For starters, I don’t think paying my mortgage off early is a
stupid idea. I think it’s a smart move. I read a book, The Power of Starting
Something Stupid, and that’s why my blog is titled so. The book talks about
starting something “brilliantly stupid” vs. “foolishly stupid”.
Some Background
In
2002, my then fiancé, now husband bought a townhouse and over the course of the
next 12 years, it became a rental property. We refinanced at least twice, were
told we needed to take out equity in the process, and after we sold the house
12 years later, we had only paid off $10,000. That’s it! We bought a new house
9 months ago, and we’ve already paid off $5,000. I know $5,000 isn’t a lot when
comparing it to a $370,000 loan, but when I think about it in comparison to
only paying $10,000 off in 12 years, then it does.
Why?
I am 36 years old. My parents are in their 60’s and still paying
off their house that they bought when I was 2 years old. When I think about
where I want to be when I’m my parents age, I don’t want to have a mortgage that
will seriously decrease the amount of retirement my husband and I are living
on. A month after moving into our new-to-us house, I enrolled in a program so
we make half a mortgage payment every other week. Over the course of the year,
we will make a total of one extra payment. Making a payment every other week,
instead of just once a month, will let us pay off our mortgage over 5 years
early. If we were to add an additional $25 to each payment, we’d cut another
year off our mortgage. That’s only an extra $650 a year. That got me wondering
if we put even more money when we had it available to our mortgage, maybe we
could pay it off much earlier than expected.
Who are we?
We are a family of 5. My husband and I have three boys and live
in a small 1200 sq. ft. 2 bedroom, 1 bathroom house in a coastal community in
Southern California. My husband has a job as a firefighter and I quit my job 3
years ago to stay home with my boys. We aren’t rich, but we aren’t poor either.
We live on a budget, but we are able to save money after bills are paid. Some
months we go over budget (think one or two hundred dollars, not thousands) and I
pull from savings to make up for it and some months we are under budget. I decided
every month we are under budget, I am going to take the extra money and put it
towards the mortgage. That way, I feel like I don’t really “see” the money that
goes towards the mortgage. To me, that money wasn’t “available” for me to use anyway.
For example, we have a monthly Costco budget. We go once a month and rarely use
the entire lot that we’ve allowed for our Costco run. Next month, if we have
$50 left over, it will go towards the mortgage. Now, if we also go $50 over our
grocery budget, instead of the money we have left over from Costco evening
things out, that $50 I will take from Savings. I’m hoping that doing it this
way will help keep me from going over our allotted budget for items.
We have no intention of refinancing…ever! We have a 3.25%
interest rate and the only reason we decided we would ever refinance is in
order to get rid of our PMI payment which is $366/month. We currently do not
have any debt other than our mortgage. We own all of our cars and pay our
credit cards down to $0 every month. We feel like we’ve been responsible with
our money in the past, but not quite to this extent. In the past, we have been
$50,000 in debt and foreclosed on a house. I don’t want to paint the picture
that we were irresponsible. It was something that we don’t think really could
have been avoided. My husband went from being a top step firefighter/paramedic
in one department to an entry level firefighter at another department at the
same time that I was taken off work by my doctor during my 2nd
pregnancy due to complications (think hospital and my mom taking a month off
work so she could take care of me and my sister taking my other son because I
couldn’t care for him). I was off work for 11 months. We had $20,000
in savings that we exhausted before getting into debt and foreclosing on our
home. The experience was something that at one time I was really embarrassed of,
but now it’s not. This, or something like this has happened to so many people and
because of the experience, I think we’re that much more careful so that it won’t
happen again.
Other than this initial entry, I don’t really have any intention
of making journaling entries like this one. Instead, I want to periodically
post our mortgage payment, any extra payments and where the money came from
that we used to make the extra payment along with a new payoff date, if I can
figure that out. Why am I doing this so everyone can see? Maybe I can help
someone else realize that they don’t have to wait 30 years to pay off their
mortgage, and that a few dollars, in relation to a mortgage, really can go a long way. It also helps make
me accountable for doing what I said I’d do, so I’ll follow through on what I
said I’d do (and really want to do)!
As of February 6, 2014
Original
loan amount $370,000Principal balance $364.868
Payoff date 2038
