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

Saturday, January 31, 2009

Monthly Summary: January 2009

Today is one of those brilliant, cloudless, blue-and-white days that makes winter in New Hampshire so enjoyable for me. Plus, spring is not too far off...

Our January payment was the 33rd of 180 scheduled payments on our 15-year mortgage, and the 13th since we've been working on our five-year goal.

At the beginning of 2009, our mortgage balance was $148,043.79. We added $2,000 to the required payment, for a total principal reduction of $2,981.25 this month. The outstanding balance at the end of January stands at $145,062.54.

The mortgage balance is now $33,838 less than it would be if we had never made any extra payments to principal. If we had to stop making extra payments after this month, we would still pay off the mortgage three years and one month early.

We saved $158.40 in interest during January, for a total of $1,037.74 in savings during the life of this project.

The average monthly principal payment required for us to achieve our five-year goal rose slightly to $3,086.44.

2009 is already shaping up to be an interesting year for us financially. I'll elaborate on those details when they are known.

Monday, January 19, 2009

2009 Goal

Since we exceeded our goal in 2008, my wife and I discussed whether we should increase our goal for 2009. We finally settled on keeping the goal amount the same this year as we had last year.

The arithmetic is simple: the yearly goal amount is the total principal amount from the start of the project ($188,983.82) divided by the number of years we gave ourselves to complete the project (five). This amounts to $37,796.76 per year. This is our goal for 2009.

The main reason we won't be increasing our goal for 2009 is because we won't be selling a vehicle this year. We exceeded our goal in 2008 by a little more than $3,000, which was almost exactly what we contributed to our mortgage from the proceeds of the car sale.

There are a few uncertainties in 2009. First, I have no idea whether we'll owe any income tax this year. Last year's tax bill was an unwelcome surprise. We did adjust our withholding in April 2008 to avoid another big bill, but there were three months at the start of 2008 when we may not have had enough withheld from our paychecks. I am hoping we owe only a small amount, or end up with a flat return. A refund would really surprise me, though.

Second, my wife will again be doing some contract work this summer. This could potentially increase our income, but it's hard to forecast how much demand there will be for her work. I can't predict how much this would add to our bottom line at this point.

Third, there is always a chance one of us will lose our jobs. We don't have any specific reason to fear this, but employment is far from certain these days. Obviously, if this happened, we would likely have to put the entire project on hold until we could find new work.

Still, I am optimistic for the future. I've been running some numbers through my hypothetical spreadsheet model and noticed a few pleasant future scenarios. Being realistic, I've filed these under "Don't count your chickens before they hatch."

  1. If we pay $2,000 extra toward our principal every month beginning in January 2009, we will retire the loan in month 57 (three months early).
  2. If we continue the pattern of payments from 2008 in 2009 and beyond, we will eliminate the mortgage debt in month 51 (nine months early).
  3. If we contribute the same average extra amount to principal as we did in 2008 ($2,541.66), we will also complete our goal in month 51.
Right now I think scenario 1 above is most realistic given our current monthly income and expenses, but I'd be thrilled if we could achieve scenarios 2 or 3. Time will tell. If we do as well in 2009 as we did in 2008, we may have to set a more aggressive goal for ourselves in 2010.

Sunday, January 11, 2009

Death of the Furnace

In this blog's first entry I described the demise of our dishwasher, and lamented our first setback of 2008. Not to be outdone, 2009 threw its own challenge at us: our furnace died.

To be completely honest, the furnace was not entirely dead. Rather, we put it out of its misery. Our home was built in 1985, and the furnace was still original equipment. When we bought this house in 2006, the home inspector told us that the furnace was in decent shape, but was past its life expectancy and would probably need to be replaced in the next several years. Heating technicians made similar comments during their annual maintenance visits. Of course, they wanted to sell us a nice new home heating system, and offer us all sorts of snappy financing deals (no interest for a year!) so that we could replace our furnace without delay. We politely declined their offers, and started saving for the future.

I know very little when it comes to home furnace operation, but I'd take a peek at the furnace when the technicians would do their maintenance work. To me, the furnace always looked OK, and I knew it still kept the house warm throughout the worst that a New England winter could throw at us, so I was never in a hurry to replace it. This year, however, was different. When the technician came to visit in late December 2008, I tagged along as usual. Unlike previous years, the technician and I discovered the furnace was sitting in a pool of some sort of condensation, with mineral deposits all around. Additionally, the amount of carbon monoxide in the air duct was higher than it had been before. Apparently a trace amount of CO is always present, but the level this year (although not yet high enough to cause any health issues) was trending in the wrong direction. So after hearing the technician's description of a likely problem with the secondary heat exchanger, and how the flue gases were slowly corroding the furnace from the inside out (the source of the condensation), I realized that this was going to be the end. Within a week and a half, our old furnace was gone, and a brand new system was sitting in our basement.

My wife and I decided to purchase the highest-efficiency model that was compatible with our existing duct work. In the end, we parted with over $7,000 of our savings. On one hand, it was tough separating with so much money all at once. However, we were both glad that we had saved for this occasion, and didn't have to incur any new debt to keep our house warm and (hopefully) carbon monoxide free. And fortunately, we didn't exhaust our entire reserve account on this purchase.

We'll continue to keep putting a set amount into our savings each month, as we have been doing for several years now. And while it may have an impact on how much extra principal we feel comfortable applying toward the mortgage over the next few months, we don't anticipate that this will be a significant setback. The contribution to the savings account is always a separate line item in the budget from our extra principal payments. Of course, another major home expense could change things. Right now we're hoping for the best and preparing for the worst. I suppose that's the best any of us can do, right?