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

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.

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