Big Brood

We’ve been thinking about refinancing our home to take advantage of lower interest rates. We missed the bottom which seemed hit at around 5.48% national average for a 30-year fixed-interest mortgage near the end of January. Today’s rate of 6.04% would still be OK for us as we’re currently at 6.8% (on one loan, we have another loan which was a dumb mistake that I’ll explain later.) The question, is: Is this the right time? The answer for us appears to be a definite “probably” (how’s that for hedging!)

With fed discount rate cuts, our first thought was to refi now! But, if you’ve been watching the trends you see that mortgage rates actually went up after the last Fed rate cut. So, I dug in a little deeper and found more information.

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Goosey and I recently stayed in a hotel. When you’re trying to pay off debt, this may seem wasteful but it was worth it to us.  However, we were able to save some money. Here’s how I ended up with a 30% discount, with no hardball negotiation involved.

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Well, my Goosey mentioned our 10 year old car for which we still have a loan. She didn’t want to go into an explanation, but I will. This car was our first foray into mini vans. It served well enough for its time but is starting to really give out on us at an accelerating rate. Here’s how we did. Don’t try this at home.

1. Buy new Jeep Cherokee that you love and you think will grow with you well. When you do buy it, pay too much and don’t negotiate with the dealer.
2. Have a second child and discover that it is getting really packed inside the backseat. Discover that you can’t haul nearly as much stuff as you’d like.
3. Trade in your nice Jeep Cherokee for a 2 year old fancy minivan. Again, don’t really negotiate except to ask for slightly lower monthly payments. Make sure to get the 5 year loan. Oh yea, since you’re a little upside down on the Jeep, just add that amount on top of the loan. Boy, that dealer sure is helpful!
4. Run the minivan for a couple of years, then decide you’d like even lower monthly payments. Refinance it at a much lower monthly payment, fully intending to make extra payments. Oh yea, get another 5 year loan. Then your required payments are REALLY low.
5. Don’t make the extra payments.
6. Fast-forward 4 more years. You’re still paying for that car. You hate that car. That car is falling apart, but you’re so upside down on that car that you can’t get rid of it without losing your shirt. Hate car. Hate it! We hates it! It burns! It burns……!

Then….

1. Get tired of paying for the car and finally accelerate payments.
2. Save a whopping $0.03 in interest by paying it off early.

Many of these decisions we made thinking that we were doing the right thing. We really DID need to lower our payments because of lower income. But, I’m still in that car!

Here are some things that someone who doesn’t love servitude to rust buckets might do:

1. Buy used! Most of the depreciation for a car happens in the first year or two (think 20-40% of the original value).
2. Negotiate! I plan to post on this more later, but negotiation is great to save you money.
3. Pay cash! Yes, it can be done. We’ll discuss that in later posts.
4. Make your extra payments automatic. Some companies will make this difficult but you should be able to do it in some way. Call them up and ask. Also be sure to ask if there are any prepayment penalties.

Back in early November gander and I took a look at our finances and decided we were at best going no where fast and more likely on a sinking ship. Together we headed down the debt reduction road once again. I say once again because we have done this several times before. We have taken tax returns, bonuses, etc and paid down credit card debt to zero (or nearly zero) only to be lured back into our consumer world thinking we should spend money on things we didn’t need and certainly couldn’t afford.

We are trying something a little different this time. We are communicating. It seems obvious but we have lacked this in the past. It is much easier to slip back into bad habits when you don’t talk about spending, purchases, etc with your spouse. It has taken us almost 12 years of marriage but I think we are starting to figure a few things out! I did say starting!

We also decided we would keep ourselves motivated by taking a special trip or buy something special to reward/motivate ourselves whenever we get a large bill paid off. Since our current endeavour began in November we have paid off 2 big bills and are chopping away at a third, Gander’s 10 year old rusting minivan (don’t ask why we still have an outstanding loan on this, sigh). Gander and I took a much needed overnight date night last night. We had the youngest gosling with us, but other than that it was just us. We had several “quiet” meals together and got a lot of chatting done. It was very refreshing and really helps us to keep our perspective.

So the other goslings don’t feel too burdened by our debt reduction plan (and the sacrifices they have been making like very few trips to the “big M”) we will treat them also, we will be going to an indoor water park next month. That will get us up to date until the next debt has been eliminated!