Sunday, September 24, 2017

How I am saving over $100,000 on my mortgage!!!

This summer I was "taking a break" from my financial goals.  Sounds funny right?  Well, I work in education, so I have summers off.  I ended the school year, and simultaneously met two financial goals:  I paid off my private student loans, and met the annual savings goal I set for my Freedom Fund.  I decided that over the summer, my partner and I would come up with a new plan that would start in September.  July and August would be all about maintaining, relaxing, etc.  We were successful.  We didn't drain our savings, or gain any debt.  We also came up with a new game plan.

Of course, anyone that knows me knows that I don't "relax" very well.  I have a huge tendency to burn the candle at both ends.  In fact, if I could find a third end to burn on that candle, I'm sure I'd try...  So, here's what happened...

The day before we were leaving for a trip to Stockholm, Sweden, I saw an email from my credit union.  They were advertising a mortgage special; a flat fee of $799 (in my situation, I don't even need to buy an appraisal).  I know one of the mortgage officers there, so I quickly shot her an email.  She knows me quite well, so immediately asked:"Aren't you supposed to be in Sweden?"  She knew I couldn't resist a deal that could possibly save me a lot of money, and boy is it going to save me some serious money!

What I have currently is a 30 year fixed that started in 2011.  So, I have 24 years remaining on it.  The refinance will lower my rate by almost 1%.  That doesn't sound very exciting, does it?  Don't be deceived!  Because I would be refinancing to a 15 year fixed, the total savings would be $99,970!  That's some serious dough!  Side note:  I personally would never refinance my mortgage if it meant paying a loan for longer.  I know there are people with valid reasons for doing so, but I would avoid it.

Now, my payment would increase by about $150 per month, but this is a rental.  The rent being paid by the tenants more than covers the difference.  Now, let's add another exciting dimension to this scenario.  If my partner and I put an extra $100 per month to the mortgage, we will pay it off 2 1/2 years sooner.  That means that we will save even more money!  It also means that in roughly 12 years, none of the rental income will be paying a loan.  It will truly be passive income!

Needless to say, we are going through with the refinance and planning to save a boatload of money, while paying the loan off significantly sooner!

Have you ever refinanced your mortgage?  Did it save you a lot of money in the long term?  Alternately, are you considering a refinance now?  Have you figured out what your overall savings would be?

Monday, September 4, 2017

Make the most of Commuter Benefits!!!

There are certain times of year that I stop and review my financial game plan.  One of those times is the top of September, when school starts.  I review several things: payroll allocations, debt repayment strategies, savings strategies, and several other things.

When it comes to reviewing payroll allocations, one thing that I do is revisit the HR part of my company's website.  I take a look at the benefits that are offered to me, and make sure that I am actually taking advantage of everything that could possibly benefit me.  Maybe that seems like a silly thing to do, but sometimes, I realize that I'm leaving money on the table.

One really common benefit that gets missed is the Commuter Benefit.  Different companies call this by different names, but it can add up to some serious dough!  Don't worry, it happens to all of us.  In fact, I realized that there was a Commuter Benefit that I could be taking advantage of, but had missed.

Here's the way it works with my employer.  I sign up for the benefit, and select a monthly dollar amount.  I live in NYC and take mass transit.  My monthly pass is $121.  Occasionally, I take a bus or train that requires a separate fee.  So, I am going to choose $130 as my monthly dollar amount.  Once I plug that number in, I will be sent a "debit card," that gets loaded with that amount each month.  The money comes out of my payroll BEFORE taxes.  When I purchase my pass each month, I simply pay for it using the debit card associated with my commuter benefit.

You might be asking yourself, "What's so special about that?  I'm still paying for my own pass with my own money!"  It's the pre-tax aspect of this benefit that is actually saving you money.  Over the course of the next year, $1560 will come out of my paycheck on a pre-tax basis in the form of this commuter benefit.  On my income taxes, it will appear to Uncle Sam that I made $1560 less.  In other words,  I won't be responsible for the taxes on this dollar amount.  If Uncle Sam has a tendency to keep 20% of my earnings for taxes, the savings is easily over $300.  Now, I just did some really straightforward math, and we all realize that your taxes are never completely straightforward, but you get the point right?

Now, when I lived and worked in Oregon, my employer offered a commuter benefit to anyone that didn't drive a car to work.  I think it was $50.  They technically called it a Carpool Benefit, but the truth is that any employee car pooled, rode a bike, walked, or took mass transit qualified for it.  Yet another company that I worked for offered a Mass Transit Benefit; they would reimburse employees the dollar amount of their monthly metro pass provided that was the manner in which they commuted to work.

Regardless of the details, if your employer offers some sort of Commuter Benefit that you qualify for, and you are not taking advantage of it, you are leaving some serious money at the table!

Does your employer offer a commuter benefit of some sort?  If so, how does it work?  Are you able to take advantage it?