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2020 - The Year End Recap

It’s the last day of 2020. Hallelujah, amirite?!

2020 has been an awful, sometimes insufferable, year for everyone. The pandemic has effected us all - I think we’re all ready to move on from the fear, the uncertainty, the isolation, everything.

And on top of it all, it’s been wrecking havoc on folks financially. I’ve been lucky for the most part but it hasn’t been a great year for me. 

Despite my inability to consistently blog, I’ve been at it since the end of 2018. I really can’t believe it’s been two years since I wrote my first monthly progress report on 12/31/18.

Sometimes I’m not the best blogger and I get lax. But I’ve continued to write my monthly progress report every month and track my progress - good and bad. 

I’m happy I’ve stuck with it and I plan to continue doing so. It’s been helpful to see my progress in black and white. It’s encouraged me to slog through at points I’ve felt like it was impossible. 

It’s also helped me realize the importance of effort - sometimes the result isn’t what I’ve hoped for but the fact I’ve tried and continue doing so should count for something. 

In the past, I’ve been too hard on myself for not doing something right the first time. Sometimes it takes a time or two (or five).

With that being said, I think it’s time to look back at the progress I made during 2020. 

If you’d like to check out how I was doing last year at this time, here’s the 2019 Year End Recap.

And for the heck of it: Here's November's progress report.

Ok, I think it’s time to get down to business!

Here's where I stand with my debt:

Mortgage: $170,000
Car Loan: $3,800
Student Loans: $8,950
Credit Cards: $1,850
Grand Total of Debt: $184,600

My student loan balances

That’s $15,300 more than November and $9,300 more than last December. But the good news is those numbers are excluding a renovation fund shortage!

That’s right, it’s time to post this:

Renovation fund requirement: $0
New Grand Total of Debt: $184,600

Ok, so what went wrong? How did I end up with more debt?

Well, my renovations, as you well know by now, went over budget. I refinanced my mortgage to include the overages and closing costs. I also added to my school loans. 

But there is some good news in there too - my car loan is going to be fully paid in the early part of 2022, the end is in sight! And my credit card balances are doing much better than they were this time last year.

One thing is for sure - I’m pretty desperate for that number to go below $180,000. Ugh, it’s just a daunting figure.

I told you 2020 wasn’t a great year for me financially. However now I’m hopeful that I can make some real progress on my debt in 2021.

Moving on to savings:

Savings account: $2,500
P2P Lending account: $150
Investment account: $850
Grand Total of Savings: $3,500

Since November my investment account grew by $100 through market fluctuations.

Overall, my savings has increased $950 this year. It’s not great and it’s mostly due to my investment account but I’m happy with the progress. 

Hey, at least it’s going in the right direction!

For the second year in a row I somehow managed to add to my debt while focusing on paying it down. I’m hoping this time next year I’m telling you a much different story.

I just wanted to close out this post and say that although I’m not happy with how my 2020 turned out, I have no right to complain. I know some people are really struggling financially right now. I know people have lost their jobs, their businesses, their livelihoods. My heart goes out to everyone who has been negatively effected ❤️

It’s time to put 2020 in the books.
Broke Dolly
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Rates are Low.. Is Now a Good Time to Refinance Your Mortgage?

Something has been on my mind lately - interest rates.

Once upon a time I worked in mortgage lending and every now and then I’m asked by a friend or acquaintance what I think about the current rate environment and if now is a good time to refinance.

It sure seems like it might be. But a lower interest rate isn’t the sole reason to refinance. And even if the rate is lower it may still not make much sense.

But we’re being bombarded with the lower rates message. Every time I open the Apple News app I seem to be told mortgage rates are lower than they’ve ever been.

Mortgage interest rates have fallen to historic lows. Rates for a 30 year fixed rate loan are at 2.67% while a 15 year fixed rate is 2.21%. 

A 30 year loan is under 3%! That’s just crazy to me. I’m not ancient or anything but my first mortgage was 5.125%. And I thought that was a great rate.

With my current rate being a little over 4% I decided to start looking into refinancing in October. A few weeks ago I closed on my brand spanking new mortgage (ugh). 

Admittedly, my motivation was not solely based on the rate environment. I’m in the midst on a large (seemingly never ending) renovation and wanted to take advantage of the low rates and a little equity.

Since rates seem to be plummeting, the pandemic is raging on and economic uncertainty seems to be very likely in the near future, it made me stop and think - when should someone really refinance their home to take advantage of a better interest rate?

First, let’s take a look at the reasons you might want to refinance:

1) To lower your monthly payment - refinancing with a lower interest rate or longer term can reduce your monthly payment and make in more manageable.

Contact a lender to see what your options are. I shopped around for the best rate and was surprised to see not only the differences in rates but also the differences in closing costs.

2) To pay less interest over the life of the loan - refinancing with a lower interest rate can save you money by reducing the total amount of money you’ll pay in interest over time.

3) To shorten your loan term - if you’ve been paying your mortgage for a while or if rates fall low enough, refinancing your 30 year loan down to a shorter term may keep the payment manageable while also taking years off the life of your loan.

Just to drive this point home - a $100,000 30 year mortgage at 3% leaves you with a principal and interest payment of $421.60. If you shorten the term to 15 years (I left the rate at 3% for simplicity but presumably your rate would be lower for a shorter term), your P&I payment $690.58.

So yes, your payment will be about $270 higher but you’ll pay your loan off 15 years earlier. That would be the difference between 61 and 46 to me. 46 sure would be a nice age to be mortgage free by!

4) To tap into equity - if your house has appreciated in value or you’ve been paying down your mortgage for some time, refinancing could give you access to some cash.

Maybe you’re like me and thought a giant renovation while the economy teeters and unemployment is scary high is a good time to spruce up your home? Before you think I’m terribly irresponsible and stop reading, I decided to do said sprucing in 2018! (Yep, I definitely added that last bit to convince myself I’m not totally irresponsible. Sometimes a girl needs a little pep talk.)

Now, let’s take a look at when at when it might be a good idea to refinance:

1) You can save lower your interest rate by 1%. Here’s a good old rule of thumb. I don’t know who determined the 1% benchmark but when I mentioned to my dad I was thinking about refinancing he asked me right away if the rate was at least 1% better. 

I didn’t know this was a hard and fast rule until I did some more research on the topic and kept seeing 1% pop up

2) You’re planning on staying long term. It makes no sense to refinance if you’re planning on putting a for sale sign in the front yard tomorrow. 

You’ll want to make sure you plan to stay in the house long enough that your savings on your payment is sufficient to recoup the cost of refinancing.

3) You’re ready to ditch the adjustable rate. Ok, I’ve worked in lending and I understand why folks get adjustable rate mortgages but I’m a risk adverse chicken. Refinancing to a fixed rate mortgage when rates are low takes away the uncertainty of rate resets.

4) You’ve cleaned up your credit. Listen I get it, ish happens and you fall behind or you simply forget to make a payment or two, then your credit score takes a hit. It happens to the best of us. But things have been going well and your score has been creeping up. Now might be the time to refinance and take advantage of a better rate.

5) You can eliminate PMI. If you’re currently paying private mortgage insurance but you believe your home has appreciated in value you may be able to refinance and kiss PMI goodbye.

Unfortunately, if you’ve only been in your home for a short time this may not be an option. Many loans have a seasoning requirement that makes you wait two years before you can refinance to get rid of PMI.

I’m certainly not an expert and I recommend you talk to someone who is if you’re thinking about refinancing. But I hope that this list helps you decide if refinancing may be a good option for you.

I understand the idea of refinancing can be a bit daunting but remember to weigh the pros and cons. 

Does it really make economic sense? Will the money you save make up for the money you need to lay out for closing costs? How long until you’ll actually realize the savings?

In the end I was able to lower my interest rate and monthly payment while also taking some cash out for my renovations. Which significantly lowered my stress levels. 

Why did no one warn me that renovations can be so dang stressful?! Did they and I just didn’t listen? I’m not sure, but I’m counting down the days until I’m done.

Whether or not you decide refinancing is right for you, I wish you the best of luck.

Broke Dolly
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