So after 8 hours of grueling labor last Saturday, my custom closets are finally installed. That was part of the deal for me being able to get such a huge discount on my closets - I had to do all of the demo prior to the install, and I had to help install. In my opinion, it was entirely worth it to help demo and install the closets to get a price to about half of what it would have been.

I live in a condo that I paid $290K for. About 2 years ago, I started getting some quotes for having custom closets put into our master bedroom. Most quotes came in at $5-$6,000. Though that was only about 2-2.5% of the cost of the house, I couldn’t justify it to myself to actually spend that much on our closets, so here I found myself 2 years later. I have a friend who just bought a franchise from a closet company, so I asked for a quote, then I asked for the quote with me providing the labor. To my surprise, the quote went down considerably, so I decided to just go ahead and pull the trigger. The conditions:

1. Demolition & Prep
   I do all the demolition and have the closet empty and ready to go at the time of installation. This was actually harder than I expected… not the demolition part… I love me some demo… the hard part was getting all of our clothes out. You would be amazed at how much stuff piles up inside your closet over the course of 5 years. Once the clothes were out, demo was quick and easy, then we put on a fresh coat of paint, a nuetral color so that the next owner of the house wouldn’t have to repaint over some hideous color.
2. Help With Installation
   I don’t mind getting my hands dirty and doing some wrenching, so this was just like an added bonus for me. You mean you’re going to charge me less than half AND I get to help??? No complaints here.

So the closets are done, I can already see the value of my home increasing. Good stuff. Anybody else out there have custom closets? Do you like them? Would you do it again if you had the chance?

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So only one month after starting to make additional principal payments on my mortgage, I have already skipped one. I decided to use my economic stimulus check combined with the money that I was going to use for my additional principal payment to have custom closets installed in our master bedroom.

This was a once in a lifetime opportunity in terms of cost, so I couldn’t turn it down. Over the past few years, my wife and I have a had various companies come out to give us quotes on custom closets - From California Closets to Closet World, all of the quotes that we got were somewhere in the $5,000-$6,000 range. And to be honest, I really couldn’t see spending that much… after all, we live in a condo. So out of the blue, I get an offer for the exact closet system we’ve been looking for, but at half the price! $2,500 for the whole job!!!

The closets get installed tomorrow, so i’ll post some updates and maybe some before and after pictures. Hopefully missing this extra principal payment will pay us back in added value in our house.

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Back in mid-June, I sent in an additional principal payment in the amount of $2,500 to be applied to my mortgage. I figured that since the stock market has been so slow recently, I might as well put my money into something that may give me a solid return (by making that single payment, I’ll be saving over $10,000 in interest over the life of my loan).

This post is just meant to detail and give some insight on the effect of making the additional principal payment last month, and how it effects this payment and all future payments toward my mortgage. My July 1st payment of principal and interest was $1,509.77. Of this amount, $1,248.60 went toward interest, and $261.17 went toward principal. I still have about 28 years left on my loan, so my payments toward interest will be quite high for a while longer, but without the additional principal payment, my next regular monthly mortgage payment would have been less favorable (though it is hard to become less favorable than 80% going toward interest). Here’s what the breakdown of my regular payment if I had not sent in the additional principal payment: $1,261.89 toward interest and $247.88 toward principal leaving me with a balance of $237,284, rather than my current mortgage balance of $234,770.

As I noted in previous articles, the amount of savings in interest expense in the short term really isn’t that great - only about $14 after 1 month, but over the life of the loan, it will really add up, and if I continue to make additional principal payments, it will add up even faster.

Stay tuned for an update on my next additional principal payment - I’m hoping to put earnings from this blog directly toward all of my additional principal payments.

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A reverse mortgage is a loan that allows senior homeowners (62 years or older) to convert the equity in their homes into tax-free income without having to sell or make new or larger monthly payments. The reverse mortgage got its name because the payment stream is “reversed”, so rather than making payments towards a loan, payments are made to the borrower from the lender. Unlike a traditional home equity loan, no repayment is due on the reverse mortgage until the borrower no longer uses the home as a primary residence.

Reverse mortgages give seniors who are no longer able to work or generate income a way to leverage the equity in their house to start receiving a monthly income once again. The payments received from the reverse mortgage can be used to pay medical bills, credit card debt, or any other expenses that may be necessary.

Qualifications & Requirements of a Reverse Mortgage

You must be 62 years or older, and the home that the reverse mortgage is being taken against must be your primary residence.

How much money can I get from a Reverse Mortgage?

The reverse mortgage amount will depend on your age, interest rate, and the value of your home. Typically, the more valuable your home is and the older you are, the more money you will be able to borrow with your reverse mortgage. A lower interest rate will also affect the amount of money that you can borrow.

How will I receive the money from a Reverse Mortgage?

You will generally have three different options when choosing to receive money from a reverse mortgage. All of the amounts will be determined by the above criteria.

1. Monthly payments
2. Lump sum
3. Line of credit

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When applying for a home loan, you’ll often need to get a credit report so that your lender will be able to give you an idea of the amount of the loan that you will be able to secure. After all, you don’t want to spend 2 weeks looking at $500,000 houses and later come to find out that you only qualify for a $250,000 loan.

Prior to going to a lender, it’s often a good idea to do your own credit report so that if there are any bad marks on it, you’ll be aware of them, and you may even be able to start amending them prior to securing a home loan.

The difference in pre-qualification and pre-approval is that a lender can guesstimate the amount of the loan you’ll be able to recieve based on income, debt, etc. and no credit report is necessary with pre-qualification, and with pre-approval, the lender will have to take an in depth look at your credit report to determine exactly the amount that you will be able to secure in a loan.

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Over the past few months as housing prices have continued fall, so it has opened up opportunities for many people who would previously not have been able to afford a house. The only problem is that for those of us who currently own a house, not only will we have a hard time selling, but we might also have a hard time getting the price we want when we do sell since the market is so low.

I just read a great post Getting offers in a tough real estate market which gives hope, but even so, I’m still not sure that I’m ready to pull the trigger and actually try to sell my house. The article talks about how to get people interested in buying your house, in a tough market. The article also mentions the market being “payment” and “mortgage” driven, which I think it should always be. If it were this way for the last 2-4 years, we wouldn’t be in this huge housing crisis.

If you’re trying to sell your house that you bought in the last 2-5 years, you may have a hard time getting the price that you want, because you’re probably looking at selling it for a price equal to or less than what you paid for it. And if that is the case, staying in your house rather than trying to buy a new one would probably be the best option.

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I just read a great article on eHow that basically gives each step in paying off your mortgage in combination with a HELOC. I believe the article gives a general outline of how a money merge account (MMA) would work should you choose to purchase the software. As outlined in the article, there are only 2 requirements:

1. A positive cash flow - meaning that you are earning more than you are spending each month.
2. A desire to take charge of your mortgage.

I think there are some other requirements, just as there are with a money merge account, such as:

• A zero-balance Home Equity Line of Credit (HELOC) that allows you to transfer money in and out of it.

I’m just going to paraphrase and condense the version that was on eHow, but feel free to check out the full version of the article at the bottom of this post. In this example, we are assuming that we have a $200,000 mortgage and that we make $5,000/month.

1. First determine your positive cash flow - Take the combination of all your bills (mortgage, credit cards, utilities, car payments, etc.) and subtract this amount from your monthly income amount. This will be your Monthly Cash Flow - if the number is negative, this option will not work for you. The more positive cash flow you have, the more interest you will save, and the faster you will pay off your mortgage.
2. Write a check to deposit the entire amount of your paycheck to the principal balance of your mortgage. This will make your new mortgage balance $195,000, so for the entire month, interest will accrue on $195,000 rather than $200,000. Next step, paying bills.
3. Get a credit card that gives some sort of rewards if you don’t already have one. Credit cards basically allow you to “borrow” free money for up to 45 days, as long as you pay your interest off in full every month, you will not accrue any interest charges. Pay all (or as many as possible) of your bills on your credit card, and for simplicity sake, let’s say that we make a total of $2,000 in charges.
4. Next, you’ll use your home equity line of credit (HELOC) to pay off your $2,000 credit card balance and your $1,000 mortgage payment. So now, your liabilities are your mortgage $195,000 and your HELOC $3,000. A total of $198,000.
5. With your next paycheck, payoff the balance of the HELOC - with the balance of the HELOC being paid back in approximately a 1 1/2 months time, any interest that accrues will be minimal, and certainly much less than the interest that would have accrued on $200,000 vs. $195,000.
6. Continue this process repeatedly.

Read the original article on eHow.

My biggest question is this: after the HELOC balance is paid back, we still have $2,000 in positive cash flow. Should this amount be put directly back into the principal balance on your mortgage, or should you wait for your next full paycheck?

After considering this method in depth, I realized that you have to be fully ready to commit all of your extra money directly to your mortgage. Something that I think a lot of people would have a hard time with. I also wonder if the credit cards are even necessary, or if doing that just helps to further offset interest by not having that balance on your HELOC for an entire month or so.

I’d love to hear comments, if any of you have ever experimented with mortgage acceleration, money merge accounts, or offsetting your mortgage interest with a HELOC account, I’d love to hear your opinions and success/failure stories.

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I just checked my account status at Wells Fargo and I saw that my payment was applied on Monday, June 16th. Not bad, considering that my check was sent on Thursday, June 12th. Pretty quick turn around. And the best part is that the $2,500 is still in my checking account as of 12am on June 18th.

Pros and Cons of the extra payment - Yes, it was tough sending in an extra $2,500, but it is great being able to look at my mortgage statement and to see the principal balance drop more in one month than it has in the past 10+ months. Stay tuned for more updates as I try to pay down my mortgage balance in half the time!

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What is a Money Merge Account? There are many options out there for money merge accounts, but one of the primary ones that I found was by a company called UFF. Basically, they explain the money merge account as a means to paying off your mortgage in 1/2 to 1/3 of the time that it would typically take. The money merge account is explained as having three major components:

1. Your existing mortgage.
2. A Home Equity Line of Credit (called an ALOC within the money merge account system - Advanced Line of Credit)
3. Money Merge Account Software

Basically, the way it works is all income that you recieve goes toward paying off the balance on your ALOC. Any income that you receive, goes straight into that account. As your you make deposits, the money merge account software tells you when to make payments toward your mortgage, the primary thing that helps you pay down your mortgage in 1/2 the time or less is the payments that the money merge account software tells you to make - it schedules larger than normal monthly payments which lowers your principal balance faster, this in turn, decreases the amount of interest that you’ll be paying toward your subsequent mortgage payments. While the ALOC will be charging you interest on your outstanding balance (it must be an open-end interest calculation), the MMA software predicts this and minimizes (or cancels) the amount of interest that you’ll be paying on your primary mortgage.

All in all, money merge accounts seem like they can definitely help cut down on the time it takes to pay down a mortgage, however it will require a lot of discipline on the part of the borrower. In the end, it is ultimately up to you, the borrower - are you disciplined enough to put all of your extra money directly into your mortgage? Could you just do this yourself, or is the software necessary?

I don’t believe it has been released yet, but I recently read an article that mentioned there may soon be a Credit Card based money merge account option. I

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I just found Mint while browsing the web the other night, and it looked very interesting. Mint offers all of your account information in one place (assuming they support your bank/credit card/investment firm/etc). At first, I was a little bit skeptical, did I want to turn all of my financial information over to them? After doing a bit of research, I found that Mint operates securely, not storing any of your username/password information, nor does it even have access to your account numbers. Mint basically just downloads transaction histories from all of your accounts for you.

Last night I imported all of my accounts and clicked around a little bit, so I really don’t have too much to share in terms of all the functionality, but just from the little bit of clicking that I did, I can tell you that Mint offers tons of functionality, so stay tuned for updates on my favorite features and functionality of Mint.

My one problem with Mint is that it doesn’t seem to support Firefox very well - At least not the Firefox 3 Beta.

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