Last year was a good year for our mortgage. More accurately, it was a good year for making strides toward getting RID of our mortgage.
Not only did our principal dip below six figures for the first time; we also managed to put one of the highest amounts of money toward our principal ever. Thanks in no small part to the fact that interest is now such a teeny part of our bill each month.
As someone who hates my mortgage, I spend a lot of time reading posts and articles from different people sharing debt pay down strategies. Of course, not everything is easily applicable. But it’s inspiring nonetheless. (Reader, I do still vividly remember how defeating it felt a few years back to read about people paying down more money than we made in an entire year!)
Then, I got to thinking about our own debt pay down story. I realized I’ve shared a lot of the sexy numbers over the years, but there’s one number I haven’t shared yet.
This journey we are on? It all started with $39.
The Starting Details on Our Mortgage
The first thing that’s worth saying is that I actually bought our house. I was 26 years old, and I had fantastic credit. My then-fiancé (now Mr. P!) did NOT. Our original paperwork included his name but when we saw what it would do to our interest rate, I gave him the boot. Just from the paperwork. Our marriage is still in tact.
We locked in a 30-year mortgage at 3.5%. In addition to a terrific rate, we got the most motivated seller around. In fact, our tax assessor couldn’t believe that it wasn’t a foreclosure or a short sale when I called to negotiate our assessment that first year.
I made the first payment (Mr. P paid half!) at the end of January 2013.
The Start of the Journey
I lurked in the blogging world for years before I started this site. Like many people who stumble into the PF world, I found Budgets are Sexy, the blog of J$. I’d read this site for quite some time and then his post on rounding up your payments really resonated with me.
On May 28, 2015, I made our first extra payment toward the principal.
I paid $39.04.
It almost seems cute, but that small amount was so powerful. In so many ways, it was the first domino that led us to exactly where we are now.
What started as a measly $39 soon became $100. The numbers grew from there, as did our motivation.
Even though we had a mortgage, I always thought of myself as debt free when I first started blogging. Then, I realized a mortgage is, in fact, debt. And I also had a zero percent car loan, but I suppose because I had the money to pay it off whenever I wanted, I didn’t really factor it in as debt. (If this isn’t proof that truly anyone can blog, I don’t know what is.)
RELATED POST: How I Fell into Six Figures of Debt Without Noticing
Once I realized we were living with six figures of debt, we got serious about figuring out how to pay it off early. First, I would sell things on Poshmark, collecting $8 here, $17 there. Then, we started putting stipend money and other small windfalls to it.
After paying off both our cars, we put that money toward making extra payments. That worked out phenomenally until we started cash-flowing advanced degrees (gotta get those teacher raises!). And then we had a baby.
My Wildest Dreams
Our loan is set to end in August of 2042.
I didn’t pay much attention to that number when we first closed on our house, but whenever I see it now, I laugh.
It feels like something out of The Jetsons. What will I need this house for when we will all be hovering somewhere in the sky?
As soon as I became aware of how much I dislike debt (yes, it’s mathematically good, but emotionally, it does a number on me), I started to daydream with my husband about when we could actually be debt free.
The wildest dream I could imagine was to own our house outright by the time I turned 40.
After all, we were two teachers living in a fairly expensive suburb. Cutting a 30 year mortgage in half seemed almost impossible, especially after adding a baby to the mix.
What We’ve Done in Seven Years
Fast forward to today. In approximately seven years, we prepaid $91,168.66 to our mortgage principal.
This past year, we paid $30,398.90 to the principal and $3,730.62 in interest. (It’s so satisfying once you crest the point where more of your money goes to the principal!) For context, that amount is more than my husband took home at the start of his career.
Where We Intend to Go
We’re starting 2020 with $89,965.34 remaining on our mortgage (plus interest). Our payments will be $1,000 a month, like it or not, before any additional payments.
Once we max out our Roths for the year, we’ll put everything extra toward our mortgage and see where we end up.
One thing is for certain, that stretch dream of being mortgage free by 40 is all but guaranteed to be our new reality.
So Tell Me…Are you working on paying down any kind of debt? Did you have some kind of financial turning point in your life?
Yes!! We are like mortgage payoff twins!! I know it’s a suboptimal way to invest money but Mrs Gov and I are super motivated by paying it off. I like to think about it as a debt snowball… we’re motivated to pay off that last 100k… we are less motivated to add an extra $15 to a retirement account for something light years away.
We are currently looking into refinancing our 15 year into a ten year because the rates are so low. I’d like to have our mortgage paid off by early retirement-definitely later than your 40 goal, but exciting for us given the number of times we’ve moved! Exciting for you, Penny! 100% debt free coming up!
Oh my goodness, yes! Laurie, you and your family are so inspiring. Very excited for you!
This is mega motivating!
I was always the one thinking to invest instead, but those numbers and that amount of “emotional debt” paid off looks amazing.
I may need to rethink my strategy with my own mortgage.
Thank you for this,
Chris
When we bought our first home we made the decision to attack the mortgage to pay it off early too. Originally we had a 25 year mortgage but as we made extra payments to it, it became a game to see how low we could get that number. 25 years became 20, then 17, 11 and then all of a sudden we paid it off on just under 5 years.
Was it the smartest decision mathematically? Probably not. But the psychological benefit trumped everything. Being mortgage free have us so many options. With more cash flow we could choose to pull back from work if we wanted to. We decided to catch up on our investing and haven’t looked back since.
Congrats Penny. I can’t wait to read the post announcing you are mortgage free!
As much as you hate your mortgage, I think I love mine just as much! Obviously, it’s still debt (not good), but it means my fixed expenses are a known quantity for the next 14.5 years! (Good!)
I wasn’t always this way… I even contributed to a crowd-sourced episode of the Fire Drill podcast sharing that I was paying it off by my estimated FIRE date, but I was converted by the others who left voicemails on that episode. Now, I’ve locked in a low fixed-rate, and I think I’ll FIRE quicker because I have that mortgage remaining. Money that would have otherwise been used for extra principal payments will now add to my nest egg.
Isn’t it incredible that PERSONAL finance is PERSONAL‽ ?
AHHHH this is so great!!!
Had no idea that post sparked something in you – thank you so much for saying so 🙂
The thing that got ME hooked on the journey was seeing peoples real life net worths floating around – particularly MyMoneyBlog.com which is still around 12 years later! That really motivated me to start tracking my own, which eventually led to me to sharing my thoughts on money too and voila! Now here we all are! 🙂
Our community here really is amazing… we are fortunate to have stumbled across it.
Go you! Love your approach of throwing little and big amounts at your debt. $20 here and there on top of your extra payment seems so little but makes a big difference cause all those little extras add up over time. Am doing same with own mortgage and building shares and am surprised at how it all adds up.
It does add up quickly! Surprisingly slow. I think for us, we really just figured we would make the regular payments because we couldn’t double them right away. But you don’t have to always make huge extra payments to make a dent. I’m glad we learned that lesson!
We made a final lump sum payment to knock out the mortgage this fall and it still doesn’t fee real yet. I know that mathematically it may have been better to keep the mortgage (we only had 3 years left of a 15 year) and it could have offered more options for pulling equity out to fund other real estate investments, but it was such a big milestone for us to reach. Long before we even considered that we could invest and build a nest egg and consider stopping work before 65 we knew we were investing in our house that we had no intention of “trading up”. The lump sum we used to make the final payment was part of our emergency fund which I realized was over-sized if we no longer needed to make that mortgage payment so I considered it a trade. Just wait until you get the balance down to the last $20-30k, it’s so close and yet so far.
For many years we weren’t able to max all of our retirement accounts and have extra money to pay toward the house so we kind of split the difference. Once our income rose and expenses fell enough to provide us with the opportunity to do both we couldn’t resist. We
10 yrs left to go! Then divorce so back to 15 yrs. Early retirement so back to 30 yrs, just in case. 3.5 yrs later I am on track to pay off in 9 yrs!
Best of luck and congrats on the big progress!
This reminds me very much about our student loan debt payoff. At the start, we were losing literally thousands each month to interest. As our payoff proceeded, seeing the amount lost to interest each month decreasing was almost as satisfying as the overall balance dropping. I remember refinancing our loans when the interest portion of our monthly payment dropped below four figures and I was ecstatic. That helped keep us motivated when the large balance itself didn’t seem to budge much in the beginning.
Now that our student loans are gone, we’re left with the mortgage. New focus, same goal. How aggressive we’ll be w/ a low interest fixed rate is another question.
Congrats on the progress to date! I love seeing the story tracing back your expedited paydown to that first $39 and change.
You have an incredible journey! Can’t wait to keep following along with your mortgage payoff. 🙂
“Did you have some kind of financial turning point in your life?”
Yes. I’d been working 3-4 years, making good money, but accumulating a little bit of debt on my credit card. I also had a car loan. And I decided it was time to learn about investing (I knew absolutely nothing about it). I began reading ALL the pf books in my public library, including YMOYL and the Millionaire Next Door, and I realized that being in debt was not, in fact, the only way to live, and that getting out of debt was at least as important as learning how to invest.
However, I should also mention that I was surrounded by coworkers who talked about investing, and peers who talked about the disadvantages of debt. Environment matters. I grew up working class poor. What I knew was Christmas savings accounts and layaway and making minimum payments on credit cards and renting apartments and not always having enough money to pay all the bills. You don’t know what you don’t know, and if I hadn’t gotten an education that led to a work environment that exposed me to the ideas of investing and not carrying debt, I don’t know if or when I would have found them on my own (this was pre-internet days).
Anyway, I started paying down the principal on my credit card debt, and then a small windfall helped me pay it off. And then I worked on paying off my car loan, and retired that debt early. I created an emergency fund, and I started investing. And now (decades later), Spousal Unit & I are somewhere between Stage 5 (Independence) and Stage 6 (Abundance) of J.D. Roth’s Stages of Financial Freedom.
TL;DR Peer pressure to retire credit card debt and to start investing led to a life-long interest in personal finance, marrying someone frugal and fiscally responsible, and both of us retiring early in a dream location.
We’re done. In retrospect I wish we’d truly maxed out our retirement instead but I didn’t know we’d be in such a good financial position now. Still, we could have stopped paying so much into retirement if money had gotten tight.
This is the struggle we’ve weighed all along. We try to focus on our Roths first and get that taken care of. But I imagine it’s going to be more tempting to throw everything at the mortgage once the balance gets smaller.
Yes! This!
We’re at the three-year mark on paying off our house. It feels slow, but I’m excited for that day—it’ll come faster than we realize.
It absolutely will! Congrats on all the work and progress so far!
This is a great story of you just have to start somewhere. It’s the small steps turning into mindset shifts that truly change us.
My financial turning point happened when I found myself with a strong desire to take control of my life. And the easiest place for me to start was with my finances. It started with paying off those car and student loans (I’ve kept the mortgage) and snowballed into cash-flowing large purchases and finally having an emergency fund.
I’m putting way more into retirement-aimed account (not tax advantaged, sadly) to make up for lost time but I think of you every time I round up a mortgage payment just a bit. I know it doesn’t feel like much when I just add another $40 to our payment but that’s ok. It will add up eventually! Our original payoff date was set in 2047, and we’ve shaved off several years with a couple big payments to principal when we had to get the monthly payment down to a more manageable number. We’ll see if our smaller payments to principle can shave off another 4 years. Mostly I can’t wait until most of our payments go toward principle, not interest.
Ahhhh! I’m right back at this conundrum again! You make me want to pay off my house sooner, but I owe far more than you do. I decided back in October to put a chunk of savings into investments instead of my house, and I’m fine with that decision. I’ve overpaid my mortgage nearly every month since I bought my house over 5 years ago, but I’m back to square one with deciding whether or not to continue the extra $212 I pay each month. Part of me wants to reduce it to $50 per month and invest the remainder, but I love seeing that principal decrease! It’s totally a psychological thing. And part of me fears I won’t be FI until I’m debt-free (this is my only debt), yet I know that’s not true. Of course, reaching financial freedom sooner with my investments would be awesome!!
Nice breakdown of your progress. Way to go!!
Wow! Its crazy to think how small actions can lead to such huge changes in your life. I don’t own a house yet but I am trying to save up for one. We are putting as much money into savings as possible, even if it means transferring small amounts at a time.
Good on you and your hubby. Trying to pay down debt but struggling as things continue to come up unexpectedly. Just started selling things on Poshmark and intend to apply all proceeds towards that debt. Looking for other streams of income and have two others in the works. Just discovered blogs like J$ over the last year – wish I’d discovered earlier. My morning often starts reading these blogs and I’m finding them very helpful.
J$’s blog is a gem. Blogs are the perfect way to start the day. 😀 It motivates me a lot!
Poshmark is a great way to start! Best of luck on your other streams of income, too!
My family also sends extra payments we should be debt free in 7 years. I sure wish we started sooner. We will be in our mid 40’s by then.
Being debt-free in your 40s is a huge accomplishment. Congrats on all of your hard work, Erica!
Our only debt is our house. We bought it in 2017 for $225k and financed $179k we now owe under 149k. We were paying a good bit towards it in 2018 and then took a break to save for a 2nd car. Now we are back at it. We hope To be under 130k by the end of this year. We have 2 kids and live off one income under 100k.
Congrats on the amazing progress!