In this regular feature, InvestorBlogger will publish stories and experiences that we all face everyday. This story is especially useful for those considering first time mortgages, especially those with extra frills (like credit cards, extra loans, 100%+ financing…),
When I bought my house, my mortgage company offered me a credit card that seemed like a very good deal. They would apply 1% of my purchases to my mortgage principal when that one percent reached $25. I accepted the card and I paid off the entire balance every month but found myself getting into a bit of trouble after about four months.
I paid off the balance each month and incurred no interest, but I was beginning to spend more. That end table was great and less than fifty dollars. A garden hose for next summer was on sale. I could replace my cheap microwave at 60% off and help pay down my mortgage.
One month the bill came in and I was glad I was sitting down. I’d gone from buying essentials to just buying and believe me, that was a very tough month to live through! Now I subtract charges from my checking balance, writing the amount in red. No more surprises when I treat the card as a debit card. I keep a better eye on expenses and don’t overspend. I’m still paying down my mortgage from my everyday purchasesÃ¢â‚¬â€just a little more sensibly.
However you pay when you out shopping, it’s always good advice to keep a track of the expenses that you incur. A little note in your notebook, an SMS, or a message on your answer machine/in your email-box… all of these are good reminders in case you threw away the credit card receipt. Of course, you shouldn’t throw them away, either. But this way you can double check your purchasing, and keep tabs on whether you are exceeding your budget or not.
More importantly, though, tying other financial products to your mortgage may not always be a good idea. Additional lines of credit, such as personal loans, 2nd home loans, credit cards, etc., may increase the loading of loans on you, increase the rates that you may for such loans, and may (as the writer found out) make repayments even more difficult on the primary mortgage, as well as other outstandings.