The Mortgage: Update on Paying Down Our Mortgage

Many of our readers were with us through the long haul of paying off our $100,000 of student loan debt in our first 2 years of marriage. (If not, you can read more about that here to get an idea)

We thought we would NEVER go into debt again, and then reality came knocking and we decided rather than to swear off debt, we would swear to be financially responsible, take on only "smart" debt, and not take on more debt than we could easily manage. 

To us, smart debt is limited to really just a mortgage (and even that isn't always smart...too much of a good thing is often bad). We had other opportunities to take on more debt, that we declined these past 2 years. For example, we are cash flowing my MBA program (and waited until we had our current debt paid off for student loans before taking on even more), and learned from our last debt experience that student loan debt is NOT smart debt in this era. Car loans were not smart debt for us...because although both of us have purchased and sold a car in the last year, we paid cash for both cars rather than take on new debt for something that decreases in value so quickly. Because we were paying cash, we also kept our car priorities in line, buying very practical cars for our lifestyle. We also did not take out a larger mortgage than we absolutely felt we needed to. That means we committed to a 15 year mortgage, with hopes of paying it off much sooner than that. We did not take out extra loans to fix up the things in the house we needed to get done, and that also means there are lots of things on the house that I'd LIKE to do...but we won't be doing them until we feel solid about where we stand on the mortgage (hopefully paid off), as well as have the cash to pay upfront for any fixes.

You can read more about our decision on how expensive of a home to purchase here and here. 

Our first step in being responsible with our new debt, was that we purchased a home that we could put 20% down on. We purchased our home for $140,000 (In case you are wondering, that is inexpensive for even the low cost of living Omaha standards)...had cash in savings for the 20% down from our savings in addition to the $6,000ish in closing costs. The mortgage we took out ended up being $112,000. The thought of getting back into debt...and even MORE debt than we originally had made me absolutely sick. We worked so hard to do this, but I gave myself some piece of mind by running the numbers over and over again in my head to justify that there is a point in time where it made sense for us to stop paying rent, and to invest in something with value. 

We took out our $112,000 mortgage at the end of June 2016

We ended up buying a home for much less than expected, so right off the bat we took a chunk of that money we had put aside for the 20% down payment that we weren't going to be using, and made a large 1 time mortgage payment on principal. That brought it down to $106,000 in July of 2016. 

That's when we decided that on top of our regular mortgage payment, we would set up an automatic transfer to put an extra $100 a month towards our mortgage. My goal is that this would become automatic, and an easy way for us to pay off a little more each month than we would normally. If you think about it, Only about $500 of our payment each month goes to principal. So that means if over 12 months I made an extra $100 a month payment towards our mortgage, it's like paying an extra 2+ months of principal every year...which is exciting and will really help trim down the length of the mortgage if you keep that up for a few years. 

Now comes the fun part. Now, about 6 months after taking out our mortgage, we've hit the $100,000 mark on our mortgage. Between taking the little steps above, as well as throwing all our extra income from our side jobs at this mountain of debt, we are finally feeling like we've made some progress. There is something also really exciting about paying off a mortgage rather than a debt...because you still have this tangible asset that you can physically see and admire (unlike my college diplomas which I've managed to lose...and tend to be a bit disappointing since it is a piece of paper). I will also say so far nothing big has come up as an unexpected expense...I'm sure when it does I won't quite be "admiring" our home quite so much. 

If you've been with me for the long haul of our debt payoff here over the last 4 years, you may be seeing a pattern. Yep, that's right....we are treating paying off our mortgage the SAME way as we did our student loans! That's because this method is crazy effective, you've just got to keep your self control and make it work for you!

Why do I share this? Because I know that mortgages are a fact of life for many many people. It's actually always bothered me when Dave Ramsey has on his podcasts people that are visiting and talk about being "out of debt" when they really just mean out of credit card, car payments and student loans. It is wonderful they have all of this paid off, but they aren't finished yet. (Don't get me wrong, I am big into celebrating EVERY milestone on this journey, celebrating milestones are one of the biggest things that got us through paying off our student loans) However, these callers are forgetting about probably the BIGGEST debt they have in their lives! Even though I'm a Millennial, that doesn't mean I'm not aware of what happened in the housing market around 2008. Everyone assumed real estate debt was a safe bet...but we learned...that just like anything other debt...real estate can take a turn for the worst too. The big mortgage on the big home isn't always the best idea. So here is the deal, I never want to be discouraging about debt, but the reality is...debt is debt. And life is so much better without it (we experienced that for over a year...and yes, being completely debt free is absolutely amazing). We hope to get there again in a few years. Even better, we are living our lives to be an encouragement that it CAN happen!