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

Sunday, May 31, 2009

Monthly Summary: May 2009

Our May payment was the third of 120 scheduled payments on our refinanced 10-year mortgage, and the 17th payment we've made since we set our five-year goal at the end of 2007.

At the start of the month, our balance was $139,026.46. Despite another month of high expenses, we were able to apply another $1,500 to the principal, which when combined with our regular payment, reduced the loan value to $136,519.50 at the end of May.

We saved $27.08 in interest this month, for a total of $52.13 saved since refinancing our mortgage. We are $8,552 ahead of schedule on the 10-year note, meaning we'd pay off this loan eight months early if we had to stop making extra payments at this point.

There are now 43 months remaining in our 60-month goal period. To meet our goal, we have to average $3,174.87 in principal payments per month. This is another increase from previous months. Hopefully we can bring this number back down in the near term, as we should have some additional income through the summer.

We passed another psychological milestone this month. When we bought our house, we took on a $204,000 mortgage. As of May we've managed to pay down one third of the original debt. We are making progress!

Tuesday, May 12, 2009

Escrow Update

Last May I called our lender to cancel our escrow account. We do not have to pay PMI, so the only thing the escrow was ever used for was our property tax payments (twice a year).

I predicted that we'd earn around $80 in interest per year by investing the escrow balance in a money market fund, and assuming the responsibility for making tax payments ourselves. That was before the bottom fell out of the equity and debt markets, so money market interest rates are much lower now (less than 1 percent) than they were back then (2-3%). Still, we've earned around $40 in interest over the past year on the escrow balance. True, those earnings are taxed, so our net amount was probably closer to $30, but still, that's $30 we wouldn't have otherwise. The rate that our lender was paying on the escrow account was ridiculously low, almost to the point of nonexistence. And now, with the fall in interest rates, it's probably actually zero. Since we're going to have an escrow account anyway, it might as well be in our own control. The interest is a nice bonus.

Perhaps someday in the not-too-distant future, rates will rise again, and we'll actually see that $80. From an interest-rate point of view, it's currently a good time to be borrowing, but not the best time to be saving. Still, given the choice, I'd rather be debt-free.

Friday, May 1, 2009

Monthly Summary: April 2009

Happy May! Spring has definitely arrived in southern New Hampshire by now. The flowers are in bloom, and pale greenery is sprouting out everywhere. This is one of my favorite times of year.

In April we made the second of 120 scheduled payments on our (still relatively new) ten-year mortgage, and the 16th monthly payment we've made overall since setting our five-year goal.

Our mortgage debt was $140,527.63 at the beginning of April. Because we were faced with such a large tax bill last month, we had barely any money left over to make an additional prepayment. However, we are determined to make at least a token contribution each month if at all possible. We were able to send an extra $500 along with our regular monthly payment, meaning we reduced the principal balance by $1,501.17 in April. The balance dropped to $139,026.46 at month's end.

We passed two psychologically important milestones this month. First, most obviously, our outstanding balance dipped into the $130K range. Second, for the first time since we've been paying a mortgage on our house, the principal portion of our regular (required) payment exceeded $1,000. Many personal finance bloggers talk about "snowflaking" when paying off debt; that is, applying any interest savings from the prior month against the current month's balance, and repeating the following month. As time goes by, the interest savings steadily increase the monthly payment amounts, accelerating the debt reduction like snowflakes building up a snowball as it rolls downhill. It's nice to see that effect in action on our mortgage, too. As I mentioned, our regular principal payment this month was slightly over $1,000. If we hadn't made prepayments on our new 10-year loan, that amount would have been around $976; and if we still had our original mortgage and had never made prepayments, the principal amount this month would have only been $835. Small differences can make a big impact over time.

We saved $25.05 in interest in April. We are $7,025 ahead of schedule on our new mortgage, and would pay it off seven months early if we had to stop making extra payments at this point.

We have 44 months left in our five-year goal period. In order to meet that goal, we need to make an average monthly principal payment of $3,159.69 (a slight increase from last month).

April was an expensive month, and May is looking to be almost as expensive. We've had to make a number of annual payments (vet bills, doctor bills, car repairs, tax payments, and so on) this spring, so the cash available to make mortgage prepayments is going to be limited. One bit of good news is that my wife has once again picked up some contract work this summer, so we should have some extra income in the near future to (hopefully) offset our recent shortcomings.