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, August 30, 2009

Monthly Summary: August 2009 (One Third Complete)

It's hard for me to believe that August is almost over. In many ways 2009 still seems fresh and new. My wife and I just returned from a week-long trip to Yellowstone National Park. Originally we had planned on a vacation closer to home, hiking along the Cohos Trail here in New Hampshire for a week. However, earlier this summer we received an invitation to go to Yellowstone with another couple who had already made arrangements to stay there, so by splitting the cost of lodging, groceries, car rental, etc, we were able to have a bit more adventure without increasing our vacation budget too much. We'll save the Cohos trail hike for another year.

Meanwhile, my wife recently finished her summer contract work and was very pleased with it. There is a good chance she may eventually be able to build on this this experience and gain full-time employment with the organization, which would interest her very much; however, a transition to that line of work would probably not happen for another few years. The good news for us is that she added to our income, which means extra money for mortgage prepayments; the (mildly) bad news is that due to the pay schedule, we won't have the money available until it's time to make September's mortgage payment.

We made the sixth of 120 scheduled payments on our ten-year mortgage in August, which represented the 20th payment since we set our five-year payoff goal in December 2008.

At the start of August our balance was $127,463.07. We added a modest $500 to the principal when sending in our regular monthly payment, which dropped the outstanding loan amount to $125,911.54.

We saved $60.27 interest this month. Total interest saved on our 10-year mortgage is now $197.72, and total interest saved since beginning our project is $1,235.46. This number is starting to become substantial.

We are now $16,198 ahead of schedule on the current mortgage, and remain on track to retire the loan one year and three months early if we stop making prepayments at this point.

We have 40 months remaining in our original 60-month goal period, which means we are now one-third of the way through the project. The original balance at month zero was $188,983.82, and after this month's payment we have reduced the principal by $63,072.28, which is 33.37%, or almost exactly one third of the initial amount. In other words,
our progress is right on track! Upon setting the goal, I wasn't sure how long we could continue to find extra money in the budget, but now that a significant milestone has been reached, I am confident that (barring major, unexpected lifestyle changes) we can continue to make steady progress toward ultimately "killing" the mortgage no later than December 2012.

At the start of the goal period, we had to average monthly principal payments of $3,149.74 to finish in 60 months. We currently need to average $3,147.79. Since the principal portion of our regular payment is much larger now (around $1,050) than it was back in December 2007 (about $775), we're benefiting from the additional principal payments we made over the past 20 months. What a great feeling to know that the effort has paid off!

Keeping up with this blog (even as infrequently as I do) has been great motivation to stay focused on the goal. The dread of going into work each day is offset by the promise that one day in the near future, I will have more control over my schedule, free from this large monthly obligation and the need to drag myself into an office every day to pay for it.

Wednesday, August 12, 2009

Retiring with a Mortgage?

If we suddenly received a windfall payment (lottery, inheritance, gift, etc) and had more than enough cash on hand to pay down our mortgage, would we do so? Absolutely, YES. Apparently some people don't feel the same way. I can't understand that logic, as I really want to be free of all debt, but perhaps there are factors I haven't considered which would make it advantageous to carry the loan even if sufficient funds are available to retire it (for example, if real estate values are rapidly declining and you are planning on moving in the near future).

Yahoo Finance today linked to a study published by Boston College which discusses this topic. I have to admit feeling somewhat vindicated after reading their conclusion: it doesn't make sense to carry a mortgage if you have sufficient assets to pay it off, unless (there is always an exception) you are interested in leveraging your property to invest in the stock market. Personally, I wouldn't want to wager my house on such a speculative investment, but I suppose there are some out there who might consider that a reasonable option.

Of course, it doesn't make sense to be "house poor" either -- that is, owning your home outright but lacking any meaningful amount of savings. I have to admit, there are times I'm tempted to raid our savings account to put a bigger dent in the mortgage balance, but I'm sure the day after I made such a decision, we'd have to come up with a bunch of cash for some unexpected expense.

Sunday, August 2, 2009

Monthly Summary: July 2009

My wife and I just returned from a week in to the Pacific Northwest, visiting my family. Even though we did not have to pay for lodging, it was a more expensive week than I had planned (food, entertainment, etc). However, we had a very good time, so I'm not regretting it.

Our mortgage payment in July marked the fifth of 120 payments on our 10-year mortgage, and our 19th payment overall since setting our five-year goal.

At the start of July, the outstanding balance was $130,502.88. We added $2,000 extra principal to our regular mortgage payment, which reduced the loan amount to $127,463.07 at month's end. I'm glad to see we've reduced the balance down another notch, into the $120K range.

We saved $52.36 interest in July, which brings our total interest saved over the (short) life of the 10-year mortgage to $137.45. We're $15,637 ahead of schedule on the loan. If we stopped making extra payments now, we'd still retire the mortgage one year and three months early, due to our progress since refinancing in February.

There are now 41 months left in the original 60-month (five year) goal period. Our average monthly payment needed to reach that goal rose slightly to $3,108.86.

We reached another psychological milestone recently. Based on two very similar numbers (either our original purchase price, or the current estimated market value of our house), we now have more than 50% equity in our home. In other words, we owe less than we own!