Happy 2017! As we enter another exciting year, here is a quick visual update on our Early Retirement Goals.
There isn’t too much to report about goals 2 and 3, other than that we continue to contribute to both and the markets have been favorable recently nudging both goals ahead a little bit. I love seeing those red blocks turn into green! When there is no longer any red on our charts – we will be FIREd!
We continue to be the farthest behind on goal 2 and this will be a major focus for us in 2017!
ER Goal 1 – A Deeper Dive
Goal 1 is to knock out the mortgage on our primary residence. (Our only property at this time). This has been a long-standing goal of ours even before we knew we would be able to retire earlier than expected. We just hate owing money to the bank and hate seeing our hard-earned money leak away in the form of interest.
So How Are We Doing?
While doing some year-end account balance checkups, I decided to dig further into our mortgage situation to see if we are still on track to pay off this puppy in April, 2021.
Our original Loan Maturity Date (when we would be making our final payment) was December, 2027. Hahaha. I distinctly remember sitting in our loan officer’s conference room in November, 2012 when we refinanced and he kept trying to get us to consider the 30-year mortgage. Mr. Need2Save was dead set on the 15 year so we could get the low, 2.75% interest rate and we both knew that we’d throw extra money at it along the way to pay it off even sooner. I remember the funny look he gave us when it slipped out that we didn’t think we would need 15 years to pay it off anyway. I guess the loan officers don’t hear that very often.
The sad news is that we still owe around $267,000 which is a huge mortgage in many parts of the country. But in our HCOLA, this is around 40% of the likely value of our current home.
The good news is that when you look at the current amortization schedule, in just 4 short years, we’ve knocked off a year and half of mortgage payments even if we didn’t pay another dime above the required payment due from here on. Man, that is awesome! Of course if we did that, the bank says we’d send our last blood payment in May, 2025. That is over 8 years from now. No thanks.
The Big Picture
As you know, we DO plan to continue to make extra payments. As a result, we seem to be on track for our April, 2021 payoff. Just a little over 4 more years. In fact, using a payment calculator that we’ve been using since we refinanced, we will save over $40,000 in interest by paying off our loan in 8.5 years instead of 15! That feels so good. The interest savings would be even more impressive if we were living in previous decades before these ultra-low mortgage interests were around. But 40-grand is still a huge number.
The Fine Print
It looks like both our home-owner’s insurance and our property taxes seem to be going up a little each year. Two more reasons this is not our ‘forever’ house. But it feels good to see the progress from 2015 to 2016.
Here were the payment totals for 2015:
And here were the payment totals for 2016:
We paid around $10,300 MORE off our mortgage in 2016 than in 2015 and we paid $1,432 less in interest. Woohoo! That feels like progress. In the last two years, we shaved $100,000 off the principal.
Why Do We Pay Extra?
I know there are many schools of thought about paying one’s mortgage off early vs. investing the extra funds. We take a blended approach and do both. We pay a little extra each month and also invest in our after-tax accounts as well.
For us, it’s not a either-OR-scenario but a this-AND-that approach. We want to reach both goals of paying off our mortgage and also padding our after-tax investments and other savings as well. We discussed this in more depth in our earlier post when we originally shared our Early Retirement Goals.
We are watching the developments with the incoming administration with a keen eye on how it will affect us tax-wise.
I didn’t realize that our home owner’s insurance had increased again. I think it’s time to shop around and see if we can get a better deal. Adding this to our to-do list for January to see if we can lower this. It’s almost $200 a month now and we have never filed a claim.
As you can tell, we are not shy about our decision to pay off our mortgage early. It’s not lightning fast, and we know there are some impressive stories out there of folks who have done it in less than 5 years, hell less than 2 years! That’s awesome and congrats to you guys. We want to take advantage of the market movements along the way so we balance investing and paying off the mortgage. This is what is working for us.
Have you paid off your principal mortgage? If not, are you paying extra, why or why not?