To Pay, or not to Pay

As always, there has been a lot of debate about whether or not it is wise to pay off your mortgage early.

JD’s post on Get Rich Slowly yesterday, and the comments on it inspired this post.

Last summer I started sending an additional $25/week towards the principle on my mortgage. Then, at the tail end of December, I picked up the pace, increasing my weekly principle payments to $125/week. So far, so good.

I haven’t “missed” any of that money (yet), and it’s put my mortgage on schedule to be payed off in June of 2017. That’s exciting.

But then you read about how stupid some think it is to pre-pay a mortgage… Invest the difference instead… One comment, from Kaleb, on the original post struck a chord:

I just got out of credit card debt this month ($11,000 or so paid off in 6 months). Now, like J.D. I have tons of extra money each month. If I prepaid my mortgage $2,000/mo, I’d have it paid off in less than 5 years. But if I saved $2,000/mo and got 6%, I’d have enough CASH to pay my mortgage off in 5 years, and that’s not counting the tax deduction! It’s the same thing, but with more security! It’s the smart thing to do!

I think I’m disciplined enough to take this route instead of what I’ve been doing. But… not this year.

You see, I’m still paying PMI on my mortgage — and that has got to stop. The sooner, the better.

So, for the remainder of the year, I’m going to keep on sending in that $125/week until I hit the mark where I can drop the PMI (currently costing me around $85/month). Right now, that should happen in October or November.

Once I’m there, Kaleb’s plan will go into effect in an ING account or something. Not earning the 6% he mentions, but something that I’d have access to if things got tight.

Posted on February 13th, 2008 at 9:54 am by Brainy Smurf
Finance, Mortgage, PMI - Mortgage Insurance | 1 Comment »

Rates Dropping All Over the Place

As I peruse all of my banking websites this morning, I’m finally starting to notice rates dropping in accordance with the fed rate drops over the past few weeks. Citi, Chase, Bank of America…

Okay, well, not Bank of America, but I think they’ll come through eventually.

It’s nice to see credit card rates dropping from 17.99% down to 15.24%. Sadly, these relatively large drops are all coming on cards that I’m not carrying a balance on anyway.

The one card I do still carry a balance on in with Chase. In the past month, the APR has dropped from 18.99% to 17.24%. That’s a good thing, though it’s not affecting me because my entire balance is sitting on a 4.99% promo rate. Drat. Foiled again…

The other place I’m seeing a rate change is on my ING account.

Dropping.  Like.  A.  Rock.

It was only a year ago that I started using a savings account — the rate was up above 5%. Now, it’s 3.348%. That’s too bad.

Just as I find myself finally overcoming debt, the interest rates start to work against me again.

Yep, it’s me against the man.  It’s personal.  (okay, that’s a little over the top…)

In the grand scheme though, I’m really glad that I’m finally digging out of the hole when I am. With all this news about a recession (I don’t see it coming personally), slumping home values, rising gas prices and, I dunno, total world destruction, it’s nice to know that 95% of it doesn’t affect me at all… other than that crappy 3.348% rate.  

And that costs a guy like me, what, maybe $20/year?

Posted on February 6th, 2008 at 8:58 am by Brainy Smurf
Finance, Credit Card | 1 Comment »

eBay to Ban Negative Seller Views

It’s about time. As a frequent eBay buyer, I can pay with Paypal seconds after winning an auction and then wait weeks for my item to arrive. At that point, I don’t dare leave negative feedback for the delayed shipping. I can’t. They’ll tag me with a negative right back. As far as I’m concerned, once payment has been made, my end of the deal is complete. Leave me feedback.

If I’m satisfied with the promptness and quality of the transaction, I’ll return the favor. That’s how it’s supposed to work.

But that’s the thing, it’s very rare for the seller to initiate the feedback.

They always wait for the buyer to leave feedback first, and then they leave feedback. It’s a flaw in the system and I’m glad eBay is doing something to fix it.

Though this will obviously open a whole other can of worms…

Online auction site eBay has said it plans to overhaul its feedback system and will ban sellers from leaving negative comments about buyers.

EBay said problems were occurring, and slowing down trade, when buyers left negative comments about sellers who then retaliated with their own views.

From May, those selling on eBay will not be able to leave unfavourable or neutral messages about buyers.

The move, which will affect users worldwide, has angered many sellers.

Sellers say it will leave them unprotected.

Tricky customers

Critics of the changes argue that by taking away a seller’s right to complain about a problem buyer they will have very little recourse for action when a sale goes wrong.

And they complain that by still allowing buyers to leave dissenting comments about sellers, eBay has skewed the whole trading process.

When both sides have equal access and rights to leave negative comments about each other it is a well balanced trading process, they say. However, eBay counters that problem buyers can still be dealt with.

“If a buyer doesn’t pay, the seller can easily contact eBay, we will review any complaint and maybe remove the buyer,” a spokesman said.

The changes aim to “improve the overall customer experience”, eBay said.

It added that many buyers would not leave negative comments for fear that sellers would retaliate.

As a result, buyers and sellers may not get a fair picture of what is actually happening between trading parties.

It maintains that the majority of transactions go “swimmingly”.

EBay says that only a minority of sellers leave negative feedback for buyers.

Here’s the link.

Posted on February 5th, 2008 at 4:53 pm by Brainy Smurf
Rants | No Comments »

Net Worth Update: February 2008

January finished with a very impressive and unexpected 8% networth increase.

Things progressed nicely on the liabilites end of things and that was expected.

Total credit card balances are now under $5k, and I’d have to say it’s been over a decade since I was last able to say that. It feels good and I can finally see the finish line. By next month, my total non-mortgage debt will be under $10k. It’s exciting.

The cash reserve on the assets side is due almost entirely to the fact that January was a three paycheck month for me, so the numbers are slightly skewed.

The last minute recovery of the market lessened the blow considerably as well. At one point I was down over $6k this month but it finished up down only $2290. Is it just me, or has it been a routine for the markets to recover lately at the tail end of each month? It sure seems that way to me.

Housing slump? What housing slump? The value of my home skyrocketed this month. I’m not 100% sure why.

Back on January 9th, when I initially checked in on the numbers, it had dropped $12k. Ouch.

But last night, when preparing this post, it had made a nearly $30k swing in the opposite direction?! The fluxuation is making me consider dropping the home value from these updates again, but quite honestly, I haven’t noticed a housing slump in my part of the country.

Homes that are on the market are selling, and for prices higher than I’d ever pay for them, so for now, I’ll take the good with the bad. And this month, it’s all good. Besides, even omitting the huge increase in home value from the totals, I still somehow mustered a 1.4% net worth gain this month.

Here’s to hoping I can keep up the progress in February…

Posted on February 1st, 2008 at 2:59 pm by Brainy Smurf
Finance, Net Worth Updates | 2 Comments »