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moving numbers around

Well, we pushed the button yesterday, and it will not actually take effect until tomorrow, but I figure it is worth calling today.

Yesterday, we paid off 66% of our home’s mortgage. Once it posts tomorrow, we will have paid off 75% of the total mortgage between FEB10 when we bought it and tomorrow. And we plan on paying off the remainder of the balance sometime next year.

Why? Fairly simple: our mortgage has a 4.75% interest rate; can you name a single guaranteed bank account, fund, or other monetary device that has that rate of return these days?

The "interest" portion of our monthly mortgage payment will go from ~60% to ~20%, meaning we pay down the principle on the house that much faster, and even if we do not pay off the mortgage next year, our total interest cost will have gone from an additional 50% of the home’s original purchase price to a scant 10% (in the interests of disclosure, we have been overpaying our monthly payments by about 15% every month).

I cannot imagine our mortgage holder is terribly pleased with us, given the amount of money we are denying them, but considering how our investments have been doing of late, I cannot say as though I care that much.

And, yes, we are well aware that it is entirely possible, if not probable, that our house will not sell for what we paid for it, but that does not really matter, does it? For however long we live in the house, we still would have been having to pay down the interest on our mortgage, and that is money we never get back, regardless of how much the house sells for or does not.

Our current goal is to be 100% debt free while we are still 30, and the mortgage is the only thing still in the way. I dare believe we can accomplish that.

20 comments to moving numbers around

  • PT

    Coolness.

    Just imagine how much money you’ll have coming in once you stop renting from the bank.

  • Mark@Sea

    That’s a great feeling. Congratulations!

  • The best part is that if you get in a financial bind, you can’t lose your house because you aren’t paying the note. You just have to pay utilities, food, and tax. That’s much easier.

  • PT

    @ Sean D Sorrentino:

    I’ve always thought of setting up an endowment much like universities do to pay the property tax, and have a trust set up to control and run it. You could then never worry about property being taken away for failure to pay tax.

    You can be independent of the utilities but never truly independent of the tax man.

  • Inspirational.

    The mortgage is the only debt we have and it should be done in < 10. I'd MUCH prefer to tackle it like you are, but we've got chirruns to clothe and feed, and it*is* difficult to do without for a few years like that. Hence why it's inspirational.

    I have no car debt, no home equity line of credit, and the only credit card we use gets paid off EVERY SINGLE MONTH WITHOUT FAIL (because we've already saved the money before we spend it). We just got back from a week's vacation in TN, and it was all paid for in advance. Christmas is the same way. We start in January, start putting money aside, and by Christmas, we don't have a single bill.

    Oh, and our credit score? Still in the 800's. Even after killing off all but one card.

    It can be done. You're proof of that. Impressive.

  • We’re not doing QUITE so well, but we ARE putting extra in the mortgage payment every month, and extra on the car payment too. The credit cards WERE paid off, and will be again when the .GOV tax rebate for our home improvement hits in February….Otherwise we don’t run on credit and still manage to stash away something into savings every week, and its not like we’re rich or something! So yes, its entirely possible!

  • rickn8or

    BTDT. I highly recommend it.

    Seeing that mortgage balance at “$0.00″ was almost as good as sex. Almost.

    Being completely out of debt might came in pretty handy last November when I had to quit work due to spinal cord tumor surgery.

    Now if I can just convince Social Security I’m not able to work while convincing my kids I don’t need a keeper…

  • We did that too, and pay-off the cards monthly – then we took out a partial 2nd on the house and banked some of the cash because it maintains a higher credit report score and keeps other financial options open. It was good to have a zero on the Mortgage and on the cards etc., but it’s also good to have a strong financial position vis-a-vis where you want to go/or to leverage from a position of strength…

  • Rob Crawford

    Here I was feeling good about paying off my car. Well done!

  • @ PT: Oh, trust me, I am already figuring out the vacations we can take, and the firearms we can buy ;).

    And there is an interesting argument about how, since we can never be free of the tax man, we never really “own” our land and home; after all, if you stop paying taxes long enough, see how well you “own” that dirt.

    @ Mark@Sea: Thanks!

    @ Sean D Sorrentino: And, ideally, unless the housing market completely crashes, once we get here, we can pretty much stay here – we plan on basically paying cash for any future homes, or, at least, paying off the temporary mortgage once the previous one sells.

    @ Robb Allen: So our situation was pretty much a perfect storm of choices: we both made it through college without any student loans, we have both worked since college, we have no children, our spending habits are fairly controlled, we have been saving as much money as we possibly can, both our cars are used (though mine is something of an exception), we do not have whizbang toys, etc. etc. etc.

    I will not deny that I have a decently-paying job and Better Half has a very-well-paying job, but those above choices are all things people themselves could choose if they had wanted to.

    On the flip side, you have kids, which is a reward in and of itself if my understanding is correct. Other folks do have whizbang toys. Or newer cars. Or whatnot. It is all choices.

    Me, I think this will work out for us in the long run :).

    @ Ruth: Paying a little extra every month is the ideal way of approaching mortgages. We took out a 30-year, but paid it down like it was a 15; that alone was going to save us megabucks in the end, but this works out better.

    As the saying goes, everything in moderation, including moderation, and so long as your spending is controlled and life does not hit the fan spontaneously, “debt” is something you can largely ignore.

    @ rickn8or: We are making plans on what we can do with the mortgage note once we get it paid off… a post tomorrow is my favorite one ;).

    @ NotClauswitz: Yup, different strategies for different situations. We are pretty much counting on paying cash for almost everything in the future once we get the house paid off and once our bank accounts recover from it, so credit ratings are somewhat immaterial to us. That said, we do maintain a credit card for that purpose, so at least there is that.

    @ Rob Crawford: Hey, baby steps! Start there, move on to the mortgage and everything else :).

  • Joe in Reno

    If you’ve paid your loan down that much you should be able to cancel your mortgage insurance as well, and save even more. Some times you have to kick the mortgage co. in the butt but once you’ve paid a mortgage down to 75% of face value, I don’t believe they can force you to keep it. At least that was the way it worked through the 90′s.

  • Better Half

    @ Joe in Reno:@ Thanks for the tip, but I’m assuming you’re referring to PMI? If so, we’ve been fortunate never to have had on our loan, since we had over a 20% downpayment. The only insurance we’re paying with our mortgage is homeowners via escrow.

  • Just had to point-out the whole “No Good Deed Goes Unpunished” aspect. :-)

  • Jim

    Congratulations.

    It took me about 15 years beyond age thirty to make it — kids plus a wife with health problems — but it was worth the pain. Without a mortgage and consumer debt, every decision you need to make is easier.

    (Found you at Joel’s place.)

  • @ Joe in Reno: What she said :).

    @ NotClauswitz: Quite true, but we can live with that “punishment”.

    @ Jim: Yeah, from the money we will not be spending on a mortgage alone, life will be a lot easier, much less not having to worry about the huge debt hanging over our heads…

  • OTOH, I’m about to go into debt for the first time in two years. Since I’m planning to buy a house on a 15-year fixed mortgage, at least it’s “good” debt. Even Dave Ramsey wouldn’t yell at me for such a debt*…. ;-)

    *He would, admittedly, fuss at me some for not having a 20% down payment on a VA loan, but I plan to borrow well less than any mortgage underwriter would happily loan me, so there is that.

  • Bravo, that is awesome. I bought a home last year on a 15-year fixed and I’m overpaying my mortgage as well, but I don’t think I’ll pay it off quite as young as 30. I would estimate 35. :)

  • @ AuricTech: Yeah, honestly, I have never really considered a mortgage (that you can actually afford) to be a “debt” any more; no one can really buy a house cash at least the first few times around, and having a house beats the hell out of an apartment, so… yeah.

    @ Eseell: Hey, overpaying a 15 is an accomplishment in and of itself. We got the 30 with the intention of paying it off at a 15 rate.

  • Super. We have been DF since age 30 (now 70+) and the longer you live that way the harder it is to remember when you didn’t. You will never be sorry, I guarantee it.

  • Trust me, once we hit that magic threshold, we have absolutely no intentions of turning back.

    Unless someone starts selling tickets to the moon.



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