The Tried-and-True Way to Save Up an Extra Mortgage Payment This Year
Most of the time your mortgage payment is the biggest monthly expense that you’ll have, and thus it can often be a daunting or stressful bill to pay. Many financial professionals agree that you should always have a minimum savings that is equal to three months of expenses, should any financial emergencies arise. Common reasons you may need to tap into these savings could be due to layoffs, family emergencies, medical emergencies, etc. While having this much saved up seems impossible to some, you can easily save up a full month’s mortgage in a year, with little to no impact on your day-to-day finances.
First, having a separate account from your regular checking account is key. If you see a high balance in checking, it’s far too easy to splurge and then end up accidentally spending the funds that you were supposed to save for your mortgage payment. Whether a specific account for just your mortgage payment and bills, or a traditional savings account, you want to make sure you have one account for regular spending, and one for savings and or bills that need to be paid.
Auto transfers are the single easiest way to allow you to not only save up an extra mortgage payment, but to ensure that you always have the funds to pay your mortgage on time. First, you’ll need to identify what half of your mortgage payment is, and then you’ll transfer that amount out of each of your paychecks. For example:
- Mortgage Payment: $1,900
- Transfer Amount: $950
In the year 2022, there will be 26 paydays if you are paid bi-weekly. Your mortgage payment totals for the year at a $1,900 monthly rate would be: $22,800. By transferring half of your mortgage payment each paycheck, you will have transferred/saved: $24,700, which is exactly $1,900 over your annual mortgage total, resulting in the savings of an extra mortgage payment in 2022.
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When it comes time to pay your mortgage, you can rest assured knowing you have the needed funds in your savings/bill account, and whether you pay your mortgage directly out of that account or transfer it back to checking to make the payment, the auto transfer method is a great way to set yourself up for financial freedom, and a more stress-free bill paying experience.
For some, saving up an extra mortgage payment could allow you to simply pay your mortgage off earlier than your typical loan term, for others, this could be a great way to slowly start saving and building up your savings account for emergency situations.
If you’re currently searching for a new home, are ready to sell your home and need a qualified seller’s agent to assist you, or if you have any further questions regarding Miami Real Estate, please feel free to contact our office at any time.