Finances, FIRE, Goals, Home Ownership, Money, Mortgage Payoff

Mortgage Payoff Update: One Year In

We moved into our home on November 27, 2020 (Black Friday, coincidentally), which means that this marks our one-year anniversary of being in our new place and in our new community. While I have mixed feelings about how this first year has been moving to a rural county at a further distance from family, for this post, I’m just going to be covering how our mortgage payoff goal is going.

While we technically closed on our home in October, we didn’t move in for a month because we wanted to get a headstart on doing several home renovation projects. Plus, just counting our house anniversary from November works great for our purposes here because we made our first mortgage payment on December 1st, which means that we now have pretty much exactly a full year’s worth of payments to report.

Back in May of this year (2021), I outlined mine and Matt’s official plan to become financially independent by age 50 so that Matt can retire from traditional employment and pursue other career paths or things that interest him. One very key component to us being able to do that is to pay off our mortgage in full by that time.

Now, I don’t know that we’ll still be in this house when we’re 50 — I’m kind of hoping we won’t be, to be honest — but I figure any and all equity we put into this home can only help our living situation down the road, whatever it may be. At the very least, having more equity in our home or especially a fully paid-off home will only serve to give us more options, and more options is something that we definitely want to have.

Early in the summer, I detailed our plan of how we were actually going to be able to pull off this feat of paying the mortgage off in 15 years. Basically, it entails us paying an extra $700 every month, which works out to an extra $8,400 a year.

With the Child Tax Credit coming these last few months, that monthly amount has actually been doable…some of the time. But as I anticipate that our income will rise over the next few years, I’m actually more focused lately on just paying off an extra 12 months per year as per the amounts listed in the amortization schedule, rather than worrying too much about coming up with the extra $8,400 amount annually (if that makes sense).

While we’re not quite on track with having paid off 24 months’ worth of payments, we’re a lot further along than if we hadn’t set this mortgage payoff goal, and I’m hoping we can make up some ground over the next few years. (And actually, since we technically didn’t set our mortgage payoff goal until May, I’d say we’re actually about right on track!)

Let’s get to the numbers.

Our original loan amount for our home was $280,500.

We bought our house during a hot housing market, which has only gotten hotter since then. While we didn’t want to take on such a big mortgage, our options were very few in our rural county, and we feel extremely fortunate to have gotten the house we did at the price we did during this insane time.

Our current loan amount is $270,438, which means we’ve paid $10,062 towards the principal in our first year living in the house.

Even though it doesn’t seem like very much, if we’d only been making the minimum mortgage payments, we would only be down to $274,521 right now. That means that we’ve paid an extra $4,083 to the mortgage this year.

Sure, it’s not the $8,400 a year we need to be paying in order to stay on track with paying it off in 15 years, but I’d say it’s an excellent start!

With the extra payments, we’ve now made 20 months’ worth of payments instead of just 12, and we’ve also saved $5,228 in interest.

Going forward, one thing I’ve worked hard to do over the past few months is to pay off the credit card in the same month that the charge is made, not wait until the next month when it comes due. Even though we always pay off our credit card in full every month when the bill comes (and thus never owe interest), the practice of shuffling credit card charges from month to month was starting to bug me since it meant that I always had a payment I had to factor into the next month’s budget, which wasn’t always conducive to the amount of expected income. I’m hoping that since we’ve now started paying off the card immediately after using it, my monthly budget will be a lot more straightforward. (In case you’re curious, the reason I use a credit card at all is because I use it to get rewards points on clothing purchases from Old Navy, which essentially gets us most of our clothing each year for free. If you’re curious, I did a whole post all about it HERE.)

With the Child Tax Credit monthly payments stopping after December (as far as I understand) and the fact that we’ll be needing most of our spare cash flow in early spring to be going to flower farm expenses in Year Two, I don’t anticipate that we’ll be making much headway on the numbers in the next few months. However, there’s a chance we might actually turn a profit in the second year of flower farming (it wouldn’t be much, but it’s possible), so that’s exciting.

All in all, I’m pleased that we’ve made the progress we have so far, and I’ll be curious to see what the numbers look like in a year!

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