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, December 28, 2010

2010 in Review

2010 is growing old. Time to wrap up Year Three of the Death to the Mortgage project.

When we set our goal in December 2007 to pay off our mortgage in five years, we also implicitly set a goal to pay off at least one-fifth of the starting principal balance in each calendar year. On Dec 31, 2007, our mortgage stood at $188,983.82, which means we hoped to reduce the principal amount by at least $37,796.76 each year.

In 2010, we obliterated that number by chopping $49,937.23 off of the debt, which was more than 132% of the yearly goal. We've been able to exceed our goal in each of the first three years (see also 2008 and 2009), but 2010 has been our most successful year to date, by far.

As the principal amount dwindled, the interest we paid each month followed suit. The amount of interest in the December 2010 payment was slightly more than half the amount we paid in December 2009. Our mortgage is now caught in a debt snowball of sorts: as the interest shrinks, the amount allocated to principal reduction keeps growing.

Or course, shrinking interest payments weren't the only reason we exceeded our goal for 2010. We also benefited from other events.

  • My wife brought in extra income over the summer months doing contract work at a second job.
  • Based on her contracting experience, my wife applied for (and was hired to) a new full-time position with the company she had been working for over the past few summers. The new job came with a higher salary, which increased the amount we could allocate to mortgage prepayments in the last three months of the year.
  • There were no changes to my job status in 2010.
  • I received a modest inheritance from the sale of my grandfather's house.
Three years into this project, it mostly runs on autopilot now. I budget at least 6 months in advance, so I always have an idea of how close we are tracking to the plan. My wife and I discuss purchases in advance (no matter how insignificant), so our spending doesn't jeopardize our mortgage prepayments. What was once a change to our financial routine has now become the norm.

I feel like we have a lot of momentum going into 2011. Since we're ahead of schedule for the project as a whole, we have a buffer to insulate against unexpected major expenses or disruptions to either of our incomes. This makes us more determined to pay down the remaining debt as fast as possible, so we can wipe the obligation from our future expenses, and appreciate an added certainty in our lives.

Happy new year!

Monday, December 27, 2010

Monthly Summary: December 2010

I'm sitting inside, looking out at the tall evergreen trees swaying in the strong winds of a blizzard, feeling thankful that the power has remained on throughout this storm. We had plans to visit my family this week, but the weather has postponed our travel for now.

December was mostly a good month for us financially. Although we did have a high veterinary bill due to our dog's surgery, we were otherwise able to keep expenses at reasonable levels, even with the usual holiday gift, food, and travel costs included. On the income side of the ledger, December was one of the two months in 2010 when my wife received three biweekly paychecks (instead of the usual two). Since I only budget for two paychecks per month, this provides an extra boost to use for debt reduction. On top of that, my employer unexpectedly announced an extra year-end bonus for all employees. By shedding some employees over the past few years, the company has been able to keep margins high. This is the silver lining of layoffs from an employee's point of view -- although job cuts are stressful and disruptive, those of us fortunate to remain on the payroll are able to benefit from the improved cash flow. (This once again reinforces our motivation to pay off the mortgage as quickly as possible. We don't want the monthly debt obligation hanging over our heads if one of us loses a job on short notice.)

We sent the 22nd of 120 scheduled payments on our ten-year mortgage in December, which was the 36th payment since we began this project three years ago. That's right, three years of mortgage-killing are now in the history books.

The balance was $63,917.61 at the start of December. We were able to add $4,500 to our regular payment (thanks to the extra paycheck and the bonus). The total principal reduction brought the balance to $58,121.17.

We realized $242.16 in interest savings in December, bringing the total realized interest savings to $3,635.99 since January 2008.

The balance of our ten-year mortgage is $67,598 less than it would be if we'd never made any extra principal payments. We'll pay off the loan four years and nine months early if we stop sending prepayments at this point.

There are two years left in our five-year goal period. We have to average $2,421,72 of principal reduction each month to eliminate the mortgage by the end of 2012.

I'll write a separate entry for our 2010 progress, but I'm quite pleased that we were able to end the year on a high note by dropping the mortgage balance below the $60K mark in December.