We've put a limit on Christmas buying this year. Why? Because we have our first completely "open" mortgage, which allows us to put extra money down whenever we can. And we've committed to doing that for each "quarter" of the year, even when we have to budget for Christmas.
This will save us thousands of dollars over the long haul. We're all for that! It also means that we could own our home free and clear of a mortgage in 5 years, if we stick to our schedule.
Bet that sounds good, doesn't it?
For the short term, we might be a bit house poor. We've committed to free up $5000 every quarter from my wife's salary, and live as much as possible on mine. It's a big deal -- we'll have to see how it goes. We may have to adjust the amount that we put down each quarter, given the impending arrival of the latest little one. But even if we put down substantially less -- say, $1000 every quarter -- we'll reap the benefits in a much shorter time period for our mortgage and thousands saved in interest.
Every time you put a bit of extra money on your mortgage, you are paying off the balance of your mortgage directly. It's not like your monthly (or bi-weekly or weekly) payment, which pays both interest and "principal". If you put extra money down, it hits that principal amount directly. That can make a huge difference, even if you only put a few hundred extra on your mortgage each year. You could still cut years from the length of your mortgage, even with modest amounts of extra cash put down. And that always translates into hundreds and even thousands in interest, depending on your interest rate and the size of your mortgage to start with.
Ideally, we'll have our home paid off in 5 years. But even if we back off from our (aggressive) schedule and put down $2250 a quarter, we'll pay off $10,000 on our home every year. That would still have our mortgage fully paid in 7-8 years.
We'll definitely be moving in the right direction.