July 2017, Sold Taxable Account to Pay Down Mortgage!

Its been a long time since I made a post. I believe the last post I made was back in January 2017. A lot has happened in my life.

First and most importantly I am now married! I got married earlier this year on May 7th, 2017 and it is the best thing to happen in my life!

Now that we are married, we’ve combined our income, savings, and expenses. Before we were married, we bought a house together back in March 2016 with a $230,000 mortgage. Since then, we’ve paid our mortgage down to $217,525. After obsessing over the amortization chart and the amount of interest that we’re paying, we’ve decided to do some research on how to tackle this debt.

On our conquest to find some answers to our debt, we’ve recently found a podcast that encourages people to get out of debt early by a guy named Dave Ramsey. Before we stumbled onto his podcast, we have never heard of this guy or any of the books that he’s written. We must have been hiding under a rock but better late than never I suppose!

Since then, we have been obsessing over his show which shows countless couples and individuals coming on to ask for help to get out of their debt based on their unique situation. However, our debt situation is not as nearly as bad as these callers who usually carry a $50,000 to $500,000 student loan debt, a car payment that is more than a quarter of their monthly take come pay while bringing in a household income of $40,000 a year!

First, both of us have 0 student loan debt with a very minimal car loan and credit card debt. To look further and to compare our situation with the 7 baby steps that Dave Ramsey is famous for to get people out of debt early, we started following his steps.

For those of you who don’t know the 7 baby steps it is as follows:

  1. Baby Step 1 – $1,000 to start an Emergency Fund.
  2. Baby Step 2 – Pay off all debt using the Debt Snowball.
  3. Baby Step 3 – 3 to 6 months of expenses in savings.
  4. Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement.
  5. Baby Step 5 – College funding for children.
  6. Baby Step 6 – Pay off home early.
  7. Baby Step 7 – Build wealth and give.

Baby steps 1 was already achieved as we easily have more than $1,000 in cash savings. Now for baby step 2, my wife’s 2013 Corolla is already fully paid for but I do have $3250 left over on my 2015 Honda Accord. Originally at the beginning of June 2017, my car loan was at $6980. Since then we have paid off using the debt snowball method by throwing our monthly earnings outside of our regular expenses at it. We expect to completely pay off the car loan by the end of July! We also have 0 credit card debt as well.

The biggest reasons for the change of mindset in regards to investing happened right after I was married. I started to think differently than I had compared to when I was single. Looking into the future and wanting to have children, I realize that my priorities are different. I believe that by following these 7 baby steps that my family and I will benefit the most in life by getting out of debt as soon as possible. Also it bothered the hell out of me that my net worth in actuality was in the negative territory after factoring in this massive mortgage. I hate being in debt and do not want to be a slave to the lender.

Now which lead me to one of the hardest decisions that I’ve had to make, to sell my taxable account to pay down our mortgage!

I know that there are many of you who disagree with our decision and would rather prefer to be invested in the stock market over paying down the mortgage early as possible. The on going debate over paying off the mortgage with low interest rate over the span of 15-30 years (30 years in my case) vs investing in the market is a hot debate. I believe that the right decision depends on the situation and for us we believe that paying off the mortgage early was the right choice for us. Our current mortgage is pretty low at 3.875% but owning our property out-right and having the peace of mind of not worrying about future mortgage payment is worth it to us. It definitely would give us the flexibility if one of us would lose our jobs in the future or when my wife decides to take off for a while and go part time while taking care of the kids.

We just love the idea of not having a monthly mortgage payment and rather only pay the property tax, HOA, and home insurance. Our current mortgage that includes our escrow + interest is $2199 a month but once we pay off that pesky mortgage, we estimate to pay around $926 a month instead. Once this is achieved, there will be so much more cash flow a month that we can max out our 401k and start to ramp up our taxable account again! Our ultimate plan is to pay off our mortgage in around 3 years.

We aren’t totally out of the market either as we are still funding our 401ks and the Roth IRA. I still have my dividend portfolio through my 401k plan through a brokerage link account with Fidelity that allows me to buy individual stocks. I’ve also increased my 401k contribution to 10% from 6%. My company matches 100% of 6%, which gives me enough to continue my dividend investing. My wife has also increased her 401k contribution to 7% from 6%. The extra amount after paying down our mortgage, we are funding the IRA account, which will fluctuate monthly. But our number one priority is to get rid of our mortgage as soon as possible!

It will be a huge battle for the next few years but I know that we can and will do this! Between our salary and bonuses that we each receive yearly, there is a very good chance of paying off our mortgage in 2 1/2 years! It also really depends on our expenses and living a more frugal life.

So far my taxable account was sold at $45,126. Once we pay down the principal of our current mortgage balance of $217,525, it will go down to $162,525. This instantly saves us $177.61 of interest per month! I’m also thinking of starting an amortization page to keep track of our mortgage to the day we pay it off. I hope you guys check in occasionally to follow us on our journey. I cannot wait until the day that our mortgage is paid off so that we can allocate all the cash flow back into our taxable account.

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8 thoughts on “July 2017, Sold Taxable Account to Pay Down Mortgage!

  1. cp913 July 3, 2017 / 12:44 am

    I can’t fault you for wanting to cut down on your mortgage debt. Whatever makes you sleep better at night and cuts down on unneeded stress.

    Like

    • Dividend Liberty July 3, 2017 / 1:13 am

      Hi CP913,

      That is exactly the reason why we are taking this journey of getting rid of the mortgage, peace of mind! I will definitely sleep well at night. Recently the FED raising interest rate has swayed us in favor of getting rid of the mortgage as soon as possible. We are locked in a fixed rate with a conventional loan so there is no fear of it going up but the uncertainty of the stock market is what worries us. Trillions of dollars in student and auto loan industry (auto loan now has subprime loans, just like back in 2007/2008 with the housing market) could cause the market to come crashing down again.

      This isn’t to scare anyone out here with my opinions but I could be wrong and the DOW could also hit 50,000 points. But I’ll take the peace and mind!

      Thanks for stopping by!

      Like

  2. DivHut July 3, 2017 / 1:53 am

    Agree with the comment above. Whatever helps you sleep well at night and give you peace of mind is worth it. If that means living mortgage free then go for it. The shocking part of this post is that you never heard of DR. He’s everywhere! Radio, TV, books. Better late than never 🙂 Congrats on your new married life too. Many years of happiness should be in your future especially with a wife that is on board to live a financially responsible lifestyle with you.

    Like

    • Dividend Liberty July 3, 2017 / 2:05 am

      Hi Divhut,

      Thank you for the kind words and support! We are definitely hooked to his podcast and just by listening to his show it motivates us. We’ve decided that being mortgage free will be our first step to FI and step two will be ramping up the dividend portfolio to pay for living expenses when we retire!

      Like

  3. Duncan's Dividends July 5, 2017 / 3:45 pm

    Congrats on so many life changing moments! I’ve gone back and forth on liquidating my account and paying off my mortgage, but just can’t make myself do it. It’s a rental property and I know that I would be adding 1350 each month direct into my pocket, but honestly I have such a low interest rate and my investments are above it that I’m ok holding onto the debt at the moment. Congrats on your changes, if you can pay that off in 2.5 years too you can go bonkers rebuilding your portfolio as well.

    Like

    • Dividend Liberty July 5, 2017 / 5:15 pm

      Hello Duncan,

      Thanks for the kind words. It was a very difficult decision for me to liquidate my account. It took me about a month to make the decision but I thought that it would be the best choice for my wife and I to be rid of the mortgage as early as possible, especially before we have our first child! One of the major reasons why we wanted to get rid of the mortgage early is that we decided to stay at our current home for at least 10 years. Otherwise we wouldn’t have liquidated the taxable portfolio.

      I also took it as a psychological peace of mind decision that only one of us is required to be employed once we own our house! And if we both are still employed it would be a bonus! Once achieved it would give us less anxiety and stress in our lives and allow us to be that much closer to FI.

      Depending on when we have our first child, it will take 2.5-3.5 years to pay off the mortgage. And of course once we pay it off, we’ll definitely concentrate and go bonkers on our dividend portfolio!

      I plan on creating a mortgage section to keep track of my payments. Hope to see you back here periodically as we make progress on our mortgage and dividend portfolios.

      Thanks for stopping by!

      Like

  4. Sprout July 9, 2017 / 8:33 pm

    Congrats on your marriage and home ownership! I listen to Dave in the car on the way to work! Not following his advice on a mutual fund portfolio? Also, if you’re comfortable with it, you could look in to trying to AirBNB a room in your house to create a little extra cash flow to throw at the mortgage. I have a friend who does it and she’s made an extra couple hundred dollars this year. Good luck!

    P.S. So, when can we expect the MortgageLiberty app? ^_~

    Like

    • Dividend Liberty July 10, 2017 / 9:26 am

      Hi Sprout,

      Thanks, being married and owning a home is a dream come true! I’ve been addicted to Dave Ramsey’s show but the only one thing that I do not agree is on mutual funds. I’ll follow his baby steps but when it comes to investing I’ll stick with dividend investing. 🙂

      As for an application, I’ll just stick with the dividend app, haha.

      Thanks for stopping by!

      Like

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