Category Archives: Mortgage

July 7, 2019 – Mortgage Balance Finally Below $100k!

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I haven’t posted a blog in over a year as I was busy with work but I decided to make a quick post about our mortgage balance, which finally reached below $100k back in March of 2019!! Currently, the balance went from $217,525 down to $88,600.32!! It basically reversed (probably much more) our interest ($286.11) and principal ($795.44). It simply feels AMAZING!

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I recently read an article where Kevin O’Leary made a comment on why everyone should pay off all their debts by the age of 45 including your mortgage (Kevin O’Leary says you need to have all your debts paid off by age 45 – Including your mortgage) and I partially agree with him. Of course, I immediately go to the comments section where everyone deemed it impossible for the average person. Or is it? I agree with Mr. O’Leary to some degree and while we will be paying off our mortgage well before 45 years of age, we changed our tune from paying off our home early to paying the monthly minimum. The reason why we switched gears at this point was the simple fact that most of the monthly payment goes to the principal. Even with just the principal (with the help of my yearly bonus and small additional payments after maxing out IRAs), we will achieve mortgage free status in the next 3-4 years. In the meantime, we will primarily focus on maxing out our IRA accounts while the mortgage will be gone in 4 years time. At least with this method, we won’t lose the next 4 years of investing time.

There are people generally in two camps in the on going argument of pay mortgage off early vs investing in the market. One side argues that in the long period of time, one should invest into the market as the returns will be greater than the interest that you will pay for your mortgage. For example, the market will return on average 7% a year vs 3.5% mortgage interest. Maybe that 7% can turn into 10% over the span of 30 years. The other side argues that one should pay off the mortgage as quickly as possible and to be debt free so that you can have the peace of mind in case of a job loss or having kids. This is what convinced us initially so that the wife can stay home and the family can live on one income.

But after further research and hearing both sides of the arguments, we’ve chosen (unintentionally) the middle ground. Instead, we’ve decided to pay the mortgage off aggressively in the past 3 and a half years to the point that the principal will be big enough to eventually pay off the mortgage early. Sure we lost the last 3 and a half years of the market gain, but it sure helps us sleep better at night when looking at the new mortgage balance and knowing that the balance will be taken care of by itself from the principal.

We initially got a 30 year mortgage to keep the monthly payments low just to play on the safe side. But I know better now for the future (if I ever do get another mortgage) to sign the 15 year mortgage, at least this way it will force us to pay the mortgage off faster. But then again, we expect to pay off our mortgage in about 7 to 8 years from the time we got our mortgage. I hate debt and this is the part that I agree with Kevin O’Leary.

What does everyone think? Which decisions have you made personally with your mortgages and was it the right choice?

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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.