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!
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?