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Mortgage Acceleration More Valuable than Kitchen Remodel

Testimony from Joy

In the summer of 2009, we bought a sturdy, 50-year-old house with a very needy kitchen. We had been renting for five years and saving for a nice down payment. Because of the imminent kitchen remodel, we kept back some of our savings for that project and paid just 20% down.

We made larger mortgage payments from the start but were also tucking a little more away for the kitchen project.
And that plan was growing as we got different opinions and considered what would be the ideal remodel.

After ten months of consideration, we decided we weren’t ready to start a never-ending kitchen-remodeling-and-expanding-into-the-garage-etc. project. With that plan, we would have proceeded with a new phase only when we had the money in hand, so the total time and money required was overwhelming.

During our hesitation, we found an online mortgage calculator that allowed us to play around with numbers. We were already on track to pay off our mortgage 13 years early, but we realized that if we put our remodeling savings toward the mortgage, both with an initial lump sum and in increased monthly payments, we could pay off the mortgage in five more years—saving in interest close to the full amount of the principal!

Seeing those numbers, we were eager to delay a big kitchen/garage remodel eight or so years until able to do the full project all at once and with cash. So last summer we painted the walls and homemade cabinets and replaced the original, cracked counter top and the stained flooring, making my kitchen a happy place to be–all for under $1,000!

Two Recommended Number-Crunching Websites

Now I know people have purchased homes in different housing markets—regarding both location and economic times. The when and where of our home purchase helped to keep our total costs low. However, the decision to pay more toward the loan’s principal each month can save any home owner money.

I knew that truth theoretically, but until we were using a mortgage calculator, I didn’t dream the savings would be so great or the acceleration could be so fast. Anyone with a mortgage could benefit from number-crunching on a website like the ones we used.

DecisionAide.com — This link is the site we found most useful and flexible (though it doesn’t include specific dates, just numbered months). This site also has a full menu of other calculators that could “lend” some help in other financial considerations (including renting vs. buying and large vs. small down payments).

Mortgage-X.com: If someone wants to have the help of viewing specific dates and doesn’t have that much variety in extra payments, this calculator was the first, more basic one we used.

Joy employs her English degrees in numerous ways in the homemaking realm—but not by blogging! Her husband of almost 7 years, Joseph, serves as the assistant pastor for youth and music at their Midwestern church. Their three girls (4½, 3, and 16 months) and a new baby boy.

photo credit

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  1. Brandon says

    Some great advice you have here. Another great source is http://www.daveramsey.com. He is a wonderful source of financial information, he also has a mortgage calculator that you can plug in different number scenarios to see different results. A wonderful tool to use.

  2. Denise says

    I love the idea of being totally debt-free – mortgage and all! We got the first half done – no consumer debt. Thanks for the encouragement on the mortgage half:)

  3. Whitney says

    Great post! I have a 150 year old house that is constantly reminding me of how beautiful it could be. But all its needs are cosmetic. I could renovate the kitchen right now (among other things) or have my mortgage paid off in 8 years. My oldest is only 3 – so the idea of having no mortgage while he’s still in elementary school helps keep my renovations to paint and light fixtures only!

    Plus, I think too many people do renovations (or make purchases in general) based on what they think they need, rather than seeing if they can live with what they have. My ideas for the kitchen have changed dramatically in the last 3 years, due largely in part to living here and seeing what works and what doesn’t. I can only imagine how my tastes will change in another 8.

    • BethB says

      I totally agree with that last point. We got a “deal” on our house (based on the market at the time and even what I see houses in our neighborhood selling for now I’m very grateful) because it had been on the market much longer than most houses in the area. Honestly, I think the main problems were the lack of shower, 1950/60’s era kitchen with no dishwasher, and the ugly carpet and wall paper. We spent a few thousand and many hours of back breaking work on the cosmetic changes. The shower was a problem but rather than opt for a complete bathroom remodel my husband and FIL took some copper piping and we have a homemade shower (it doesn’t look as bad as you’d think!). While I routinely curse the lack of dishwasher I’ve accepted we are willing to spend the money on a kitchen remodel when we can pay extra on our mortgage. Sure a modern kitchen, bathrooms, and new windows would be lovely but I’d personally rather be a bit more financially solvent!

    • chelsea says

      I definitely agree about making changes before seeing if you can live with them. When we bought our first house, we made lots of upgrades after moving in. Five years and 3 kids later, I can see that those changes were not really essential. To be honest, I wish we had waited until after kids arrived before major upgrades because then you really see what you can and can’t live without!

  4. Valarie says

    While this advice is practical from a money-saving perspective, it’s not for everyone. Just because paying more can save any homeowner money doesn’t mean it’s the best place to invest “extra money”. This may be the case when comparing things like ROI for major remodeling projects. However, it’s also important to consider the amount of time you plan on living in your current home- ie long-term plans/goals. Since the housing market is still quite unstable and there’s no way to know when home values may begin to increase again, for many it makes better financial sense to save or invest the money rather than pay down a principal- that’s no guarantee of greater equity in the short-run. Just another point to consider. =)

    • Andrea says

      There’s no guarantee that an investment will give a rate of return comparable to what Joy’s family is going to save on interest. Living mortgage free would give so much freedom; having money tied up in investments doesn’t.

      • says

        No, but if you need to move in two years, you may not recoup the extra money you put into the payments. That’s all she’s saying. Paying down your mortgage is absolutely the way to go if you plan to stay in the house long-term.

        We put 20% down on our house seven years ago. That equity is almost completely gone due to the market downturn. So that’s $40K we scrimped and saved and put into this house, and it’s vanished. If DH ends up getting a job out of state when he graduates law school in two years, we will lose that money if the market hasn’t improved by then.

        • says

          Your plan would then require you to foreclose on the home in order to benefit from paying less of the principle. What you paid for the home is what you paid for the home regardless of how much you have paid towards that home within the last few years. If your $250,000 house is now worth $200,000 and you owe $210,000 or you owe $180,000 the current value and what it will sell for will not change. Your money has already been lost because of the price you paid regardless of the current value and is like any other investment.

        • says

          Better to have scrimped and saved and be able to walk away without owing, even if not recouping what you wanted. Many, many people are taking huge sums of cash to closings because they didn’t pay more to their house. And many others are taking out loans in order to sell a house…not a situation I’d want to be in!

          The more you put in on the front end or in extra payments, the less you are paying in interest, thus a higher ‘return’ on your money. We recently took a large chunk out of the stock market (before the huge downs of late) and threw it at our mortgage. We figured out we would save over $4000 in interest the first year alone and there is no way that the same chunk of money would be making that much for us in the market. We didn’t touch any retirement money and it is not for everyone, but for us to have the very real possibility of paying off our home next year in sight it made a whole lot of sense, especially in this economy.

          Of course, as is already mentioned if you play to walk away from your home and let the bank foreclose, then none of this applies. I would hope and pray that people only do that as a very last resort. We all need to do all we can to be responsible for the debts we take on.


      • says

        Most people blindly follow the advice of Dave Ramsey when he tells everyone to pay off the mortgage early and that it is right for everyone. Well, it is not right for my family. I would much rather have liquid cash that I can take out of an investment, even if it is at a loss, than have two more years to pay on my mortgage and need the cash. Even a “three to six” month expense cushion can’t even repair that.

        No one ever remembers that there are three factors that you have to compare when paying off your mortgage. The first is ROI. Typical long term investment in a stock portfolio yields 8% average per year, excluding any dividends that you can make. The second is the tax break that you get for your mortgage interest. The third is inflation. Simply put, a $1000 mortgage isn’t going to be worth $1000 in thirty years, it’s going to be worth $250. (Imagine only paying $250 on your mortgage?!?!)

        The BEST CALCULATOR is at http://www.hughchou.org/calc/payoff_v_borrow.cgi — to see if your loan vs. your investments would be better!

    • vana says

      I agree with some of these points for so many reasons. We recently purchased a new home and got a steal. The windows are outdated, this neighborhood generally is filled with 4 bedrooms and ours is a 3 and our appliances need some upgrades (my dishwasher sounds like amonkey is in there grinding the gears, but I am grateful to have any dishwasher!) We talked about paying extra to our mortgage and we discussed that due to the fact that it is not really the home we will stay in forever (or even the 30 year mtg) , it is pointless for us to pay extra. Yes paying it off early would be great, but for us, the upgrades like a 4th bedroom and bigger deck will pay off and still leave us with plenty of profit. as with anything, knowing your goals and prices are what will help make this decision.

  5. Sara says

    This is encouraging. We have a very ‘needy’ kitchen as well. The oven and stove top and cabinets are original to the 1959 house. :0 When we first bought the house we considered a major renovation, but decided we’d rather not go back into debt over it. We likely won’t have the house paid off before we need to renovate, though we are going to hold out as long as possible. Praying that the oven holds out until we’ve got money saved!

  6. says

    This is very similar to our story! We moved into a 1970s home a few months ago with a small kitchen and no master bath. We loved the house but wanted to either renovate the kitchen or add on a master suite. We decided to live in the house and see how it works for us. After using our kitchen, we’re completely happy with it just the way it is and don’t have any plans for changes. As for the master suite, we’ve been quite content in our small ‘master’ and it’s not that big of a deal to walk down the hall to go to the bathroom (especially since our house is small!) The money that we had saved for our upgrades will be applied to principal! (And that, to me, is more exciting than any master suite or kitchen!)

  7. April says

    My hubby and I just bought a home that is in need of both major and cosmetic repairs. First we found out that the house is infested with poisonous spiders, the keys don’t fit all of the locks, some of the exterior doors don’t close or lock because they don’t fit the door frames, and the downstairs basement and washroom isn’t insulated and the ceilings are unfinished and filled with spiders and the house has electrical problems. We called pest control but cant afford their service right now or a locksmith to have the locks changed, and plus their are so many points of entry for the bugs doors that aren’t level or properly sealed and the garage isn’t sealed when closed. We also want to get an alarm until we can afford to replace the doors that don’t lock, and then we will attempt to attack the insultation before it gets too cold and our electric bill sky rockets. But we are still thankful because less than two weeks ago we were living in public housing in a really dangerous high crime neighborhood filled with drugs and murderers.

    • Andrea says

      April, one of the easiest ways to control spiders is to remove their food source (i.e., kill the other bugs). Diatomaceous earth (available at garden centers) sprinkled around the foundation and in the garage will kill a lot of small bugs. Borax powder (in the laundry aisle) can also be sprinkled around. DH sprays our foundation with an all-purpose pesticide twice a year and it does seem to help. Use weather stripping and caulk to plug up some of the holes.

      Best of luck with your new home!

      • April says

        We bought yellow bulbs for the porch lights. We use bug spray that we already had. We have started seeing dead bugs upstairs, but the main problem is downstairs so I believe the powders should work. I read online we have to knock down all the cobwebs and find the eggs. Yes we will be doing a Lot of caulking. The seller had some repairs done but the work was shoddy.

  8. says

    My husband and I purchased the home we want all of our children to grow up in so we plan to be here for years. We have wanted to renovate the kitchen and add an additional Master Bathroom from day one and were originally putting money aside solely for the renovation and addition projects. We had three small children when we moved in and now have four that are getting bigger every day. We will NEED the extra bedroom space when the boys get bigger. We decided fairly quickly that as long as we could hold out on the renovations we would do some smaller projects but also get on a schedule to payoff the mortgage MUCH earlier than planned. I am so happy to be making strides in both goals but I also know that if we did not have the funds to devote to both, the mortgage without a doubt would come first.

  9. Denise says

    I may be the only voice of semi-dissent. We have lived in our house for 13 years and have always wanted to remodel the kitchen. While our kitchen is large, it functioned poorly. We finally remodeled this winter and now we spend much less money eating out and more time together in the kitchen. I completely agree with living in your home for a few years to be sure what you can or cannot live with. But I wish now that I had remodeled while my kids were younger and we would have been able to enjoy the kitchen for the last decade. And I say this even though we had to borrow some of the money to pay for the remodel (I had been saving bit by bit over the years in a special kitchen fund.) My advice is to consider not only how much you are saving by not remodeling, but also the benefits to your family (which may not be related to money) of living with the remodeled space.

    • Katie says

      I totally agree! We paid over $15,000 for a kitchen remodel about 3 years ago (using cash) and it has saved us a ton of money because we never eat out. I love using my kitchen and cook from scratch much more now.

  10. Stephanie says

    I would recommend only paying extra on your mortgage if you have 6 months worth of expenses set aside in the bank as an emergency fund. Also, it may be beneficial for some to invest the money rather than paying down the mortgage, depending on what your investment is. We can earn more in dividend income on preferred stock investments than the mortgage rate we’re paying.

    You should also take into account that you can deduct mortgage interest, which lowers your effective tax rate on your tax return and saves you money (although we may see the day soon where you can no longer claim this as a deduction.)

  11. Julie says

    I think that is great, but one question I have about paying down the mortgage. If you have no mortgage, wouldn’t you be paying exponential amount in taxes because you do not have that large tax deductible? That is something that I have been wondering about.

  12. CJ says

    I’ve been sending in extra principle payments for the majority of the 17 years I’ve lived in my house. It will be paid off by the end of next year, more than 10 years early :) Fortunately I bought a house that was really affordable and my monthly payment (without the extra principle) is still under $600. Hopefully after the house is paid off I can use that $600 per month to make repairs or put it into savings.

  13. Mrs. Frugalista says

    Paying off your mortgage is a personal choice. We paid off our house and we are so happy we did! We are able to cash flow our sons’ tuition payments and save my husband’s income. We do not owe anyone a penny and our life is happier and much more peaceful.

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