Big vs Small Thrift
There is big thrift and there is small thrift. We thrifties will go out of our way to save $.03 per gallon on gas. That’s $.36 per fill, and then you figure there are 52 weeks each year and … you’ve saved a whopping $18.72.
Don’t get me wrong. If I found $18.72 on the sidewalk, I’d pick it up. However, when I think about owing $134K on my mortgage, that $18.72 isn’t going to make a dent. So, I either need a ton of $18.72′s or I need to think bigger.
When I look at my Mint.com spending chart, our biggest expense is our mortgage. We are at a decent 4.625 interest rate, however, rates are quite a bit less than that now.
PenFed is currently advertising a 5/5 ARM loan at 2.753% APR and they pay closing costs. Since I’m wanting to pay down my mortgage ASAP, I don’t see there being a problem with the rate increasing. Worse case, I save 2% for 5 years, and break even on the next 5. I can’t imaging still paying on my mortgage in 10 years. I also don’t want to pay closing costs, because that will be around $3K we would have to pay and it’d take a year and a half for our mortgage savings to pay for it.
A reduction in our mortgage rate would give us $2,177 extra each year to pay towards the principal. That’s 116 years worth of 18.72s in one fell swoop. It’s more work than driving a few blocks, but it’s a lot less work than driving a few blocks for 116 years. I need to make my mortgage refi a top priority.