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

Monday, September 1, 2008

Monthly Summary: August 2008

As I mentioned in my previous entry, the $1,500 extra principal payment we sent to our lender during the first week of August was credited against the July balance. I've updated the July Summary to reflect the correct totals.

The August payment was the 28th of 180 scheduled payments on the 15-year mortgage. It was our eighth payment of the 60-month goal period.

Our outstanding balance at the beginning of August (adjusted) was $164,188.51. Through a combination of lower expenses and extra income, we were able to make an additional principal payment of $3,000 this month, for a total principal payment of $3,900.53. This reduced our debt to $160,287.98.

We now find ourselves $22,686 ahead of schedule on our payments. Our work so far has reduced the term length by 2 years and 2 months.

We saved $97.94 in interest this month, bringing the total interest saved to $385.83.

Because we paid more in August than the average principal required to meet our five-year goal, the new average payment amount fell to $3,082.46.

I'm very encouraged by our progress so far in 2008. With two thirds of the year now behind us, we find ourselves ahead of our goal pace for the first eight months. Let's keep this train rolling!

8 comments:

move to portugal said...

it's so good that you are ahead of your goal. Well done!
-Laura

change is a good thing said...

Wow! You are really getting far ahead on your payoff! That is so exciting!

The Executioner said...

Thank you. We won't have many opportunities for extra income during the next few months, so I'm glad we're ahead of the game right now. We need to do a great job of keeping our expenses down through the end of 2008.

Hannah said...

Keep up the great work at 'killing ' that mortgage!

j1mbo said...

I apologize for repeating this, which I said elsewhere -

"I don't often repeat this, as when I tell people they look at me as if I were demented. And the truth hurts...

When we were trying to put the money together to finance our future in Portugal, there was one little trick that paid dividends, and was sure to guarantee that our friends thought we were one sandwich short of a picnic. It is one of the simplest money earning tips we can give to anyone.

Lend money to yourself.

You read that right. OK, example, in a nutshell - You've got some money in the bank. The fridge breaks down. You take the money from the bank and buy a new fridge, right? WRONG.

You take the money from the bank, you buy the new fridge, then, you repay yourself, with interest, the money that you borrowed from the Bank of Laura.

At the end of the day. you have the new fridge AND you now have more money than you started with.

If you didn't have the money in the first place, you would had to have financed the purchase. Why should you lose out just because you had some spare cash lying around?

Try it, keep a record, and tell me in five years if I'm a liar!"

The Executioner said...

How does this apply to the mortgage debt? We don't have money in the bank to cover the outstanding balance on the house loan. I understand your fridge scenario, I just can't figure out how to make it work in the mortgage example. Can you clarify?

j1mbo said...

In England, there is a saying something to the effect - Look after the pennies and the pounds will look after themselves.

Many financial advisers agree with the benefit of paying off the mortgage as quickly as possible, but unless your mortgage allows you immediate access to a capital reserve of cash (an 'offset' mortgage) the same advisers will - almost without exception - suggest that you should always keep some instantly available cash in a savings account for emergencies.

My suggestion involves keeping a pool of money, for example $500 - $1000 in savings. At the end of each year any interest gained in this account could be used to overpay on the mortgage. Should an emergency arise and the funds be required, draw down from the fund then repay the principal at the going rate of interest. In our case we always used the monthly rate that was charged on credit cards as our benchmark interest rate.

We kept track of how much capital and how much interest was paid back. Doing this, one could, say once a year, take the interest payments out of the savings account and apply them against the mortgage.

Two questions arise -
- how would you finance an emergency?
- are 'offset' mortgages available there?

Keep up the good work

The Executioner said...

J1mbo:

We do have an emergency fund. We add to it monthly. Our last big dump into the emergency fund occurred in May when we sold our car. Currently the balance in that fund stands at around $5,000, but I hope to continue adding to it until the balance is between $10-12K.

We also have a savings account earmarked for our property tax payments. That fluctuates between $1000 and $3500 as we add to it and pay our tax bill. I guess we could take the interest from escrow and add that to the mortgage, but I'd prefer to keep the interest within that account as a buffer in case tax rates suddenly spike for some reason. If a future tax payment is significantly less than expected, I'm sure I'll draw on that escrow account and use it to pay down the mortgage.

I do like your idea, though. Once the emergency stash is fully funded, I will definitely not hesitate to use the excess interest (as well as the cash flow that had been directed toward that emergency account) to pay down the mortgage balance.

And while they may not be called offset mortgages in the US, I know a similar product exists (I believe it is described here and here). However, due to the fees/expenses associated with obtaining a new mortgage, I think it would do more harm than good for us to change our mortgage at this point in the project. If worse comes to worse we could always open a line of credit on the house, but I'd like to avoid that at all costs. We just paid that off in December 2007 and I hope never to open a HELOC again.