6 Ways We Saved Money & Eliminated our Mortgage Insurance
A few years ago we decided to begin looking at houses. We did not have much for savings, but we figured that we were a few years from buying anyways. One of my good friends had been looking at houses for nearly a year, had made seven offers on houses, and then finally had an offer accepted after a dramatic bidding war. We figured that would also be our fate, so we wanted to look casually.
Of course, we fell in love with the third house we looked at and then looked at our financing options (not great to do things backwards, but we were lucky). Thankfully we both had good jobs and great credit, but we only had enough for a 2% downpayment. Since we were first-time home buyers, we qualified for a matching grant up to 1%, so in the end I believe that we started with 3% down. The interest rates were low, so we decided to go for it. Our offer was below asking and yet it was still accepted.
Fast forward two and a half years now, and we have officially made it to the 20% mark of our loan-to-value, which means we have officially said good-bye to mortgage insurance (PMI).
Many people think that you have to have 20% down when buying a house, but that is just not true anymore. I’ll write a blog post on that topic some other time.
That may not seem like a big deal, but that means that we were able to put $56,000 towards our principle in just thirty months, not to mention also paying at least $20,000 in interest, taxes, and PMI. Additionally, of those thirty months I was unemployed for twelve while I was in graduate school and we were just living on my husband’s income (of around $45,000). Before graduate school, I was working and making around $36,000 annually and then I was working again for five months again before getting to the 20% mark. So know that we are normal people that do not have shiny-high-paying jobs that allow us to put so much towards our debts.
So how did we do it?
Renting our extra rooms out
When we were looking at buying, we were specifically looking at either duplexes or single-family homes with many rooms with the intention of renting out some of the space to cover the mortgage.
Our house has five bedrooms. One in the basement, two on the main floor, and two on the second floor. Our bedroom is on the second floor. The house also has two-and-a-quarter bathrooms: one on the main floor, one on the second floor, and a vanity/sink in one of the guest rooms. As soon as we moved in, we listed two of the rooms on Airbnb and found two long-term renters for two of the other rooms. It was a full house for the first year!
We have typically had three out of our four available rooms taken at time, purposely, so we have still have a guest room for friends or family to visit.
Our long-term rooms have always been taken/booked since we bought the house (we live near several universities, so it has never been an issue to find renters). The Airbnb rooms have been completely booked as well, but we have been more choosey about dates and taking breaks from Airbnb.
I write more about our Airbnb experience here.
Overall, this has been a really positive experience for us and we have been thankful to put all of that extra money towards paying off our debts quickly.
If you are iffy about using Airbnb or not thrilled about the idea of changing bedsheets that often, you can use Airbnb for long term stays by adjusting the minimum # of nights. There are also other organizations like Travel Nurse Hosting where you can host traveling nurses and doctors for 30+ days and get paid.
Using your hobbies to make extra cash
The possibilities are endless, but I can share a few of the things I have done. I love writing, so I started a blog, and I enjoyed wine and true crime, so I hosted a podcast (Click the “podcasts” tab above). I was also making a lot of tools and resources to use for my job and posted many of the tools on Teachers Pay Teachers. Click here to check out my online store, which may inspire you to start your own!
One of my good friends began selling her paintings and digital products with her art through Society6.
There are all of sorts of ways to monetize your hobbies and make some extra cash by doing things that you love.
Eating and drinking at home
Meal planning is key to this, and buying ingredients that work for multiple meals, so as not to waste extra ingredients.
The weeks where we are spending the most money and then looking back at our bank statement, the slyest culprit is typically restaurants. I work in social services, so it is so tempting to relieve stress or make my life easier by eating out for lunches. Plus the last thing I usually want to do when I get home from work is to start cooking.
Setting up a meal planning or cooking routine can actually help relieve a lot of the stress, and you’ll actually find a lot of comfort in that routine. For example, on Saturday or Sundays we like to look ahead at our week and figure out what nights we are home/what nights we have plans. We figure out what nights either of us might need to be working late and then make dinner plans. I also like to make a big meal for lunch or dinner on Sunday, which will usually last us for the first few lunches of the week.
In my senior year of college, Collin and I lived in a little one bedroom apartment downtown. I wasn’t able to work with my course load and internship, so we relied on his part-time coffee shop and part-time substitute-teaching paychecks. I think that the main way that we survived that year was with the intense meal-planning and freezer meals that we would make. We would buy in bulk and then make a bunch of freezer meals to last us until the end of the month. Plus we would shop at Aldi (and we still do!). We wouldn’t eat out for months at a time, and it saved us a ton of money. It also helps to have a few go-to lunches in case you don’t have leftovers to bring to work. Here is a link to a freezer meal night that I hosted last year.
Stop buying things that you do not need or could borrow
I always use books as an example of this. I am an avid reader and read around two books per month. If you are always buying new books, that ends up being around $20-30/month, and $600 per year. Instead, I use our phenomenal library system for free, including the Libby app, and borrow from friends.
Avoiding fast-fashion is another important component of saving money. When shopping for clothes, buy pieces that are timeless and good quality so they will last more than ten washes. This saves money in the long run, as well as being better for the environment. (Say goodbye to Forever 21)
When online shopping, I try to leave things in my cart overnight– if I still want it the next day, then I can buy it. This is a small way that I try to cut out unnecessary purchases. Plus, websites will often send promo codes to entice you to come back to their website to complete your purchase. I also use the add-on Honey (referral link), which typically saves us a few dollars any time we are making an online purchase. Highly recommend using that add-on!
Cut back on subscriptions
Instead of paying for Stitchfix, Barkbox, Book of the Month Club, etc. (I know, all subscriptions that I have adored) allow yourself to spend $X per month on those items. You’ll end up with less things that you like or dislike and more items that you love. The fun part about these subscriptions is the surprise factor, and it tricks our brain into thinking that these items are gifts. *They are not gifts* You are still paying for them, but you are being a less mindful consumer by ending up with pants that you would not have chosen at the store.
Entertainment subscriptions fall into this category as well: Netflix, Disney+, Hulu, Amazon Video, YouTubeTV etc. We pay for Hulu currently, and use family or friends’ accounts like YouTubeTV. Honestly, of all of the providers, YouTubeTV has been the best, coming in around $45 per month. With YoutubeTV we have not needed to use any of the other services.
We also do not pay for cable, so that’s another area that we are saving $40-200 per month, depending on the provider.
Compare Prices
I am notoriously bad at this. A few months ago we were looking at switching our phone plans, and my husband researched and researched, and we landed on using Visible for our phone service. Not gonna lie, setting up our phones and communicating with their customer service was a headache, but the phone service has been great and we are saving a lot of money on our phone bill every month. Moral of the story: there are way more options than the big names like Verizon and Sprint.
Other options
The idea with mortgage insurance is that once you have paid your principle to the point where you just owe 80% of the house’s original appraised cost, you get to cancel mortgage insurance. If you suspect your home’s value has increased you can always have it re-appraised, and if the appraisal comes back stating it’s worth more, that factors into the loan-to-value ratio and you could get rid of mortgage insurance even sooner. Our house’s value has gone up significantly since buying a few years ago, so I wish I had known about this option.
Mortgage insurance is notoriously hard to get rid of. Some lenders require every home owner to get a re-appraisal to prove that the house hasn’t gone down in value. When we submitted our request in writing, they stated that it could be up to a month before they respond with further instructions. Luckily, they responded in a few weeks and agreed to our request without asking for an appraisal (which would have cost $300-400). If they had asked for an appraisal, we decided that it would’ve been cheaper for us to just not do the appraisal, pay a few more months of PMI, and wait for the LTV to get to 78%, at which point lenders have to take the PMI off automatically. These are all just things to keep in mind.
Snowball or Avalanche
It doesn’t matter if you are the type of person that is paying off your debt using the snowball method (paying off your smallest debts first and then after using the same amount to pay the next smallest debt and so on) or the avalanche method (paying off the debt with the highest interest rate and then using that amount to pay the next highest interest rate and so on).
I am personally more of a snowball-debt-person, because I get fueled by small victories. I am thrilled to have made it to this one goal, and now we can put the $174 + [all of the extra cash we have been putting towards our principle] into other financial goals that we have, like investing (we use the Robinhood app for investments) and saving to buy another property like a duplex.
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