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!