference. If we could scrimp and save for five or six years and have the house paid off and be free of a mortgage, that would be one thing. But a couple decades of that are not worth it. However, we do pay a couple hundred dollars extra on principal every month, and even that can make a difference! So please assure your readers that baby steps can still be valuable, even if they can’t afford the whole shebang!

    (That illustration of the money to be made on investments over the next couple decades is pretty eye-opening!)

    • Anita Fowler says:

      Rachel- Paying an extra couple hundred a month on your principal should definitely shave more than 3 years off the line of your home loan. I wonder if you used a proper mortgage calculator. Great job! and Yes even small steps will help you get out of debt, save on interest, and grow your money much more quickly. Time is money when it comes to compound interest-that’s for sure!

      • Rachel R. says:

        I might be misremembering the details. I don’t pay any of the bills, myself, and I’m not the one who keeps a running tally on this stuff — my husband does it all. (I’ve looked at it with him, but I’m not the one looking at it over and over.)

        I just remember that we’re looking at paying it off a little earlier than the “official” time on the mortgage as it is, and scrimping and saving to put every possible penny we’ve got toward it wouldn’t make much more difference.

  24. […] of money. So how do you get around that? Simple- pay off your home faster. Check out this post by Anita at Live Like You Are Rich for a detailed guide on slashing those interest […]

  25. […] home (before and after photos here) for 40k more than the appraisal value (explanation of why here). We began paying PMI on our home loan. Then the market went up quite a bit just as we had […]

  26. […] To Make Your Home Energy Efficient This Winter 5 Tips To Help Renters Save Money (And Headaches!) 3 Secrets to Save $102,533.35 on Your Mortgage by Live Like You Are Rich 10 Ways To Cut Your Electric or Gas Bill by Moms Need To Know Ways To […]

  27. Leslie Jackson says:

    I am looking to buy in a year to a year and a half. I have $35,000 saved now and will have $50,000 in a year saved. What would you do with the money for a year if you intended on buying a home? I don’t have kids and won’t be having kids. It would just be me and my significant other. I have experimented with mutual funds and gained money but I pulled it out because I didn’t like the risk.

    • Anita Fowler says:

      That’s a great question. My dad does hard money lending that I would invest with him because he sees an awesome return. He mainly invests in real estate. I would only do that if you were very very comfortable with the investment and the contract and trusted the parties involved- and as long as the contract is short. Often investments are longer than a year. Considering this, I personally would open a few checking accounts (in my and my significant others names’s) at Chase bank or similar bank that rewards you with $500 back for putting $15,000 in them for a few months. Or I’d hold on to it. A year is typically a very short time frame for an investment and if you stumble upon the perfect property at a killer price while interest rates are low you don’t want your money tied up for too long.

  28. Marybeth says:

    IN regards to point #3, no bank big or small wants to repossess a house. I know this cause I have worked in the default/foreclosure end of mortgage banking for 15 years. I was on the panel that developed HAMP before it was even called that. No bank wants a property back. Banks are in the business of lending money to make money, not to foreclose and then have to market and sell property. And 99.9% of the time the bank looses money when they foreclose. Depending on the state the property is in they could have thousands of dollars in legal fees. In Pennsylvania, New Jersey, and New York areas it cost anywhere from 5000.00 to 10K to forclose. Then you have the eviction process if there are people living there. Then there are repairs to at least make it livable and b able to market it. So it’s very rare a bank even breaks even. Number 3 is dead wrong.

  29. […] much easier for you. And your finances are now easier to deal with. You can read more on this link:http://livelikeyouarerich.com/3-secrets-to-save-102533-35-on-your-mortgage/ also. However, think twice before you decide 100% if you really need a mortgage or […]

  30. […] It’s no secret that banks charge an insane amount of interest on any loan they give out. Especially for mortgages. In fact, for many years, you’re not actually making payments on your home- you’re just paying the bank thousands of dollars in interest only. Which is just crazy! For tips on how to avoid this and save up to $100,000 on interest, read this article by Anita at Live Like You Are Rich: […]

  31. […] 3 Secrets to Save $102,533.35 on Your Mortgage…That Banks … – 3 Secrets to Save $102,533.35 on Your Mortgage. Banks don’t want you to know that there are many ways to avoid paying mortgage insurance. Mortgage … […]

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