Why We Got a Mortgage 🏡 {when we could’ve paid cash💰}

Here on the blog, I try to be very transparent about our finances, our budget, & our spending. I think it really helps people to see that it’s possible to live a frugal lifestyle if they can see exactly how much we spend, what our weekly grocery budget looks like, and other details about our lives. Lately, we’ve found ourselves in a (slightly-stressful) and different financial situation from our normal, so I thought I’d be open with you all about that too!

Our Recent Transition

On this date 3 years ago, we paid cash for a home. We had just moved to Findlay, Ohio so that Byron could begin his studies in seminary, on his path to becoming a US Army Chaplain.

Here’s a quick rundown on how that process is supposed to go:

active duty military service→ accepted into Chaplain Candidacy Program → transition from active to Army Reserves → attend seminary for 3 years → acquire 2 years of post-graduation pastoral work experience → transition back to active duty as a Chaplain 

Right now, we’re in the middle: Byron will graduate from seminary in August, and he accepted a job as a pastor last November. When he took the pastor job, we packed up our family and moved from Findlay to Tiffin, about 45 minutes east. We placed our paid-in-full house on the market, and we were very blessed that it was under contract in only 3 days!

We prayerfully considered our vision for our new path in Tiffin, and what that would mean for the house that we chose:

  • We wanted to be able to welcome our new congregation into our home, so that meant a dining room big enough for entertaining. 
  • Part of Byron’s mission here in Tiffin is to start a dual-campus ministry (there are 2 colleges in town), so we wanted to be both centrally located between the two, as well as easy to find for visitors.
  • Because we host many ministry events in our house, we need ample seating and parking. 
  • After 2½ years of kids stacked on top of each other, we really wanted them to have their own bedrooms.
  • I wanted a space for homeschooling, so we could keep the schoolwork out of the way of all of these guests we are hosting. 

We toured several homes with our realtor, but I knew right away that the first home we looked at was the one for us. It had everything on our list: √ 5 bedrooms √ lots of parking √ large entertaining spaces √ perfect location on a well-known street

It was listed for $125,000, but had recently dropped from $139,000. We offered $112,000 and the motivated sellers accepted! (They had already moved out of state, and were desperate to unload it.) We were both pretty excited to get 2600 beautifully restored square feet for that price! I think that God was saving this house just for us. 

So why get a mortgage?

Initially, our reason for getting a mortgage was timing: we were moving to Tiffin at the beginning of November, and we had no idea how long it would take for our Findlay home to sell. So we used savings we had accumulated over the summer (Byron was activated for 3 months of Army training — in that 3 months we were paid about $20k and we saved most of it) to put 20% down, with the intention that we would pay off the rest when our Findlay house sold.

Since this is Byron’s first official job as a pastor, I’m still learning about how pastors get paid, and the tax implications of that pay. Luckily for my husband, I’ve been a tax preparer for the past 8 years, and I know my way around IRS code.  I was pretty taken aback to see how much pastors get whupped by the IRS. They are one of the lowest-paid occupations known to man, but they have to pay self-employment tax at 15.3% without any of the deductions that self-employed people usually get to take!

The only upside is that pastors can allocate part of their income to a housing allowance, which still gets taxed at the regular rate, but does not incur the extra self-employment taxes.

The housing allowance requires insanely detailed record-keeping. I have to keep track of every single housing expense: including mortgage payments, utilities, and other things like home improvement receipts. But I’m pretty detail-oriented anyway, so keeping records is nothing new to me!

Basically we were looking at paying 3.25% interest on our mortgage OR 15.3% taxes. No brainer, right…?

What We Did With the Cash From Our House

We sold our Findlay house for $94,000. After closing costs and realtor commissions, we took home $82,000. This is how we dispersed it:

  • $45,000 down on the principal of our mortgage
  • $22,000 into our retirement funds (to max our Roth IRAs for both 2016 and 2017)
  • $15,000 in savings

Why I’m Struggling With It Now

It’s an easy decision to say, “I’m going to save 12% on our income by having a mortgage instead of paying in full.” But the day-to-day reality of that is much more difficult. Tiffin utilities are considerably higher than they were in Findlay. Our water bill went from about $45/month to $175. Our gas (heat) bill went from $50-60/month to a whopping $500 in January! Our electric bill went from $50 to $150. I was expecting a bit of an increase when upsizing to a larger house, but I was not expecting such a drastic jump!

Our pastor pay is $1800/month. So far in 2017, we have spent almost every penny of that on housing. That leaves us Byron’s Army Reserve pay (about $700/month) for all other expenses: food, savings, homeschooling, tithe, sponsoring our 3 Compassion kids, car insurance, gas, as well as covering the costs of our new campus ministry. Our grocery bill is more than double what it was in Findlay for 2 reasons: we are feeding a lot more people — having guests in our home 3-4 times a week, sometimes a dozen college students at a time; and our eating habits have changed quite drastically due to my health condition, with a lot more produce and meat, and fewer carbs.

I never expected that getting a job and tripling our income would put us in a tougher place financially than when we were jobless! We do have some savings, but it’s hard to say how long that will last if we continue leeching from it month after month. It’s supposed to be our emergency fund, which we don’t touch at all ~ so I hate using that money.

Looking Ahead

Looking toward the future, I have some goals to try to alleviate the financial pressure:

  • finding ways to cut our grocery bill again, preferably back under $300/month.
  • finding alternate funding sources for the campus ministry
  • cutting homeschooling expenses, by trying to find free and/or used curriculum
  • cancelling several of the kids’ extra-curricular activities
  • possibly finding someone to take over our Compassion sponsorships (it kills me to do this, but I’m not seeing another alternative!)

I’m optimistic that we can make the necessary changes in our budget, it will just take some finagling and grunt work! And of course, I have faith that God will lead us through this time the way He always has in the past!

So what’s YOUR take?

I’d love to hear what you would do/would have done in our situation! Share in the comments below!

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