Personal Finance

  • 17 Popular Digital Product Ideas To Sell To Make Passive Income

    Selling digital products on Etsy or Shopify or any website is a great way to make passive income in 2021 and beyond! Digital products are amazing because you create it once and then sell it over and over again.

    You may have heard this about digital products before but what exactly can you sell? What digital products are popular and will make the most passive income?

    In this video I’ve narrowed down the digital product ideas from a large video into the most popular ones! These are very common and sell well which means you can create and sell them to make a lot of passive income. This list of digital product ideas is a great one because these popular products have more ability to sell because they have large audiences that BUY frequently.

    This is part of a larger video with 60 different ideas: 60+ Digital Product Ideas To Sell On Etsy To Make Passive Income.

    If you have been trying to decide what to sell then this will definitely help get you started!

    Why Sell Digital Products?

    There are many reasons to sell digital products especially if you are looking for passive income. Selling any kind of digital product can create a new passive or mostly passive income stream for you.

    Here are a few of the reasons why you should create and sell digital products:

    • You make them once and sell them many times
    • They can be very easy to make compared to physical products
    • Cheap to make since you can use free programs
    • High margins – you have no product cost so you keep the profit
    • Unlimited growth in sales without having to scale any production
    • Unlimited growth in income by reaching new customers

    Convinced? Me too! Let’s look at some of the most popular digital products you can create.

    17 Popular Digital Product Ideas To Sell

    These digital products are some of the most popular items you can sell which means there are a lot of people that look for and buy them. As a seller this can be a great option!

    Here are some of the more popular digital products that you can sell:

    1. Birthday invitations
    2. Checklists & Trackers
    3. Clip art
    4. Digital papers
    5. Ebooks
    6. Excel templates
    7. Holiday cards
    8. Invitation templates
    9. Party decor
    10. Party invitations
    11. Printable games
    12. Shower invitations
    13. Social templates
    14. SVG files
    15. Wedding invitations
    16. Wedding signs
    17. Workbooks

    These are some of the most popular types of digital products you can sell, especially if you are on Etsy.

    If you are trying to make the most profit possible then you should look at creating and selling the most profitable digital products.

    How To Decide What To Sell

    If you have been trying to decide what to sell then this will definitely help get you started! Most of these ideas can be created in free programs like Canva or PlaceIt.

    You don’t have to have design skills or a background in digital marketing in order to create and sell digital downloads. You don’t need a formal education or design background to create digital products and earn money selling them – you just have to be curious and willing to learn!

    When deciding what type of digital product to sell I would recommend picking an area where you have a passion in life and then deciding the types of products. For example, maybe you think you should make SVG files because they are popular, but you really love making spreadsheets to keep your life and business organized. I’d focus on that instead!

    Or maybe you like planning parties so you think you need to create party invitations. But I wouldn’t limit myself to one digital product. I’d think about what types of products would complement each other in a shop that helps my target audience. You can create listings that complement and link back to each other like related party invitations and party decor.

    Creating Digital Products Online

    There are a number of ways to create digital products online these days. It’s possible to make digital products to sell for free with a number of programs!

    Adobe InDesign

    Adobe InDesign – I personally use Adobe InDesign for creating all my printables because it’s the best, most reliable and has the most flexibility. There is a learning curve because it’s a professional program but it’s worth it for the hassles it removes. Try creating with Adobe InDesign’s free trial.

    Canva

    Canva – Canva is one of the best free editing programs where you can create a digital products and the paid version is even better with bonus features that help take your work to the next level. Try creating with Canva.

    Selling Digital Products Online

    You will want an e-commerce platform that will allow you to both take payments and deliver your digital products to your customers. There are many different e-commerce platforms that make this possible so let’s look at the best ones for selling digital products specifically.

    Etsy

    Etsy – I love selling on Etsy because you don’t have to find people to buy your digital products – they are already on the platform and Etsy is bringing them to you! It’s easy for beginners to start and Etsy shop and you can get 40 free listings through this link.

    Podia

    Podia –  Podia is a more robust platform that will allow you to not only sell digital downloads but also offer memberships and online courses. If you have plans to grow a full online business it’s the ideal platform to use to keep everything in one place and is cheaper than most other platforms. Get a 14 day free trial of Podia here

    Shopify

    Shopify – One of the most popular platforms to use for selling goods online. Shopify has emerged at the top of many seller’s lists for the ease of use, beautiful designs, set pricing, and powerful backend. It offers everything you need to sell digital or physical products and scale your business too. Get a free trial of Shopify here.

    WooCommerce

    WooCommerce – WooCommerce integrates easily with existing WordPress websites to sell digital downloads. WooCommerce is not specifically for digital downloads but they have made the process super simple for sellers and do not take additional fees from sales. I currently use WooCommerce to sell my digital downloads on my website. Get started with WooCommerce.

    How To Start An Etsy Shop

    If you’re not on Etsy yet, it’s a great platform to start on and learn how to sell digital products.

    If you want to start an Etsy shop in order to earn part time or full time income then this tutorial for beginners will help you get started! I know a lot of people who have never sold online before can feel intimidated which is why I created this tutorial on how to set up an Etsy shop step by step. It is very easy and seeing someone else do it makes it feel much easier!

    You can start your shop with this link for 40 free listings to jumpstart your shop without having to waste money on those first listings.

    Additionally, here are some posts about starting and growing an Etsy shop that may help you:

    How To Start A Shopify Store

    If you don’t want to sell digital products on Etsy or want to start with your own store from the beginning, then I recommend using Shopify.

    The video above is specifically tailored to opening a Shopify store for selling digital products.

    Additionally, here are some posts about Shopify that can help you:

  • How to Hide Your Etsy Shop Sales History (& REASONS WHY)

    Your Etsy sales history can be very valuable for learning your best products and what your customers want to buy. However, when that information is public by default your competitors

    How to Hide Your Etsy Shop Sales History

    Hiding your sales history on your Etsy shop is actually very, very easy.

    You can hide your sold listings page from your shop by following these two steps.

    1. Go to Shop Manager > Settings > Options.
    2. Scroll down to the Sold Listings section at the bottom of this page.
    3. Under “Want shoppers to be able to see these?” select the button for “No, hide them.”

    That’s it! Those steps will hide your Etsy sales history from anyone being able to view it. You will still be able to view the page and see what has sold over time, but buyers won’t be able to click the number of sales on your public shop homepage.

    Reasons To Hide Your Etsy Sales History

    So why exactly would you want to do this and hide all your sales from everyone? There are a few reasons to hide all of your Etsy sales history from public view:

    Past sales are not the best way to judge an Etsy shop.

    Even customers will sometimes browse past sales on a shop if it is available, but if your work has improved over time then they may not be getting the best look at your shop.

    Sales are only one indication of success on Etsy and it’s not always the full picture. The seller may also have a website where other products are more popular for example. Or you may have had to take a hiatus on your shop and decided to return and revamp your offerings. – which your sales history won’t reflect.

    Hiding your sales history and only showing the number of sales you have gives the social proof you need without oversharing too much information.

    People may want something you no longer sell.

    Unfortunately by showing your sales history you are also opening up your shop to show things that you have sold in the past but may no longer offer. People will wonder why you don’t sell it any longer or why you don’t have that specific offering even if you have multiple similar listings available.

    People can be very finicky when buying things online and seeing something they want that is not available can turn them off from your shop forever.

    It’s not as valuable as reviews.

    Your shop history and seeing what has sold is not the most important thing for potential customers to see. It’s great for them to know that you have other sales, but for new customers your reviews will be much more important.

    Instead of showing off your sales history you’ll want to focus on other things like getting more reviews on your shop.

    When you don’t, you are helping your competition.

    Everyone snoops on their competition, myself included. It’s intriguing to know what other people are selling and what products are popular. When you see a shop with lots of sales and then the history shows 2-3 products over and over then you know they are popular.

    But this unfortunately means your competitors can see your sales too. I’ll talk about the problem with Etsy competition later on in this post but just know that showing your sales history means other Etsy shops will rip off your designs.

    Hiding your sales history means hiding the secrets to your success. It slows people from focusing on your shop and hopefully redirects you from competition snooping to focusing on how to make your own shop better.

    The Problem With Etsy Competition

    I’ll be honest, the problem with Etsy is that many people on the platform are not creative enough to think up their own products. Many just want quick money and have no problem with ripping off other sellers by copying their products directly. When they can see what you are selling the most in your shop it’s easy for them to rip off your top products and even under cut your prices to steal your sales.

    Unfortunately there is no real recourse on Etsy when this happens. You can ask them to take it down or pursue a more formal takedown process that is much more work and doesn’t usually succeed. The sad truth is the Etsy competition is cut throat and succeeding there means you will have to deal with people stealing your work.

    The best option for dealing with Etsy thieves is to be proactive and give them as little information as possible. By hiding your sales history they will be unable to determine which of your products are making up the bulk of your sales. You will likely never full stop people with no morals from stealing and reselling your items, but doing things like hiding your sales at least slows them down.

    How To Start An Etsy Shop

    If you’re not on Etsy yet, it’s a great platform to start on and learn how to sell digital products.

    If you want to start an Etsy shop in order to earn part time or full time income then this tutorial for beginners will help you get started! I know a lot of people who have never sold online before can feel intimidated which is why I created this tutorial on how to set up an Etsy shop step by step. It is very easy and seeing someone else do it makes it feel much easier!

    You can start your shop with this link for 40 free listings to jumpstart your shop without having to waste money on those first listings.

    Additionally, here are some posts about starting and growing an Etsy shop that may help you:

  • How To Create Product Mockups Fast To Sell Digital Products

    Wondering how to create cool products mockups that you see on sales pages and social media? Want to sell your digital products like SVGs and PNGs by showing the customer how they will look in the real world?

    In this video, I’m showing you how to create product mockups fast and easily with PlaceIt. Affiliate links for PlaceIt will be used in this post so if you decide to create a new paid account I will make a commision.

    It took me less than 10 minutes to create multiple mockups for a product that can be used to then sell that digital product.

    Product mockups can completely change your shop and make your digital products more appealing to buyers. Many, many popular sellers know that mockups are the key to more sales.

    You’ll see these very commonly on shops that sell digital products on Etsy like the one shown above.

    What are mockups?

    Mockups, or product mockups, are an example of what your final product will look like. They are very often used to show off what a final product will look like in a real-life setting. This is especially important for things like digital products where a customer is not buying a final product from you.

    Mockups are used commonly on online stores selling digital products to help showcase what the digital product will look like once the customer is using it in the final form. For example, if you sell SVGs you may want to create product mockups of the SVG design as a tshirt so they can envision it being used in the final stage.

    Creating mockups for your shop is a great way to increase sales when you are selling digital products. Psychologically it is much easier for someone to buy an item when they can see what the final product will look like. Successful shops will often have product mockups in their listing photos to show how the product can be used.

    What Is PlaceIt?

    PlaceIt is a newer venture from Envato, one of the world’s largest creative marketplaces. PlaceIt allows you to create amazing visual assets like mockups without needing technical and artistic skills. They focus instead on ready-to-use templates where you can create your design in just seconds.

    Amazingly PlaceIt has the largest collection of mockups on the internet. They’ve got the most options and the easiest way to make mockups quickly since all you have to do is drop your design in and they do the rest. It truly makes mockups easy and efficient which means getting more sales on your items.

    I love using PlaceIt for product mockups for my shops but even better is that is not all they offer. They also have thousands of templates for logos, designs, ads, social media posts and even videos. If you want to make no face videos for YouTube, there are lots of options for templates on PlaceIt.

    Selling Digital Products Online

    You will want an e-commerce platform that will allow you to both take payments and deliver your digital products to your customers. There are many different e-commerce platforms that make this possible so let’s look at the best ones for selling digital products specifically.

    Etsy

    Etsy – I love selling on Etsy for complete beginners because you don’t have to find people to buy your digital products – they are already on the platform and Etsy is bringing them to you! It’s easy for beginners to start and Etsy shop and you can get 40 free listings through this link.

    Podia

    Podia –  Podia is a more robust platform that will allow you to not only sell digital downloads but also offer memberships and online courses. If you have plans to grow a full online business it’s the ideal platform to use to keep everything in one place and is cheaper than most other platforms. Get a 14 day free trial of Podia here

    SendOwl 

    SendOwl – This platform is specifically designed for selling digital products. You upload the digital products and start selling immediately. This platform is just $9 per month with no additional fees taken our from sales you make which can be a great option for anyone wanting less fees. Get a free trial of SendOwl here.   

    Shopify

    Shopify – One of the most popular platforms to use for selling goods online, Shopify has emerged at the top of many seller’s lists for the ease of use, beautiful designs, set pricing, and powerful backend. It offers everything you need to sell digital or physical products and scale your business too. Most of my Etsy friends have migrated to Shopify (here’s my post on moving from Etsy to Shopify). Get a free trial of Shopify here.

    WooCommerce

    WooCommerce – WooCommerce integrates easily with existing WordPress websites to sell digital downloads. WooCommerce is not specifically for digital downloads but they have made the process super simple for sellers and do not take additional fees from sales. I currently use WooCommerce to sell my digital downloads on my website. Get started with WooCommerce.

    Marketing Digital Products Online

    Once you’ve created your digital downloadable products and have them ready to be sold, you have to market them to get more sales! This is why creating product mockups is so important – it improves your marketing too potential customers.

    People won’t know your products exist without a little effort on your part. While Etsy makes this the simplest (you just need a little SEO to go!), you should still work to promote your items in oder to make sales.

    The following items are what I’ve found work best for promoting digital products to the right audience.

    MailChimp – Email marketing sells more products than anything else and should be at the top of your list when you are planning to create and sell digital products. MailChimp makes it easy and cheap to get started and can scale with your business growth. Try MailChimp for free.

    Convert Kit – Recently Convert Kit has become a leader in email marketing for creators and they’ve upped the game with additional resources for selling digital products within emails. Their commerce tool actually makes it very easy for creators to sell digital products and earn money without having an additional e-commerce website. It’s a great option if you want to market your products but not deal with a separate website. Try Convert Kit for free or a try a free trial of their premiumi

    Grow Your Passive Income With Digital Products

    Digital products are amazing because these are things that you can create once and sell online over and over creating passive income and freedom in your life. This benefits you but it also benefits the end user who gets something they need at a lower price point and quicker. Not everyone has the budget to pay top dollar for custom designed work so digital products have revolutionized how consumers are able to get what they need. It is truly a win win for us all.

    If you have been wanting to sell some type of digital products in order to earn passive income I highly recommend it! I started my Etsy shop to share what I had made for myself during my own budgeting journey. I definitely did not know everything about Etsy and have figured it out along the way while also selling thousands of dollars worth of products.

    If you want to grow on Etsy I recommend my friend Sharon’s Etsy Entrepreneur course where she walks you through the process of setting up an Etsy shop and growing it to make $1,000 a month or more. She grew her Etsy store of digital downloads to more than $1,000 a month and has inspired many people to do the same.

    Regardless of whether you continue to learn on your own or pay for education, I hope you keep going and keep creating products for the world to use and enjoy. You are capable of creating the products that can change your life while also helping others.

  • How To Raise Your Credit Score With Credit Card Use

    I’ve gone through the process of improving my credit score and I’ve also helped my husband and several friends do the same. Working on your credit to reach an 800 credit score can be both frustrating and very rewarding.

    Figuring out what works to raise your credit score takes a bit of effort, reliable resources, and time. The things you need to do to increase your credit score to 800 are well documented and anyone can do it. In this video and blog post I’ll share what I’ve learned about raising my credit score to 800 and how I used credit cards to do it.

    Learn About Credit Scores

    You are probably starting off with a bad or non-existent credit score so the world of credit seems mysterious and unknown. Luckily while the exact formula is not public information, the general knowledge of how to increase your credit score is well know.

    Learning about credit scores and how credit works will help you raise your score on your own or find the right person to help you do it. If you’re new then reading up about how to improve credit is a great place to start. I’ve share multiple posts about credit scores that can help get you start:

    There are no real secrets to credit repair and anyone can do it with a bit of self-education. Most of the things that increase your credit score are actually just solid financial principles likes paying down old debts and not spending more on credit than you can afford to pay.

    Figure Out Your Why

    Credit scores and even the use of credit can be controversial in the personal finance world. Some people are for it, some are against it, and others like me accept it as part of our current system as a tool we can use to better our life.

    Credit scores are important to regular people living their lives for a number of reasons from buying a car to purchasing a home to even getting better rates on insurance. There are a number of reasons in life why you might want a good credit score and thinking about your own personal reasons will help you during this process.

    For example, knowing you need to increase your credit score to finally purchase a home of your own is much more motivating than just the general idea of having good credit.

    In this step you can also decide if you really want to pursue a good credit score or not. Most of the things you can accomplish with good credit can also be done with no credit at all as well. However, you need to pick one route or another because ending up in the middle without a plan leaves people with bad credit that hurts more. You need to think about why you want good credit and then either commit to having the best credit possible or no credit score at all. Either option is valid but you need t commit to what is best for your situation.

    Open New Credit Strategically

    Opening new credit can boost your credit score if it’s done in the right way. You need to have a strategic plan for opening new credit so that doing so helps you and raises your credit score instead of pushing you in the wrong direction.

    Building your credit by opening multiple new lines can actually hurt you if you do it all at once. Instead of running out and opening multiple new credit cards at once, you’ll want to do one now and wait a few months until making your next move.

    Opening credit for the first time can be done by getting a commonly offered card or even getting a secured card if you can’t get approved for another. A secured card is where you put down a deposit in order to have a credit line equal to the amount of the deposit. This protects the credit lender and allows you to build a history with credit.

    Because you won’t be opening all your new credit lines right away you’ll have to accept a longer term perspective for increasing your credit score to 800. It won’t happen overnight and depending on your starting point it could even take a couple years. This is where having a reason why and having a purpose will keep you on track.

    Using Credit Cards Wisely

    How much credit you are currently using will affect your credit score. If you are only using a small percentage of the credit you could be using then your score will be higher.

    Having a good credit score doesn’t mean you need overwhelming amounts of debt. In fact, having large debt balances usually hurts your credit score because of the credit utilization factor. You never, ever want to max out your credit cards because doing so will hurt you and your credit score.

    Your credit utilization is the balance of your debt compared to the available credit you have access to. This contributes 30% to FICO score’s calculation which means it is something you need to work on asap. 

    The goal here is to pay off debt while still keeping your credit limits high. This lowers the amount of credit you are using compared to the amount you could actually use. 

    Keeping your credit utilization low will involve several things:

    • Paying down existing balances – Keeping your debt levels on credit cards lower will help you keep your credit score high. If you have high existing balances your first move will be to pay those down.
    • Use your cards with bills not spending – Personally I recommend most people don’t use credit cards for day to day spending because it usually gets out of control and leads to debt. The best way to do it is just charge a bill or two to your card so it’s active and being used but not hitting 30% use (I find 10% or less to be effective).
    • Increase credit card limits – Another way to help utilization is to increase the amount of credit you have access to that you are not actually using. A great way to do this is to increase your credit card limit by asking the company to raise it.
    • Pay your bill on time once it’s been reported to the credit bureaus – Every lender reports their existing balances to the credit bureaus at different times. This is a critical thing for you to know because you want to make sure you pay your bill before it’s overdue but after it’s been reported so it will help you credit score. While it’s normally around the statement date, the best way to find this date for each card and lender is to ask them directly.
    • Never max out your cards – This has been mentioned throughout the post but you do not want to max our your cards when trying to increase your credit score. This will just hurt your score.

    Apply for New Credit As Needed

    Having multiple accounts open for long periods of time can help your credit score but that doesn’t mean more is better.

    You don’t need to open 25 different accounts to get a good credit score. In fact I have less than 10 and have an excellent credit score.

    Be selective in the credit lines that you open. Don’t max yourself out with too many new open lines of credit. It will drop your credit score temporarily and it could potentially put you in a precarious situation.

    If you are in a credit building stage, then you should work on opening new cards strategically over time but never all at once. Wait 6 months or more between opening new credit lines.

    Don’t Obsess Over The Score Daily

    It might be tempting to pay someone to help improve your credit score quickly, but be cautious of these services. Many are not helpful but take your money for something you can do yourself.

    You can improve your credit score over time by following common sense credit guidelines and getting on a budget.

    The less you obsess about your credit score the better off you will be.  Ultimately a credit score isn’t the most important thing in your financial life and there are ways to operate around a bad credit score or no credit score at all.

    If you are planning to use credit less and don’t need it for a future mortgage or car loan or new job then your credit score will be less important.

    Remember that even if you are planning to use credit in the future, you can work with what you already have, pay things on time, use credit responsibly, and build your credit score from there.

  • Reasons To Use Credit Cards

    I used to hate credit cards. Hate. Hate. HATE.

    When I was paying off credit card debt right after college I hated those cards so much that I couldn’t bring myself to use them at all. I didn’t understand how anyone could say they actually liked using their credit cards… it just didn’t make sense!

    Credit card debt can be one of the worst types of debt because the high interest rates make it very hard to get out. When you are paying 24% interest on your debt you have to work much harder than if you are paying 2%.

    When I was paying back credit card debt I was very much in alignment with Dave Ramsey – I hated credit cards and planned to never use them again. Cancel them! Cut them up! Never again!

    Obviously, after I moved past the trauma of paying off credit card debt I eventually changed my mind and saw credit cards for what they can be: a tool to help you financially when used responsibly.

    using credit cards responsibly

    Why I Love Credit Cards Now

    Now that I’m free of credit card debt I love credit cards and credit cards are the main reason why I have an 800 credit score.

    I’ve been using my credit cards responsibly for several years now and haven’t missed a payment or paid interest again. During that time I’ve also gotten thousands of dollars in free travel and cash back rewards. Thanks to responsible credit card use I’ve benefitted far more than I was hurt by credit cards.

    The credit cards are paying me now instead of me paying them. It’s a huge lesson – if you are smart with your money you get rewarded, but if you are dumb you are penalized.

    If you are smart with your money you get rewarded, but if you are dumb you get penalized. 

    That basically sums up credit cards in a nutshell even if there is more behind the psychology of it where credit card companies work to make you spend. If you can be responsible you will be rewarded, and if you can’t then you will be penalized.

    That means you need to stick to some very important but sometimes hard too follow truths:

    • If you don’t have the actual money to pay for something then don’t use a credit card.
    • If you don’t trust yourself then don’t use a credit card. If you know you will overspend then don’t carry a card.
    • Use your credit cards for increasing your score and other benefits, not to spend more on a lifestyle you can not afford.

    Credit cards can be good. You just have to be smart.

    I’m under no illusion that I’ll get rich off using credit cards. That is often the thing mocked by certain financial gurus who are anti-credit card. I know I won’t get rich from using them and there are potential downfalls, but if you use credit cards wisely then you can be rewarded in small ways and also increase your credit score too.

    Reasons To Use Credit Cards

    There are actually more reasons to use credit cards than to not use them. If you’ve been wondering why anyone would use a credit card over a debit card, check out all of these reasons to use credit cards:

    • One time sign up bonuses (often hundreds of dollars)
    • Cash back rewards for spending
    • Reward points for travel for spending
    • Frequent flyer miles with your favorite airline
    • Safety protections from fraud
    • Protection from bad or dishonest vendors
    • Grace period before money leaves your bank account
    • Insurance and consumer protections from the company
    • Builds your credit history and raises your credit score
    • Easy spending tracking with less effort
    • Free credit score monitoring

    There are even more rewards and benefits that cards may offer but these are some of the biggest ones that are reasons why you might want to use credit cards!

    When Credit Cards Can Help You

    In order to use credit cards responsibly you have to be aware of when and how you are using them. Swiping a credit card without thinking is a slippery slope that might start off ok but can end in a credit card debt disaster.

    Credit cards can help you, but only when these things are true:

    • When you know your credit score.
    • When you use them responsibly.
    • When you pay off balances at the end of each month.
    • When you use credit cards for expenses you can afford.
    • When you use credit cards that offer rewards.
    • When you use credit cards to slowly build your credit score.
    • When you use credit cards to get extra protection.
    • When you don’t buy more than you can afford.
    • When you save more or get a store discount.
    • When you sign up for a credit card to get a killer bonus.
    • When you tae advantage of special offers from credit cards.
    • When you get a good balance transfer deal to save money.
    • When you use credit cards to reach a goal.
    • When you use them to better keep track of spending via Mint.

    I might have hated credit cards in the past, but I love them now! There are lots of situations where using credit cards can be a good thing and I’ll forever advocate for wise credit card use.

    If you feel like you can’t handle credit cards and always overspend, then that’s ok! Don’t use them. Don’t even tempt yourself with the possibilities of overspending. Either cut up the cards so you can’t use them or cancel them entirely. You don’t have to use credit cards and should never use them if you know it will lead you to a bad space financially or mentally.

    Learn More About Credit

    If you are using credit cards then you should also make sure you learn about and understand credit scores. Here are a few posts to help with that:

  • Why & How We Refinanced Our Home in 2020

    I’ve shared a lot about our first home purchase from the starter home purchase price to the easy ways we were paying it off faster to drop PMI.

    Now I’m sharing the next phase in our home ownership journey: our mortgage refinance.

    Our Home Refinance Trigger

    When mortgage rates dropped to low levels in the middle of the pandemic during 2020 we decided it was finally time to start a refinance of our loan.

    We bought our home in 2016 and had been paying $99 a month in mortgage insurance premiums every single month since then. We had not found an opportunity that made since to refinance previously because we had a decent rate at 3.625%. The few times I looked into refinancing the interest rate was not low enough to give us any financial benefit.

    Once interest rates started dipping below 3% I knew it would be a good time to refinance for us because we might finally be able to get a deal good enough to break even from closing costs within a reasonable time frame.

    While the pandemic of 2020 is tragic in many ways it was a great financial opportunity as far as interest rates on mortgages went.

    Shopping Mortgage Refinance Offers

    Once I wanted to refinance I knew it was time to shop around and find the best mortgage refinance offer.

    To compare the offers I made sure to look at several things:

    • the new interest rate compared to my rate
    • the new payment compared to my payment
    • the total amount of closing costs
    • when I would break even based on closing costs

    Those were the most important factors. It makes no sense to refinance your mortgage if you aren’t getting a better deal that will start saving you money within a reasonable time frame, especially if the home is not your “forever” home.

    I decided that I wanted the interest rate to be 2.75% and less than $2,500 in closing costs, and preferably a 15 year loan. I set out to find just what I wanted!

    I began with Rocket Mortgage / Quicken Loans because they were constantly advertising to me and I’d previously reached out and their loan officer straight up told me it wouldn’t make sense for us (I valued the honesty instead of trying to make a sale). However this time I got a different person and it was not a pleasant experience. They were the first I checked with but the rate was higher than I wanted (I wasn’t refinancing who was pushy and would not get the rate below 2.99% with over $4,000 in closing costs. When I explained their costs were higher than I wanted the sales person got pushy and tried to explain interest rates to me like I didn’t understand how much money I could be saving. I already knew I wasn’t going with them based on having the worst quote but that experience was rude but unfortunately likely works on people who aren’t as savvy who then end up paying more.

    Because that first check on my credit had opened my mortgage shopping period I then checked with every single bank I could in my city as well as local credit unions. I figured if the larger national mortgage companies weren’t providing great service then I should turn to banks that were known for doing a better job.

    I got about 10 different quotes and some got close to what I wanted but not quite. I went ahead and checked with the bank I already used for business checking because it’s a regional bank who’s been great to deal with so far. They ended up giving me the best closing cost quote: just $2,000. They also agreed to lock me in at 2.75% and wouldn’t go forward with the paperwork unless that was a sure deal. At the time I contacted them rates were bouncing back up to 3% but they assured me that they were there to get me what I wanted … and they did!

    Our Mortgage Refinance Experience

    Because of the low closing costs and great rate I went with Iberia Bank for my mortgage refinance. I figured they would likely sell my loan to a larger servicer but the deal for my mortgage was just too good to pass up.

    Because I banked with Iberia already they allowed me to waive the appraisal of our home for the refinance. I’m not sure if that is 100% the reason or if it was also because of the pandemic or that they could look at real estate websites and conservatively estimate our house at an amount that would have us past 80% loan to value ratio.

    We didn’t have to do an appraisal but we did have to still provide a lot of paperwork.

    The video above shows the things you have to provide in order to refinance out of your FHA loan to a conventional mortgage during a refinance. Here are the things we had to provide during our refinance:

    • two years of tax returns
    • two years of W-2s
    • last two paycheck stubs
    • current mortgage statement
    • current insurance information
    • credit checks
    • credit check explanation (for mortgage shopping)
    • approval for no appraisal (you might have to do an appraisal)
    • explanations for anything confusing (my work had to provide one)
    • proof of identity

    Even though you already “own” the home you are creating a new mortgage so it’s very much like the first time you buy a home. You have to provide a lot of paperwork and “prove” yourself in order to qualify. They want to know that you have the income and stability to pay this new loan.

    Our refinance experience was interesting because they were so bogged down and busy during this period because many, many people were refinancing. We actually would go long stretches without hearing anything back from the bank. At points it felt like they had forgotten us but I knew they were overwhelmed and were working on it.

    In the end the underwriting and everything went smoothly and we closed on our refinance in April 2020.

    Our New Mortgage Details

    Our new refinanced mortgage is pretty great in my opinion and it’s set up to let us pay our home off even faster than we had originally planned.

    Here are the details for our new mortgage loan:

    • New loan amount: $142,000
    • Interest rate: 2.75%
    • Loan term: 15 years
    • Monthly principal & interest: $963.64
    • Monthly payment: $1,292.96
    • NO PMI

    This fit all of the requirements I wanted when I set out to refinance our mortgage.

    The break even for us was just under two years and we knew we planned to stay at least that long and potentially keep this house forever as a rental. With that in mind it was very exciting to be saving so much money in the long run and paying off this home much faster.

    As you can see from the most recent mortgage payoff video in July 2020 we are already paying off the mortgage at a much faster rate.

    Our new mortgage payment is $93 per month more than we were paying with our original loan each month yet we are more than doubling the amount we are paying toward our principal balance each month.

    With this new refinanced mortgage loan we are starting off with our first payment sending $638.22 to reducing the principal of the loan and that number will only increase over time. In just 9 months we will be sending over $650 per month to reduce the loan balance.

    This mortgage refinance has drastically increase how fast we will pay off this loan and reduced the amount of interest we will pay. Even if this is not our home forever I’m thrilled to see my money being used for equity instead of PMI and interest!