Frugal in the Fruitlands

This is part two in the Dirty Facts About Lise’s Finances series.

In my previous expenses overview, I bet some of you looked at the $3,196/month figure for our mortgage and cried. Probably my mother did. Hi Mom!

There’s a little bit more to it than merely spending 53% of my net income on housing. Here is the detailed breakdown:

Total cost of the House: $375,000
Time lived in: One year
Brief Description: It has three bedrooms, a spacious basement that we use for sewing and craft space, one and a half baths, and a gorgeous sunroom, with central heat/air/vac, a well, and private sewer. It is on three acres of land in the middle of the Hickory Hills region of Lunenburg, MA, about 50 miles from Boston.
Down payment: Since we didn’t have a spare $38K lying around when we bought the house, we purchased the house with zero down (we used our savings to pay the closing costs).
Mortgage: We actually have two, opting for the piggyback route to get out of paying PMI:

• A 30-year fixed mortgage of $300,000 with an interest rate of ~6%.
• A 15-year mortgage at 8.9% (yeouch). It is amortized over 30 years, but balloons in 15 years, meaning we’ll have to pay off the balance in full at that time. Obviously this is something we want to avoid.

Monthly payment: Minimum monthly payment is $2,666, which is 44% of our total income—it’s a bit high relative to the recommend 30%, but it’s about average for the Boston area. However, we put $500 extra per month towards the second mortgage. At this rate, the second mortgage will be paid off in seven years.

Paying off your home early is a conservative investment, it’s true. But when the interest rate is 8.9%, and sub-prime mortgages are looking so iffy, it seems pretty sound to me. Once that second mortgage is paid off, my husband and/or myself will be able to reduce the number of hours we work.

In retrospect, I might have done things a little differently if I had to do it again: I might have waited longer before buying, or I might have pushed for a smaller house. Ironically, just as my interest in voluntary simplicity grew, I bought into this rather large house in the suburbs. But done is done, and I’m thankful for what I have.

In closing:
Average mortgage expenses over the past three months: $3,196/month
Mortgage budget for the next year: $3,196/month. We will continue to pay $500 extra as often as we can. In an emergency, we would be able to hold this back and only pay the minimum $2,666/month.

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Since this blog is moving more in the frugality and personal finance direction, I thought it was only fair to my (few) readers to make it clear where I am coming from in terms of personal finance and frugality.

The secret: I’m no frugal ninja, yet. My husband and I probably own more house than we can afford, and we still have to work around that. Voluntary simplicity and financial independence are goals of mine, but they are still distant goals.

So here’s the start of the Dirty Facts about Lise’s Finances Series. I’m not doing this to impress anyone or make anyone resent me. I’m doing this, in part, because money is taboo, but also because I want people to know that I still, often, “give myself very good advice, but very seldom follow it.”

I plan to spread this out over a few posts, but here’s the beginning: my husband’s and my income and expenses for the past seven- and three-month periods.

The Bad News is, I am consistently outspending my income, if only by a little. I am managing to stay afloat, nonetheless. We do have some credit card debt - less than $2000 - but more about that later.

The Good News is, my expenses over the last three months - where I’ve started to put a more consistent effort into frugality - are greatly decreased.

Here’s the basic breakdown:
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