How to Love Your Home (And Afford It, Too)


Transcript

- Your home could either be a blessing or a curse. But in this episode, we're gonna talk about how you can love your home and afford it, too. Well hey you guys, I'm so excited about this episode because we are going to be talking about how to own your home without letting it own you. That's right. Now a lot of you are currently paying off debts or you're saving up for your emergency fund, which is fantastic, and paying off your mortgage seems so far away. But there are some thing you can do to help you now and in the future with paying off that mortgage. So we're gonna walk through how to pay off your home early, because who doesn't want to do that? We're also gonna skype in a couple who's currently on baby step two with a mortgage, but they want a new home. I know some of you out there, you have the same situation. And last but not least, we're gonna talk about when is the right time for you to buy a home, and we're gonna have a real estate agent here to give us some great tips on the home buying process. But listen, the topic of your home, this is a big one. It's kind of an emotional one, 'cause not only is it the biggest financial investment most of you are ever going to make in your lifetime, it's a big deal, but it's also your home, right? Like this is where you go to bed every night, where you wake up every morning, where you raise your kids, where you have meals. Like this is a huge staple in your life. And for a lot of people, it brings a lot of joy, which is so great. But at the same time, it also can bring a lot of financial stress and financial strain and even some discontentment, yeah, when you're comparing your house to everyone else's. I feel like I'm in the season of life where a lot of my friends are moving out of their first homes because they like have multiple kids now and they're busting at the seams. And like I've heard the phrase over and over, like ugh, if we just had more space, everything would be better, right? So like it could be the size of the house that you're discontent with, or maybe it's not. Maybe it's like what's inside your house you're discontent with. Or you know when you walk into someone else's house and you're like, am I in Pottery Barn right now? Like what is this? Like every light fixture looks like it's from restoration hardware and you're like oh my gosh, this is just like the most put together, beautiful, like your paint colors work with the fabrics on your couch. Like all of it is just gorgeous, right? Like that feeling you have, ugh. So listen, you can be very discontent in your home. And trust me, I have been there. And this is a big deal, because this is like totally what happened to Winston and I when we moved into our first home. So just a little backstory. We bought our first home, it was in 2009. That's right, we bought at like the bottom of the market. So we actually go our house on foreclosure. We were able to get a bigger home than we probably normally would've just because of like where the market was. But here's the deal, when you're moving in to your home, it's a little bit bigger than what you planned, you don't have furniture. Yep, we had like no furniture. We bought a couch, we bought a coffee table, we bought a kitchen table, and some bedroom stuff. So like that's it. Like we had places that were just empty. Like barren rooms, there was nothing in them. And when we moved in, I was like oh man, I kind of now get why people go into debt. Like it really, it was one of these first moments where I was like I could go to Pottery Barn or wherever and be like I could go buy like all this furniture. We could pay for it, you know, a little bit each month. But like my instant gratification and like that itch would be scratched. Like oh, it's just gonna feel so good. Like I just want to do it now, I want to do it now. Like the idea of waiting and saving was so hard. But of course, we did. Don't worry, I did not go into debt for my furniture. But it took us years. And when I say years, I mean like a solid five years to finally furnish all of the rooms. 'Cause we took our time, we wanted some nice pieces. But those first five years, like there were moments where I genuinely was kind of embarrassed to have people over. And I look back now and I was like that's so stupid. But beforehand, I was like man, I like don't want to have people over 'cause it looks like we have nothing. Like they're gonna walk into this empty house. But I got over myself. And it's so funny when you put expectations on people and they don't have them. Like my friends, like they don't care. They didn't care at all, like at all. And so it was just that moment that I look back and I'm like man, I'm so glad I got over that rather quickly and that we took our time to furnish our home, 'cause we still have those pieces now like nine years later. Right, so like they'll probably move with us to our next home, so we did some investment on that end. But it was just important to point out that like discontentment is real you guys, it is. But you can overcome it in your home and you can learn to love your home, not everyone else's, I promise. Alright, coming up next, most of you are paying off debt and you are killing it. You're in the process and you're doing so great. But there are some things you can actually do right now to help pay off your mortgage early.

- Why do we fight with the person that we love the most?

- What's crazy is one of the leading causes of divorce in America today, money fights and money problems.

- Money's the number one source of conflict. It doesn't matter how much you have, a little or a lot. It's still the source of a lot of friction. And what happens to negative feelings that we bury? They have a high rate of resurrection.

- It's amazing that money hits us in a place in our marriage that no other subject does. I want you to put yourself back in the driver's seat of your life and your money, because I want you to learn to love your life, not theirs.

- Your relationships can only be as healthy as you are.

- Don't get on the same page with your spouse just because of your bank account. Do this for your marriage. Alright, I think everyone out there wants to pay off their mortgage faster, right? So here are three things that you can do no matter what baby step you're on. Now if you're wondering, what is a baby step, Rachel? Well, if you don't know what the baby steps are, it is a proven financial plan to get you out of debt. They're amazing. So make sure to check out my recent episode titled The Seven Step Plan to Live Debt Free. You'll learn all about the baby steps. Alright, number one how to pay off your mortgage faster is to refinance for a better interest rate. So if the current interest rate is actually lower than when you bought, this could be a great option for you 'cause ultimately at the end, it's going to save you money, which we love. Number two is to refinance your mortgage from a 30 year mortgage, if that's what you have, to a 15 year fixed rate. So when you do this, I will warn you, your monthly payment will go up a little bit. But the good thing about that is that you're paying off your home faster and you usually get a better interest rate with a 15 year mortgage versus a 30 year. So if you think about it, like the math side, a $250,000 mortgage, you could save over, get ready for this, $130,000 in interest by going to a 15 year fixed rate. You guys, $130,000. What could you do with $130,000? I could do a lot of shopping, that's what I could do. I mean that's a lot of money back in your pocket. So if you want to do that, if you want to refinance, I recommend Churchill Mortgage. So they are awesome, they work with people all the time on this. Make sure to check them out. And last but not least to pay off your home early is to look at your current situation and look at what your mortgage is costing you in your budget. Like how much is your mortgage? Is it like have of your monthly take home pay? If that's the case, you guys, you have too much house. This is a hard pill for a lot of people to swallow. But seriously, think about it. It's going to be really hard to win financially and pay off debt and save up for an emergency fund if half your income or more is going to your mortgage. And so you're working really hard to keep that house, okay? So you might be in a better situation if you sell that home and move to one that you can afford, where you have less house, but in the long run, it's going to help you. You're going to pay off that mortgage faster 'cause financially, you will be ahead. Alright, most of you are in baby step two and it probably feels like paying off your mortgage is so far away, but stay motivated you guys. You can do this. Use those steps we just talked about and pay off that mortgage, you can do it. Alright, we've called in a couple who is currently where probably a lot of you are. They are paying off debt, but they want to move. But they want to be wise. So welcome to the show Emma and Rolando. Thank you so much for coming on and sharing your story.

- Thanks for having us.

- Yes, thank you for having us.

- Absolutely. Okay, so you guys are on the debt free journey right now. You're working your way out of debt. So I want to know how much debt did you have and how much have you paid off so far?

- So we started out with 169,000. And in 25 months, we've paid off $153,000.

- You guys, that's insane, that's absolutely insane.

- Thank you.

- Okay, I want to know like what made you start when you had all that debt? What made you say okay, we want to actually get out, we want to do something proactively with our money and get out of debt, how did you, what made you start that?

- So initially, Dave came to our church here in Houston. And he made the pitch for Financial Peace University, the class, and Rolando was pretty much all in as soon as he heard it. I was more hesitant. I was, we both have student loans. I had almost 90,000 in student loans. So I figured I'm always gonna be paying these loans anyway. Why would we sacrifice so much? And then we laid out all of our debt when we got home. And that's when it hit me that we have to do something about this. Dave illustrated a borrower being slave to a lender with the chains.

- The chains, yeah.

- And that just, that just got me whenever we laid out all of our debt, and I said we have to. 'Cause I'm literally working to pay my student loans.

- Totally, okay, so how long will that debt free journey be from start to finish, what do you predict?

- From start to finish, it'll be about 28 months.

- 28 months, okay, and you guys own a home currently?

- We do.

- And so are you guys happy there? Are you itching to move? Like where are you at in that process?

- So we're kind of on different sides of the fence there. We're both happy where we're at. However, I'm excited that once we're out of debt, we'd be able to save up, sell our home, and eventually purchase a larger home. She's got a different perspective on that, though.

- Yeah, he's the one, he, I guess I'm the more content one, I guess you could say. He's already like looking at homes, you know, just for fun, he says, ready to move to a bigger house. And I'm just more content and comfortable where we are already.

- And so I'm curious, like what's the biggest motivation to move? Do you feel like you're busting at the seams for a bigger home, or you're just like man, we could afford it and it'll be fine? Like what's the, what do you think?

- I think it's both, right, so if as our family grows, I'd love to grow into a bigger home. And then again, being out of debt, not having that weighing us down, it'd be a whole lot easier to move into a bigger home, 'cause we can then afford it.

- Yes, totally totally. Okay, so the fact that you kind of have that itch and together you guys may not necessarily want the same things right this minute. Like what keeps you from not doing it? Like what keeps you guys paying off all your debt, saving up for a down payment? Like what keeps you on the plan when you still have that itch to move?

- Well I think starting off, it's understanding that we're so close, first of all. We're so close to being out of debt. Why jeopardize that at all right now? And then just being able to say we're free, we're debt free, we don't have any bondage now. And it'll open up and free up that income.

- Yeah, and I agree with that, and it's also seeing the success of focusing on this getting out of debt, how successful you are by just focusing on one thing rather than spreading your efforts out, and then just remembering why we're doing this. We have two little ones, so knowing like, like Dave says, we're changing our family tree. And that is worth the wait for us.

- So good, I mean that's just like the classic example of like that long term goal. Like that long term freedom, what you see. It may not be in the moment, but you see it's out there, you see it's possible, and that keeps you motivated. Which I think is just so important. So what would you say, what would you say to someone watching, and maybe they have $85,000 in debt. And they're like man, I think I'm gonna start this journey. But like ugh, I hate my house, like I hate the carpet in it. I hate the paint, like I want a different floor plan. And they just want to move right now with all that consumer debt, what would you say?

- I'd say just wait. It'll be worth the wait. And again, because you'll be able to use the income that instead of paying towards debt, you'll be able to throw it at a house. You'll be able to possibly afford the home of your dreams instead of having to settle for something less.

- Yeah, I agree that it's worth, it would be worth the wait. And you have to learn to, I guess my big word is just being content and be happy for what you do have. Work at this current goal, and know that in the future, those all will be possibilities that you don't have this debt weighing you down. And like he said, you'll have even more options available to you.

- Oh, I love that, right, 'cause it's not like you're never gonna be able to have the nice home, right? It just may be putting something, the things in place for you to enjoy that home so much more than right now. So I think that's such good advice, you guys. And you're killing it. I mean you guys are like doing like crazy stuff right now, paying off all that debt. You're sacrificing, putting some of your wants aside for the moment, but absolutely absolutely incredible. And you're exactly right what you said earlier, Emma. You are changing your family tree for those two kids. So thank you so so much for coming on and encouraging those watching.

- Thank you for having us. Appreciate it.

- Thank you so much.

- I mean how awesome were they? You guys, I love how focused they are. They're just so great. Okay, so those of you working through the baby steps or those of you who haven't even started the process, there's one requirement I have of you. And yes, I'm going to require this of you. You have to have life insurance. Okay, I know we go over this often, but it's really important and you have to have it. I mean imagine if something were to happen to you or your spouse and they left you with that mortgage and all the other expenses. It would be terrible, so you need to make sure that you and your family are taken care of. Now Winston and I, we use Zander Insurance because they make it so easy. All it takes is a single phone call or visit their website, and they will shop the best rates for you. We recommend getting 10 to 12 times your annual income. And if you already have term life insurance, then it would be a good idea to get a new quote, especially if you've made any lifestyle changes like losing weight or you quit smoking. All you have to do is go to Zander.com or click the link in the show notes. Alright, coming up next is Alex Helton, who is an awesome real estate agent. And he is going to walk us through when you are financially ready to purchase a home and what to look for. He is one of our real estate endorsed local providers and these are agents that we recommend all over the country to help you buy and sell a home.

- Well thanks Alex so much for coming on, sharing your wisdom.

- Thanks, Rachel. Glad to be here.

- So appreciate it. Alright you guys, so when you're looking to buy a home, here are three things to remember when it comes to your money to know that you are ready to buy that home. First and foremost, I want you completely out of debt and a fully-funded emergency fund of three to six months of expenses in the bank. So this is great, because this sets you up for your house to be a blessing, not a curse. And Alex, you know that, but it is, it's so key. So key to be out of debt and have that emergency fund. 'Cause if you're broke, you guys, and you buy a house, you become broker is what ends up happening. So getting that solid foundation is so so key. And then next, I want to make sure that you have a good down payment on your home. So Alex, I always tell people 10 to 20% down payment is like the ideal world, so would you agree with that?

- For sure, so we would recommend putting 10% down. By doing that, you are, keep in mind these folks are working towards ultimately getting the home paid off, right? And so if somebody says hey, can I get a loan and put nothing down, they are out there, those are options. It's just not consistent with where we're trying to go.

- I think that that is great advice. And you guys, if you are saving up for a down payment, you can click the link in the show notes and get my free down payment goal tracker to help you stay encouraged while you're saving up for that down payment. And then last but not least when you're taking out your mortgage, make sure to get a 15 year fixed rate and that your payment is no more than 25% of your take home pay, so that's key. Alright Alex, you've been doing this for how long? How long have you been selling homes and helping people buy homes?

- Six weeks now.

- I literally was like, you're really good at this.

- 12 years, 12 years.

- 12 years, okay. So what are some things that people should be looking for when they're going to buy a home?

- The first thing I would do would be encourage them to remember what got them here, right? So patience, they're working a plan, and they've had discipline. And so what you don't want to do is throw all those things out, get into the process, be overly emotional, and then put yourself in a bad situation, right? The second thing that we want to encourage people that have never bought a home before is that this is your first home. Like there's probably gonna be a second, maybe a third, a fourth, a fifth. This is not your forever home, so just keeping that in mind.

- 'Cause it's emotional, right? 'Cause like when you're buying a home, you're imagining yourself in it, especially your first one, right? It's like this is the biggest purchase you've ever made in your life for most people. And it's like this is where I'm gonna raise my family, this is where life's gonna happen. It's gonna be so exciting and so great. But it's probably not gonna be your dream home, especially your first one. So I think that's a great realistic expectation just to throw out there and remember, so that's good.

- Yeah, so now that we have the right mindset, then we're gonna work on three things before we go shopping. The first one is getting really clear on a budget. We know what you all recommend with having a mortgage with HOAs and taxes no more than 25% of your take home. But that doesn't mean that they're clear on their budget. So they need to get clear on their budget first.

- That's good.

- The second thing would be a wish list. And not just a wish list but prioritizing your wish list. And some of those may be non-negotiable, and others may be strong preferences. But that's gonna be really helpful for somebody starting out.

- And those non-negotiables I think are so important because I mean, I think about like, for instance, it could be a yard, right? Like you're like I don't want a zero lot line, like we want a yard. And what it does is it just starts narrowing down what you want, and those big priorities, those non-negotiables, you're still gonna have options but it's not like this whole world of houses and it's so overwhelming. It does narrow it down and it helps you be wise in those decisions.

- That's right.

- I think that's so smart.

- Yep, the third thing is gonna be choosing an agent, hiring an agent. You know, we recommend reaching out to an endorsed local provider in your area for real estate services. And when you're looking for an agent, when you're interviewing those agents, we recommend interviewing you know, anywhere from two, three, however many it takes to be comfortable. And you're probably gonna be comfortable with them because you trust them.

- Yes, trust is huge.

- And not a blind trust, like you're the expert, I don't know what I'm doing. But a we're partnering together and I'm trusting you to guide me. I'm trusting that you're gonna be patient with me, to answer questions that I have, right, if red flags pop up or whatever it may be. I'm trusting that you're looking out for me and that you're giving me really good advice.

- Such good tips. Okay, so I want to know some red flags. Some things when someone walks in a home that they have to just like run out the back door and you're like get out of there, don't do it. Like what are the big red flags to look for?

- Yeah, just throughout the process, 'kay, so we're assuming that you're working with an agent that is an ELP and that you trust them and that you're comfortable with them. But if you hear the words, I was thinking about this, if you hear the words coming out of like anybody, alright.

- Can't wait.

- Of like that's not a big deal. And then they want to keep moving on, huge red flag for me.

- So good.

- And it may or may not be.

- Yes.

- But I--

- But they're not taking the time to explain it.

- And these folks should expect that they take the time to explain it to the point that they are comfortable making their own decision to move forward, or not.

- So good, oh I love that. Guys, there's so much in this. Yeah, for real though, such great advice, Alex. Thank you. And I know you guys probably learned a ton, so seriously, thanks so much for coming on.

- Yeah, my pleasure.

- Okay you guys, if you're getting ready to buy or sell a home, make sure you connect with an ELP real estate agent like Alex. So click the link in the show notes to get in touch today. Alright, best part of the show, I celebrate you guys. That's right, she works hard at saving money. And it's a baby step six edition. That's right, these are all people who are currently paying off their mortgage. Tami said at baby step six. Took my coin jar and took a bit of money from selling a couple of items from our home for a $55 principal only mortgage payment. A little at a time is better than none. I now owe less on the mortgage than my annual salary. Feels so great, oh, great job Tami.

- Kevin said what a year. We finish out the year with our biggest mortgage payment ever, over $10,000. $75,000 of debt paid off in a year. And one year closer to freedom. Don't let anyone tell you you can't do something. You can do this, crush 2019. I love that Kevin, that's right. Anyone, you can do this you guys. Melissa said, we are celebrating a major victory over here today. Last week we brought in our final mortgage payment to Veridian Credit Union and walked out with a weight off our shoulders. You can do it too and we are here to support you along the way. Melissa, you guys paid off your house. Look guys, it's possible, they're doing it. Oh, I love it so much. Well I really hope you guys found some encouragement on today's show and ways to pay off your home early. Alright, thanks to Emma and Rolando for skyping in and for Alex coming on and giving us some great real estate tips. And make sure to subscribe to my new podcast. That's right, the Rachel Cruze show is on the Apple podcast or wherever you get your podcast. I don't want you to miss out, so make sure you go and subscribe there. Well, thanks you guys, thanks for watching and remember, as always, take control of your money and create a life you love.