Summary: Learn how to pay off your mortgage and discover the financial peace of living in a paid for home.

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Session 6

Developed from the books Your Money Map: A Proven 7 Step Guide to True Financial Freedom and The Total Money Makeover.


- You’ve been pulling together figures from your expenses and your income for over a month now.

- Hopefully you have a balanced budget in place.

- Be sure to use a system to implement your budget.

- Find a way to determine if you are staying on track each month.


- First we talked about getting out of debt.

- Next we looked at how to stay out of debt by saving up for future expenses.

- Today we will look at the largest purchase more people will ever make.



Destination #1

- Begin using a spending plan

- Save $1,000 for emergencies

Destination #2

- Pay off credit cards

- Increase savings to one month’s living expenses

Destination #3

- Pay off all consumer debt

- Increase savings to three month’s living expenses

Destination #4

- Begin saving for major purchases (home, auto, etc.).

- Begin saving for retirement.

- Begin saving for children’s education.

- Begin saving to start a business. (If this is a goal for you.)


- As you start this Destination, you are now one of the top 5 - 10% of Americans because you have some wealth, have a plan, and are under control (Dave Ramsey).

Buy an affordable home.

Pay off your mortgage.

Proverbs 11:29

29He who troubles his own house shall inherit the wind, and the foolish shall be servant to the wise of heart.


- We learned in the previous Destination the importance of saving for a good down payment for a home.

- It’s best to save up at least 20% for a down payment before buying a home.

- Monthly payments will be smaller.

- Eliminates need for expensive PMI (Private Mortgage Insurance)

- PMI costs $65 - $70 per month per $100,000 borrowed (Cost avg. $840 - $1,680 per year)

- PMI is basically foreclosure insurance

Renting -vs- buying

- Some will advise you that it is always better to buy than to rent.

- This is not true.

- It is better to rent a house you can afford than to buy one you can’t.

- This is why the destination for buying a home is after you have paid off your debt.

- If you are in debt up to your neck, buying a home is the last thing you want to do.

- Also, when you rent, you do not have to pay for unexpected and often costly repairs to the home.

- If your money is tight, it is better to rent until you get to this Destination in your journey to financial freedom.

Affordable housing.

- Your total housing expenses should not exceed 40% of your gross income.

- Your total housing expenses will include:

~ mortgage payments

~ real estate taxes

~ Utilities

~ Insurance

~ Maintenance

- You can estimate the cost of maintenance to be 1-2% of the value of the home each year.

- Dave Ramsey says to never buy a home that would have a payment of more than 25% of your take home pay.

Dave Ramsey Advice

- Make sure you don’t borrow more than it is worth.

- Some banks today will lend you up to 125% of the value of the home.

- Some use the extra 25% to payoff credit card bills and call this restructuring their debt.

- This is a good way to get stuck with a house you can’t afford.

- It could lead to foreclosure.

- You also end up paying on credit cards for 15-30 years.

- If you cannot afford a house right now there are three things you can do: pray, save, and wait.

Assignment from last week

- Do you own your home? Find out how much you owe on it and how long it will take to pay it off at your current payment rate.

Prepaying the mortgage.

- One thing that is important to understand is the way interest is paid on a mortgage.

- Interest is front loaded on a mortgage.

- In the beginning of your loan repayment, your payment will go primarily to paying interest.

- In fact, in a 30 year mortgage, it is 23 years before the interest and principal portions of your payment are equal.

- With a 150,000 home loan at 7.5% you will pay $12,585.84 each year.

- In the first year only $1,382.73 of those payments will go toward the principal (the loan amount).

- If you pay around $100 extra per month, you will save around $900 in interest over the life of the loan.

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