Snowflaking The Mortgage
I recently wrote about our huge and unexpected tax return. Well, it showed up in our account yesterday. I am still a little freaked out over it. That deposit put our checking account into dollar amounts it has never seen!
Since the day we had our taxes done, we have gone back and forth on what to do with that money. It’s a lot of money, so the pressure is on to make a worthwhile decision about it. We are debt free; we never carry a balance on our credit cards, we have (finally!) paid off our cars and we have no other consumer or student loans to speak of. So, we are debt free, right?
Well, there is of course, the giant elephant in the room….The Mortgage. Yes, I want to pay off our mortgage and I want to do it fast! We currently owe 167,000 (30 yr. fixed at 5.7%-if you want to be technical about it) and the sooner we can take that huge weight off our shoulders the better. I have been sending a few snowflakes here and there to the mortgage each month-usually around $100. Not much, but every little bit does count. Now, that I have this huge windfall to play with, I have one gigantic snowflake.
How much will sending a lump sum to the mortgage really help me out? Well, it will obviously decrease our outstanding debt to the mortgage and it will reduce the interest we will inevitably have to pay. However, I don’t want to send a huge payment in all at once. This is a lot of money and I would like to hold onto it a bit; for nothing more than my own of fear of parting with money. So, the plan is to put it into a high interest money market account available at our credit union; and pay an additional $1,000 to the mortgage each month from that account. The money market is currently paying close to 6% (who knows though, by the time I click ‘publish’ it may change) and I feel that the amount we would make in interest would be just enough to make it worth our while to hold onto the money without feeling guilty for not sending it all to the mortgage straight away. No, this is maybe not the BEST idea, after all this is money we were not expecting to have and sending it all in at once would be a terrific idea, but because I am fearful of parting with such a big sum of money, I am taking the ’safe’ route. In a few months, I may take another look at this and maybe even send in a lump sum at that point;but for now this plan will both serve it’s purpose of paying down the mortgage and will make me less likely to second guess my decision.
I still plan on sending in my additional ’snowflakes’ when I round them up. The checks I get from surveys and things usually go into our checking account and make up all or part of the extra I pay towards the mortgage. I plan on continuing to do this and hopefully will see my mortgage melt away sooner than expected.
For more information on Snowflaking check out the Snowflake Revolution
To learn what a Snowflake is all about check out Snowflaking- A Primer at I’ve Paid for this Twice Already…
Do you use the Snowflake/Snowball method to conquer your debts? I would love to hear your stories!
Topics: Finance & Money |
March 19th, 2008
Hooray! I think that’s a reasonable plan, indeed.
As long as you have a healthy emergency fund, I think you’re right to put that $12k toward that mortgage, even if it’s a bit at a time.
March 19th, 2008
Kacie-yes, we have the emergency fund already in place and all other financial ducks in a row…so, the mortgage is really the last thing there….Oh, it’s a big one, but I am going to try my hardest to get that sucker paid off early!
Take Care!
March 19th, 2008
This is a very interesting and informative article…too bad I have to run out to get the kids or I would stay and read more. I will be back later. Thanks.
March 19th, 2008
You should look into a Universal Life Insurance Policy. It’s a life insurance policy tied into a money market account and has soooooo much to offer.
March 19th, 2008
Do you have money saved up for your next vehicle purchase? My husband and I are working on that so we’ll never have to have a car loan again.
Other than that, I love your plan!
March 20th, 2008
Good plan!
We currently pay an extra £600 from our mortgage every month. We also have a mortgage piggy bank in a prominent place where we put all our loose change etc. There is usually about £10-£15 in that every month that we snowflake to the mortgage.Whether its the right way or wrong way I want my mortgage gone in 2012.
March 21st, 2008
Great post! I think you made the best decision with the money. You always have to think of it as one of those things that you weren’t planning on getting.
March 23rd, 2008
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April 2nd, 2008
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April 4th, 2008
[…] MommyGetsPaid, there is a great story about how they are using a huge tax refund of over $12,000 to pay down their mortgage. The approach they have chosen to take is very interesting. Rather than put the whole […]