Somewhere in the swirl of a pandemic, long overdue protests, and a slew of personal ups and downs, we paid our taxes. We also made a really exciting discovery during the deepest financial dive we do all year. A money milestone that I’ve been pursuing relentlessly unfolded: we could pay off our mortgage.
But we haven’t.
This isn’t precisely a new milestone. We’ve had an extra beefy emergency fund for years. And for years, people have tried to convince me to put it to work somewhere. Invest, consider real estate, pay down debt. Truthfully, our emergency fund worked harder than anyone ever gave it credit for. When the economy hit the skids a few months ago, we knew we could push through largely unfazed when it comes to our finances thanks to that fund.
What made our tax-time discovery really exciting, though, is that we realized our mortgage balance was dropping low enough that we could actually pay it off and still have a year’s worth of expenses covered.
It was truly thrilling. We could be debt free and still come away with an emergency fund that many other people would consider sufficiently funded.
But now, after working toward this mortgage freedom goal since the moment I realized mortgages were debt, I’ve stopped.
Here’s why we pushed pause and when we think we will actually submit that final payment.
Why We Aren’t Paying Off Our Mortgage Quite Yet
There’s no one single reason that made us hesitate on our quest to be mortgage free. In fact, there are dozens of ideas we’ve mulled over. These are the big three reasons that we decided to wait a little longer for the virtual confetti storm.
Pandemics Mean to Expect the Unexpected
We are still in the midst of a pandemic. I’m stating it because there seems to be some confusion judging by the volume of the house party two doors down. While no one could have anticipated the start of this pandemic, I think it’s foolhardy to pretend it’s over. Of course, I certainly hope it’s under control and we’ve weathered the worst of it, but I’m choosing to keep my eyes wide open. That means I know these uncertainties aren’t going anyway.
Unlike millions of other Americans, my husband and I are both in the incredibly fortunate position to know–barring catastrophe–we will both collect our income for another school year. However, education is not nearly as stable as many people believe. Of course, teachers early in their careers are much more vulnerable. But in cases of deep economic turmoil, there are cuts that will impact virtually everyone. Based on when budgets are approved and when funding does (or doesn’t) show up, the impacts don’t ripple through education right away. But make no mistake about it, they’re coming.
Earlier, I said that my husband and I both have jobs for this year barring catastrophe. While it wasn’t declared a catastrophe, this past school year ended with an Act of God and a State of Emergency. Our governor pushed to ensure that school staff received their salaries throughout remote learning. However, our district pushed back hard on extra duty pay. It wasn’t a deal breaker for us, but my paychecks came up over $100 less (after taxes!) than originally expected each payday. If, for whatever reason, we find ourselves in the position of remote learning again, I am not certain what our income would look like.
The Cost of Owning a Home and Being a Parent
Houses and kids are expensive. Thankfully, we only have one of each. If we paid off our mortgage tomorrow, we could cover a year’s worth of typical expenses. But that doesn’t account for things like losing both jobs and having to pick up insurance on the exchange or take COBRA. It also doesn’t account for a year’s worth of regular expenses coupled with new windows or newly discovered health conditions.
Given the din of uncertainty that is hovering in the background, I don’t want to put ourselves in a position where we no longer feel like we could do what was best for our child. We also don’t want to unearth a big issue with our house and have to make do with temporary fixes until we can afford a real solution.
Looking Out for Others
We are not the most generous people I know online or in real life. Still, giving always has been important to me, and it’s something I’m proud to have been able to maintain these past few months. In fact, one of the only things that has given me a small sense of control and voice when looking at the challenges facing our country is giving.
I feel a bit better is to know that I can participating in giving challenges and donate to GoFundMe links and support other charities without having to worry about where the money is coming from. In addition to not wanting to skimp on peace of mind for our family and our home, we also want to be able to continue to freely support our community.
When We Will Pay Off Our Mortgage
When we first started this quest to be mortgage free, we were not even close to pulling in a combined six figures. In my wildest dreams, I thought it would be fantastic to be debt free by 40. That would have meant shaving off 17 years on a 30-year mortgage.
Our expenses have gone up now that we are a family of three. But our income has as well. Now, we’ve crested that combined six figure mark, thanks to me doubling my teacher salary and my husband growing his as well. That means my most recent wildest dream is to pay off our house when I’m 35.
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Based on what is sitting in the bank right now, it seems shockingly possible. We will continue to make our regular monthly payments, adding extra payments whenever we can. Once the balance is small enough, we’ll wipe out the rest. Depending on how generously I interpret my goal, we have 10-20 months or so to figure it out.
While I expected to feel frustrated and defeated even when we made the decision to wait, it feels anything but. We could erase our mortgage if we wanted to or needed to. Knowing that we can wade through the unexpected mostly financially in tact seems more important, at least in this moment.
So Tell Me…Do you think we should be itching to pay it off? Are we better off waiting? What are you doing with your debt or your money goals at this moment in time?
Whoooo!
Just having that option is an amazing accomplishment that you’ve both worked so hard for!
I agree with you that there are too many uncertainties at this time, especially with education to make such a big decision. I’m 100% team pay off the mortgage but in this situation, I’d delay it a bit further as well till things are more concrete.
Massive accomplishment having the option!
Anxiously awaiting that payoff post though ?
I am also anxiously awaiting that payoff post! It’s going to be my dancing toddler debt payoff GIF x10000. That’s it 😉
I think keeping a reserve is wise, given the circumstances.
Thanks! I think so, too. Knowing we have the option is a great feeling, but I also really want to see what the fall brings with our jobs!
When you get near the end of the mortgage, you just don’t save that much money by paying it off early. When I realized we’d be saving at most like $500 of tomorrow’s money, I stopped prepaying (except to round up the numbers to make them even). Early prepayments when your regular payment is mostly interest are just worth so much more than late prepayments when your regular payment is mostly principal.
Personally in your situation, I’d make a bigger payment now (but enough that you still have a healthy emergency fund) and then not pay it off right away when it got smaller. It doesn’t have to be all or nothing.
Get Rich Slowly has an excellent mortgage prepayment spreadsheet somewhere that makes it really easy to see how much interest you will save (and how many months you will shave off) with different prepayment schemes.
That’s a really good point!
We’ve been paying extra on our mortgage since we got it, and have just now crossed the line where we pay more in principal than interest each month.
Which is great, but it’ll still be a while for us until it makes no sense to prepay.
Penny, I think it is awesome that you guys are so close to paying it off in your 30s!
You have given a lot of thought and consideration to this situation. The one benefit of being mortgage free that may factor in here is how quickly your savings will grow after. Without a regular mortgage payment your monthly cash flow will be much higher therefore potentially accelerating your savings. I know when we paid off our mortgage it felt like we were printing money every month.
All that being said, this pandemic is unpredictable. Normally we would be investing more regularly but have decided to increase our emergency fund for the time being. As a fellow teacher I also feel like I have stable employment for the next school but there are a lot of unknown factors. It’s better to be comfortable than stressed.
When this all passes over and things are a bit more stable then it will be time to deploy the cash and reach some milestones.
Way to go! It’s a huge milestone that comes with a lot of peace of mind. I, too, am in “there’s a pandemic, let’s not do anything risky with our savings”, and I’m glad we avoided putting out emergency fund in the market.
Knowing we have savings, even with all of *this* going on has helped to calm at least part of my worries. Still plenty worried about everything else!
Wow. I am impressed with your emergency fund and your mortgage paying off abilities! I agree, things are super unpredictable right now. Because of this we are focusing on building up our emergency fund and paying down some debt from last year and it is really hard to not think about what else we could be doing with the money in our emergency fund. Like I could pay off our super low car payment but it wouldn’t save us enough every month to make a difference and we are only paying about $12 a month in interest which isn’t much. We should have it paid off by next spring so that money is way better off in our emergency fund right now.
I do find myself playing a lot of “what if” money mind games, and I’m trying to stop myself from doing that. I think you’re right to prioritize your emergency fund!
I was on track to pay off my mortgage in August of this year – but then the pandemic hit, and while my job is still ok – things are definitely more uncertain than I’d like.
I skipped paying extra on my mortgage in April and May – which pushed my payoff date out a couple of months. I put that extra money in my savings account as a quick efund – and ended up needing to use it to cover some unexpected things.
This morning I did my “regular” extra payment – and at this point I am planning on continuing as I have been and pay off my mortgage in November – the money I save at this point by paying extra, is minimal, as someone else pointed out.
But the psychological benefit of finishing this year – making that goal of paying off my 30 year loan in 10 years – is pretty big, and I’m not willing to let that slip away, even by a few months 😀
Then I can spend 2021 beefing up my emergency fund with what I *had* been putting toward the mortgage every month – and that will knock off another goal!
I love how you acknowledge the psychological benefit. I think–for me anyway!–it motivates me mentally to keep going with this goal and with others. Good luck to you!
I’d wallow in the satisfaction of knowing I COULD pay off if I wanted to and still have a year of money left. Probably wouldn’t do it either as much as I’d itch to, because while we may be pretty sure we have income for another year, I never take income for granted more than one year out. In a pandemic? That’s a no-squared. I might make a big payment, though, just to hit the principal with a good wallop.
With one thing and another, I often second guess my huge cash cushion but the security of knowing I don’t have to sell stocks low because I need the cash today, in a potentially crappy situation of job loss and/or illness is pretty huge.
Way to go! Even though you’re not rushing out to pay it down right this second, it’s still pretty cool that you’re in a position to be able to do that, if you wanted to. I think the logic makes sense, though. We’ve made a similar decision with the student loan on our end — we’re not at “pay it off completely” level, but we’re stashing away all the extras for now since it just…makes more sense to hold it in savings, given the uncertainty of everything. Still, I feel good knowing it’s there and that, hopefully, when things get back to some semblance of normal, we can start putting it to the intended use.
I think, given your reasons, you’re making a wise decision. Nicoleandmaggie makes a great argument too for not rushing to pay it off. And if you’re about 20 months from paying it off, why bother rushing it when you can invest the money or keep some liquid for any future catastrophes that hopefully never strike? If you’re mainly paying the principal, take your time. It’ll be gone soon enough. Great job! I wish I was that close to being mortgage free!
It’s completely psychological, and it always has been. But yes, I’m just trying to savor being able to be done with it if we want. Thank you and good luck to you!
Brilliant post! Im excited for you to pay it off, I’m working my way towards paying mine off too at the moment, I’m currently just over 3 years from Mortgage Freedom and i cannot wait. If anyone is interested in paying their mortgage off quickly, check out my post that discusses The Magic Of Over-Payments… http://planonfire.com/2020/06/16/the-magic-of-over-payments/
That’s awesome that you’re only three years out. Congrats!
“…our mortgage balance [is] low enough that we could actually pay it off and still have a year’s worth of expenses covered.”
Gurl, please. Pay off your dang mortgage. OR find an investment for all of the cash you have sitting there beyond a 12 month EF.
If you miss the debt, you can get another mortgage! And at historically low interest rates! But you won’t. It will give you added peace of mind and enable you to take more risk with your career(s) and investments and make you feel super proud and accomplished and financially ahead of everyone else.
I’m a banker, and I’m not averse to leverage. But you apparently have a **it ton of CASH money just sitting there losing value to inflation in case of…what? The worst case scenario – that you pay off your mortgage and THEN both lose your jobs and THEN neither of you can figure out how to earn a dime OR qualify for any government benefits for more than 12 months – is so far fetched it’s not really worth considering. If that happens we’ll all be in Great Depression II or WWIII and up a creek, savings or no. And anyway, you owe the money regardless. If the worst case happens at least you’ll own your home and can’t be foreclosed upon.
You’re doing amazing! Don’t let fear guide you. If your home was paid off you wouldn’t borrow on it to keep a pile of cash there “just in case.” In case of a giving emergency? Haha you have a good heard but you are reaching there I have to say.