Progress to Date

  • Original Loan Amount: $204,000.00
  • Balance at Beginning of 5-year Goal (1/1/08): $188,983.82 @ 6.00%
  • Balance at Refinance in February 2009: $148,000.00 @ 4.625%
  • Outstanding Balance: $0.00 (PAID IN FULL!!!)
  • Latest Payment Date: April 2011
  • Latest Additional Principal Amount: $17,623.22
  • Amount Ahead of Schedule (since refinance): $121,462
  • Time Ahead of Schedule (since refinance): 7 years 10 months
  • Interest Saved Last Month: $23,972.48
  • Total Interest Saved: $28,435.55 ($1,037.74 on original mortgage; $27,397.81 on current mortgage)
  • Months Remaining in 5-year Goal: 20
  • Average Monthly Principal Needed to Meet Goal: N/A (Goal achieved)
  • Progress List Explained

Friday, June 27, 2008

Monthly Summary: June 2008

The June summary comes a few days early because my wife and I are headed away for vacation and will be without internet access for a little while.

June's payment was the 26th of 180 scheduled payments on our 15-year mortgage. It was also our sixth payment since we established our five-year goal.

We started this month with an outstanding balance of $172,436.38. We made a $5,000 (!!!) extra payment to principal, bringing our total principal payment to $5,859.29 in June. Our new balance stands at $166,577.09.

We're now $17,998 ahead of our scheduled mortgage balance. We could stop making extra payments now and still pay down the debt twenty-one months early.

This month's saved interest amount was $64.67. To date, we have saved $197.90 in interest payments.

Our average required monthly principal payment to meet our five-year goal dropped to $3,084.76.

My wife got an advance payment for some summer work she's doing, which helped us make a larger-than-normal extra principal contribution in June. Our July and August payments may be smaller than past months as a result. However, if we can focus on saving (especially during vacation), we may be able to end the summer months in great shape to meet our first-year goal.

Wednesday, June 25, 2008

Falling Equity

Every day it seems like I notice another headline about home prices falling around the US, occasionally accompanied by similar news from other parts of the world. For example, today's financial reports include an article from the Associated Press which states that sales of new homes in the US are down when measured two ways: (1) the number of homes sold, and (2) the median sale price. Similar trends are occurring in sales of existing homes.

Websites like Zillow.com track approximate prices of homes around the US. Our house's estimated price has been falling steadily during the few months I've been checking (an exercise to help establish our monthly net worth). [By the way, "net worth" is a term I absolutely despise, because it values an individual or household only by monetary assets, when a person's true worth rarely has anything to do with money; but in the absence of a better term, it seems that I'm stuck with it for now.]

Does it bother us that my wife and I agreed to pay thousands of dollars more for our house than it would likely sell for now? Not really. I owned a townhouse condo before we bought our current residence, and used the proceeds from the condo's sale as our down payment. Had we waited until housing prices moved lower before selling the condo and buying a house, I wouldn't have received as much from the sale of my previous property, and therefore, our available down payment fund would be proportionally smaller. Sure, we could have sold the condo and rented for a while, but we would have dealt with the hassle and costs associated with moving more than once. And there's simply no way for anyone to know when the housing market has "hit bottom," so what would have been our cue to stop renting and buy a house?

There are a few important reasons why I'm not bothered by the downward trend in home prices.
First, the decline in our assessed property value's translates directly into lower taxes every six months. This is the silver lining of the housing slump, and since we have no plans to move anytime soon (and turn a paper loss into a realized loss), the tax savings become a miniature windfall which we can funnel back into our mortgage principal payments.

Second, our goal is to eliminate our debt completely, which means we don't want to tap the equity in our home for any reason. I was delighted to pay off (and close) the HELOC we had used for initial expenses when we bought our house (such as replacing windows and doors). If the equity in our home falls, it does not affect our spending plan, as we don't rely on equity borrowing to finance the rest of our life.

Third, and most importantly, we didn't buy our house as an investment property; we bought it because we wanted a place to live, and really liked what it had to offer. At the time we were ready to begin our lives together, my wife and I spent months searching for the house that best suited our anticipated wants. This house continues to be a source of daily enjoyment for both of us. Its primary value is its utility: we sleep, eat, clean up, work, relax, find shelter, store and organize, entertain, provide for our dogs, and feel secure inside its walls. I'm grateful to have this place to call our home.

The June mortgage payment is complete. I'm excited about our progress this month. I'll elaborate on that in a few days.

Tuesday, June 17, 2008

Time = Money

Our summer income is going to be a little unpredictable, so I've run several possible scenarios for the next few months through my hypothetical model of our mortgage amortization schedule. I've noticed a pretty consistent relationship between extra principal payment amounts and the length of time until our mortgage is paid in full. Right now, each additional $1,000 we pay to principal translates into one month that we won't have to make a mortgage payment in the future. We've felt the desire to spend recently, as we're going on vacation at the end of the month (and we're tempted to stock up on new camping equipment). The recognition that a new $250 pair of boots represents one more week of future debt payments is helping me stay focused and committed to our goal: premature mortgage death.

Wednesday, June 11, 2008

Summer Happenings

My wife and I held a yard sale this past weekend. Even though the weather was unseasonably hot, we had reasonable success. For 5 hours of work, we earned around $75, and in the process got rid of a bunch of stuff we didn't want around anymore (including VHS movies, books, and trinkets that I was surprised anyone would ever want to buy). The $75 isn't going to make a huge impact on our savings, but considering that (a) we sold many items for only 50 cents or $1 each, and (b) we got money for stuff we were willing to get rid of for free, I'm pleased with the result. Plus, we got to meet some of our neighbors, which was an added bonus.

The escrow refund check from our lender arrived last week. I used it to buy a money market fund. I then scheduled a monthly purchase into the fund (from my paycheck) to replace the escrow amount that was previously included in our mortgage payments. Our property taxes are due July 1, so I will soon be making a partial withdrawal from our homemade escrow fund to cover that bill. We'll be left with a decent balance in the escrow fund which will grow monthly with each paycheck until the second half of our property taxes come due in December. There's enough of a buffer that I don't expect the escrow fund balance to ever dip below $1,000 (even immediately after making a withdrawal for tax payment).

The unusually hot New Hampshire weather this past week (highs in the 90s F for the better part of five days) had a lot of people hiding indoors with their air conditioners turned to high. My wife and I tried a less expensive cooling technique which worked reasonably well. In the evening, we opened all windows in the house and used a combination of two window fans upstairs to draw in the cool outside air (on the shady side of the house) and exhaust the hot indoor air (on the sunny side of the house). We let the window fans run all night long, then shut the windows in the morning to trap the cool air inside, and pulled down the blinds to block the hot daytime sun. This worked well for the first two days, but by the third day the evening temperature didn't drop enough to cool the house as much as I would have liked. I offered to turn on the air conditioning, but my wife insisted that we keep it turned off to save money. In the end it worked out just fine. We sat near fans, spent time outside with our dogs, and ventured down into the naturally cool basement when we needed to feel refreshed. Today's weather was more temperate, and it's comfortable inside our house once again.

I'm even more impressed that my wife rode her bicycle to work all three days this week, even though she doesn't have access to a shower at work. She reported being a little sweaty on arrival, but since she leaves early in the morning, she was able to avoid the worst of the heat until the return trip home (when being sweaty isn't as much of an issue). With her inspired commitment to our goal, we're saving money on energy costs by minimizing use of the car, and avoiding air conditioning usage altogether.