jenforsberg

I’m a numbers person; not because I have a degree in Accounting, but because it’s just naturally ingrained in me.  I love playing around with formulas to see what changes lead to different outcomes. We are in the process of taking out a mortgage on our dream house so obviously I am playing around the a loan amortization schedule to see how much interest we will pay based on how many years we use the banks money.

Maybe I should have started by saying I absolutely HATE paying interest! Why? Interest is the amount of MY money that I willingly give up to make someone else rich. With my new mortgage, I can pay it like a sloth and give the bank an extra $350,000 or I can pay with gazelle intensity (thanks to Dave Ramsey’s baby steps) and give the bank an extra $100,000. Either way, that’s a lot of MY money that I’m willingly handing over just because I want to move into my dream house now (years before saving up to pay 100% cash for it).

I was going to discuss the opportunity cost of paying interest. That’s what you give up (what you now can’t afford due to the loan payments) in order to use the banks money. However, I just had to take a deep breath there for a minute, because I’m looking at those numbers… $350,000 or $100,000. I clawed my way out of poverty and while I was still in that season, I couldn’t have even imagined owning something that cost that much money, much less paying that amount in interest alone.

The house we are moving out of cost much less than $100,000 and we couldn’t even afford to acquire it with conventional financing. Our journey brought us into a relationship with community action and our starter house was offered by MURL (Minnesota Urban and Rural Homestead Program). What that meant for us, was that community action would sell us the house on a contract for deed with zero percent interest and no down payment plus our monthly payments would vary because they were set at exactly 25% of our income. For someone struggling with poverty, that was a dream come true!