Easy 5-step plan to pay off your mortgage on your budget and on your time

Master Your Mortgage in 5 Steps

We can help you master your mortgage in five steps.

You’ve already set your new home budget, now it’s time to build your mortgage plan.

Before you even sign the papers to your new casa, crunch the numbers. How much house can you 

to buy! There’s actually a real difference here.)

 of the numbers—like credit card debt, college loans, retirement savings plan

 monthly budget, etc. Are you left with enough cash for a solid 20% down-payment and enough cash flow to cover your mortgage? Do you have enough left over in your cash reserve to cover a few months of mortgage payments just in case disaster strikes?

If you answered yes to all of those questions, sign away, Mr. Hancock! Ready for five steps to mastering your mortgage? 

When should you put extra cash toward your mortgage?

Have a good month? Awesome! Get a large tax return? Great! Ready to use that cash to take a bite out of your big debts, like your mortgage? Maybe. However, before you pull out your mobile pay, check a few things first.

Saving and investing is all about balance. Yes, many people talk about paying off their mortgages aggressively with extra dough lying around. But consider doing this only after you’ve taken care of high interest credit card debt and loans, and you have a bigger plan for your cash flow and personal finance (debt management, college savings, retirement, etc.)

All set with your budget and debt payment plan? Awesome. You’re almost ready to throw down more cash at your mortgage. Just be sure you don’t have any prepayment penalties. And, consider what your interest rate is compared to the current mortgage rates—could you make more if you invested that excess cash in the market?

Make a plan to pay off your mortgage aggressively

If you have the funds, plan to be aggressive with your mortgage payment right from the get-go. That way, you’re buying a home you know you can afford—comfortably, too—and you’ll be chipping away at your debt faster, helping you pay less in interest over time.

Mark your calendar for your monthly payment

Buyers beware! Don’t be late on paying your mortgage bill. It may seem like common sense, but it happens to the best of us. Missing a payment can lower your credit score and even cause your interest to accumulate. Yuck! One easy way to avoid this is to set up an automatic payment plan. This way you can sleep easier at night knowing your bill has been paid on-time. (Just make sure that you will have enough funds in your checking account each month to ensure you don't overdraw your account and accrue overdraft fees.)

An escrow service automatically sets aside money for your property taxes and insurance that the mortgage lender will pay on your behalf. Your mortgage lender may offer or insist on an escrow service for your loan. They tend to do that because escrow increases their security that you won’t default on these expenses.

Escrow can be a great forced-budgeting tool that ensures you’re putting away enough to cover your expenses. And, it helps keep you from having to write these big checks twice a year.

However, the downside is that escrow accounts typically don’t pay the interest on funds that you could otherwise earn in other accounts. And, once you set aside the money in escrow, you can no longer access it easily.

Hey, we’re always fans of saving money. But just know that you should not rely on your mortgage as a primary investment. Yes, your aggressive monthly mortgage payments can help you pay off your house sooner and save on interest (less debt = 🙌). But, don’t assume that your home value will increase each year. One of the factors that contributed to the 2008 housing crisis was that people bought homes they couldn’t afford. They 

 the value of their home would increase each year and then down the road they could just refinance it with an 

 higher real estate value. So when the home values didn’t go up as much as expected, people were left underwater on their mortgages and ultimately lost their homes. Many people’s largest asset is their home. But we advise you to think differently. Look at your home as a place to live rather than a prized asset. In other words: don’t bank on those “savings” paying out.

Now you’ve sufficiently mastered your mortgage! Remember: financial planning doesn’t have to be hard. We can help.

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Quick and easy 8-step plan to figure out your new house budget 

How Much House Can (No, Should!) You Afford?

How much should you really spend on your new house? We have eight steps.

In the market to buy a house? Awesome! Let’s get one thing straight. It’s not how much house 

Already got your pre-approval loan letter? Cool! You’ve heard back from the bank, and all of a sudden, you’re a millionaire! The bank has pre-approved you for a surprisingly-high amount. You barely close the email and you’re already Zillow-ing McMansions and considering hiring a butler.

Just because the bank is willing to bet you can pay them back for that loan on your mortgage, are you entirely sure what that even looks like?

First thing’s first. Just like trying on wedding gowns, you only try on ones you can afford. Because, if not, all of sudden you’re sitting in a pool of tears, bridal salon champagne, and wrinkled tulle (that you can’t afford). Buying a house is a crazy-emotional concept. As soon as you find that dream house, it can be hard to tear yourself away and fall back to reality. Before you fall in love, your first move is setting a budget.

Consider these standard rules of thumb when determining your realistic new home budget.

Your mortgage should fall between 2-3 times your annual salary (or less!)

If you and your spouse have a combined household income of $100K, you shouldn’t look at houses where you will need a mortgage that exceeds $200-300K. That is, unless you’re a master negotiator! In which case, call on that McMansion and haggle your way down to your budget.

Allocate 25-30% of your monthly budget toward your mortgage

Don’t forget you still need to eat! And afford gas, your gym membership, dog food, cell phone, etc. Not every penny can realistically go toward your house. (And, oh, hey! Remember to factor in the cost of real estate taxes and homeowners insurance. Isn’t adulting fun?!)

Your annual debt payments should not exceed 36% of your annual income

Remember that four-letter-word, “debt”? Yeah, we’re talking house, car, college loans—all that good stuff. Take account of all the dollars you need to pay annually on all your debt against your annual income and ensure you’re falling within the safe range.

Have enough cold, hard cash for your down payment

Consider paying up front for at least 20% of your home sale price. Yes, you can get a mortgage with 10% down or less, but then, typically, you will have to pay an additional fee for private mortgage insurance. Consider stretching yourself here. Saving for that 20% down payment is a great financial exercise in itself before owning the home. With a 20% down payment, you’ll likely get a lower interest rate on the mortgage, thereby lowering your monthly mortgage payment and giving you some extra cash to throw toward your other debt, entertainment fund or retirement (hello retirement savings, we’d never forget about you).

Bonus tip: Having a good credit score is another way to lower the interest rate and monthly payment on your mortgage.

Woohoo! You’ve made it through inspection and now you’re officially closing. Hold up; you’re not out of the woods yet. Zillow reports that, on average, people pay $3,700 in closing fees; or in other words, between 2 and 5% of their home price.

In addition to real estate taxes and insurance, when creating a budget make sure you think about the costs of utilities, lawn services (if mowing isn't in your wheelhouse), renovations, and any other fees that may be necessary to upkeep or upgrade your new home. Keep in mind that these costs should be separate from your emergency fund. Although replacing your old linoleum kitchen counters may seem like a life or death situation, it isn't exactly an emergency… (But, don’t get us wrong; there are certainly times that call for using your emergency fund!)

Despite what you may have been told, bigger isn't always better. So before you get too excited about the great listing price on the 4,000 square-foot house of your dreams, think about the additional costs that may come with it. A larger home often means higher utilities. The cost of heating and air conditioning all that extra space will make the check you write to your new friends at the utility company more expensive. And if you plan to pay for housekeeping, lawn care, or any other services those extra square-feet also mean extra bucks.

Moving ain’t cheap! Set aside $1-2K for moving expenses like moving trucks, boxes, cleaning supplies, professional movers, etc. Part of that pot o’ money can go toward new furniture to fill your new house, too.

Want to stretch your home budget? Consider what you can sacrifice. Just think: skipping dinners out and cutting down on your non-essential purchases (ahem, we’re looking at you, fantasy football and new wardrobe) can get you closer to that dream house.

Remember, just because someone tells you that can 

 afford that down payment and monthly mortgage, think about how that will feel. What will you have to skip? What luxuries are you accustomed to that you’ll have to forego?

Now that you have your budget in order, now comes the fun part! Whip out that phone and start swiping through homes. Good luck!

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Content before 2026 may contain references to our former name.

How Much House Can I Afford Blog Content

Easy tips to create or update a budget that you can actually stick to

How to Create a Budget

One in three Americans keep a detailed budget, according to Gallup. We've found that some people love budgets while others loathe them, and some have them but find it easiest to simply ignore them. The question is: 

Does one really need a budget and how detailed does it need to be? 

Yes! But we don't think you should get hung up on how detailed it should be.

Your budget, and budget process, shouldn't own you. If it does, we'll help you find a better way to approach your finances. There are many valid reasons for having a budget which we will dive into in a bit and more importantly, we think there are some great tools out there to help you in the process.

To pay off debt in a planned, consistent manner

To prepare for emergencies and build a cash reserve

As a tool to discuss general finances if you share finances with a partner or spouse

Consider this: (before we dive into your 4 specific to-dos):

Consider which system will work for you. It may be pen and paper, spreadsheet, or an app. Go with what you are comfortable with and stick to it.

Decide how detailed you need to be. If you know being super detailed is not going to work for you, then abort mission and stick with something less detailed.

If you have a partner, get their buy-in. For this to work, you'll both need to commit to a budget.

Consider how much you should be allocating to spending, saving and debt payoff. An industry rule of thumb is the 50/30/20. That means you're putting 50% of your income to your needs (like your house, car, groceries), 30% to your wants (guitars, fancy clothes, concert tix) and 20% to savings and retirement. If you're like many of us and want to strive for that little extra, swap the 30 and 20. Put 30% of your income toward savings and 20% toward your wants. You can do it; push yourself.

Do a little research and plan how much you want to save, and where that "next dollar" should go. Nerd Wallet has a graphic we love on this topic, especially if you have debt.

nerd-wallet.avif

 Digital banking? An app? Pen to paper? Excel? Find it and stick to it, for at least for six months. If after six months it isn't working, try something new.

Be realistic. If you like detail and the thought of typing in each expense into an excel spreadsheets sounds fun, then have at it! If it sounds miserable, consider something more high level. Aggregating your accounts with a platform like our digital banking app will allow you to scroll through your expenses as frequently as you like. That way, you can simply take note of each expense. This option may be sufficient for you to track your spending.

 our digital banking app will do a lot of the heavy lifting for you, like importing real time transactions and current income in addition to simple rules of thumb. It'll only take you about 15 minutes to connect your accounts and get started.

If you are calculating your budget manually, include the following:

Income from all sources: Include not only steady income but any other income you expect periodically. Think about any real estate you own, rental income, frequent gifts, holidays; and vacations, birthdays, and weddings, etc.

Expenses: We recommend use the past 12 months to see what you typically spend in a given year. When looking at periods less than that, spending can be inconsistent. Include 

We all fall victim to "that was an atypical expenditure" to make ourselves think we spend less than we do. There are 

After each month, compare your expenses and income

. If your expenses are exceeding your income, it is time to make changes in your budget.

 After you have established your budget, it's time to take a step back to consider your financial goals. Do you need to save more, or plan better, think about your complete financial goals, like spending down debt and saving for retirement and kids' college plans.

 It can be tougher to alter your income, but you can surely make changes in your expenses.

The final step is to monitor your progress in financial terms to check whether you are making right efforts or not.

How to Create a Budget Blog Content

A 5-step plan for teaching your children about money and financial wellness

How to Teach Kids about Finance

You may be wondering when to talk to your child about money, how to teach your child about saving money, or how to teach your child about budgeting at an early age. As if raising children wasn't hard enough, teaching your child finances can be a daunting task. But it doesn't have to be!

When it comes to talking to your children about money and finances, there are lots of reasons why parents put it off. But, that's why we're here to help.

Below is a five-step plan to teach your children about finances. And, before you (or your child!) get overwhelmed, remember that small doses of money talks are better than none. And, real world experience can be the best teacher of all.

You don't have to "nail it" on the first try.

As parents, it's only normal to want to "nail it" in everything you do for your family. That said, we parents know we're getting things wrong—fingers crossed it's not the big things!—but we're still trying to do things right. Too often we become overly concerned with trying to do the "right thing" or even the "very best thing" that we become paralyzed and end up doing nothing at all.

We see this unfortunate result all too often when parents try to figure out the "best way" to 

teach their children good financial habits

. As it turns out, financial paralysis is a common thing many people experience. That's why we're here to help you through these hard financial discussions and decisions.

Having financial conversations with your children is more about normalizing finances and financial decisions, rather than making them huge and stressful moments. These conversations don't have to be perfect, but they do have to at least happen.

Small conversations are better than none.

Because there are no hard and fast rules about which financial conversations to have with your children at certain ages, we parents all too often end up skipping the conversations altogether. It's not like parents (or children, for that matter) have homework or worksheets about why you should have a savings account, or why it's important to live within your means. Of course we're skipping these conversations, because we don't have benchmarks to guide us along the way.

But small, deliberate conversations can make a big difference. The "money talk" doesn't have to be a lecture or a worksheet to be effective. Instead, it can be a two minute on the fly conversation as you're paying your utility bills, getting money out of the ATM, choosing which groceries to buy, or handing out allowance money.

After all, these conversations matter. Did you know that most money habits are formed by age 7, according to a 2018 study by Purdue University*? That means that, even if you don't have money conversations with your kids, they will still learn from your behavior or your comments about saving money, paying down debt, racking up credit cards, being worried about bills, and more.

If your child is going to learn financial behaviors from you anyway, we recommend you have thoughtful money conversations with your children. That way, you're more in control of the message and lesson. And, of course, you can help your children learn about money, how to save money, and how to spend money wisely. These conversations will help set up your child for a life of financial wellness. And, they don't have to be long and burdensome for you or your child.

You know what they say: actions speak louder than words.

We aren't suggesting that you sit down with your children to "have the conversation" as a one-time item to check off your list. Rather, teaching financial habits is best done through leading by example and using real life occurrences as teachable moments as they come up. Sharing these real-life examples with your children will teach them about money and finances in appropriate, kid-size doses.

So, for example, next time you're at the grocery store, explain to your child why you're choosing one brand over another. Perhaps you could explain that the money you're saving from the expensive cereal will pay for an extra dessert. Or, next time you're paying bills, explain to your child that things like electricity, water, and food cost money. Or, take your child to the bank with you (or show them as you use your mobile banking app) when you deposit money into your savings account. That way, your child can learn by your example, and experience firsthand, how to manage money well.

Your 5-step plan to teaching your children about finances

Need a road map and some specific ideas to accompany your commitment to share real world finances with your children? Okay. Here are some of our favorite one-off suggestions on teaching children about money. We've also thrown in an infographic for what's appropriate at each age.

Start slow and ask open ended questions about money

. How does your child feel about money? How does she earn money now? How will he earn money as an adult? How does your child think you, his parents, earn money? Let her think as she deliberates her answers. You'll know when it's enough.

If you don't know the answer to a question, or if the question isn't something you are willing to share with your child (e.g., "How much money do you make?"), tell him that. But, encourage him to continue to be curious and ask lots of questions.

If your child has no means to receive income, she has no means to build wealth (well, 

. Some parents tie allowance to daily or weekly chores. We recommend doing what works for you and sticking to it. As all parents know, consistency is really important with kids.

 For Pete's sake—remember board games?! Games like Monopoly

 teach children basic financial concepts—and, importantly, that money management is fun!

 When your child loses a library book, breaks something or wastes something, discuss it. View it a moment to revisit finances, money and values. Let your child sit with you while you pay your utility bills. We're fans of teaching children real numbers to get a sense of how much things cost in the real world.

*PBS News Hour, "Money habits are set by age 7. Teach your kids the value of a dollar now." (2018)

How to Teach Kids About Finance Blog Content

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How to Teach Kids about Finance