May 11th, 2017 7:05 AM by Jackie A. Graves, President
Getting a 15-year mortgage was one of the best decisions they made. - Andy Hill
During late 2013 while I was traveling out of town for work, my
wife Nicole found our "forever house."
home had everything she was looking for, including an attached garage, open
floor plan, updated kitchen, walk-in closet, and a big backyard on a half-acre
told me that this was THE ONE and as soon as I got home from out of town, I had
to see it.
wife has excellent taste and the majority of the time we are in sync. I wasn't
worried about liking it. I was worried about getting a BIG OLE MORTGAGE to pay
from our small bungalow (my bachelor pad she begrudgingly moved into when we
got married) to a ranch twice the size of our current house was going to be a
big upgrade for us.
I got a look at the house she found, I loved it too. It felt like home
instantaneously. Even the neighbors were perfect.
… we decided to go for it.
had a few nerdy money guy rules that we discussed to ensure this mortgage was
obliterated in less than five years:
our first house together, I had made a lot of uneducated first-time homebuyer
mistakes that I didn't want to repeat. One of those areas I was bound to
improve was with the mortgage process.
first mortgage was a lovely thing called a five-year ARM (Adjustable Rate
Mortgage). "ARM" sounds a lot cooler than "Adjustable Rate
Mortgage" – smart marketing department at Chase Bank! In the beginning, I
didn't quite comprehend the whole "adjustable" part of the name. In
2009, my five years ran out, the metro Detroit housing market was in the dumps,
and the rate adjusted. I quickly understood.
time would be different.
we bought our new house in 2013, the rates were at an all-time low. We got a
$200,000 15-year mortgage at a 3% interest rate with no points.
15-year mortgage has higher monthly payments of $1,900, but the bulk of it is
going to the principal every month instead of our mortgage company's pockets.
Nicole and I agreed that if we couldn't afford to pay the larger monthly
payments of a 15-year mortgage, then we shouldn't buy the house.
years into this home purchase, the 15-year mortgage was one of the best
decisions we've made so far.
only are we paying less interest to the mortgage company by going with the
15-year mortgage over the 30-year mortgage, the mortgage principal has been
going down by a sizable amount each month.
second nerdy money rule to crush our new mortgage in five years was to make
additional monthly payments of $500 toward the principal each month.
required us to dial back our expenses slightly – things like less eating out
for dinners, packing my lunch for work more often, and cutting the cord on cable TV (we still don't miss it today).
consistent monthly payment made a major impact in the dramatic reduction of our
mortgage. Yes, we had a 15-year mortgage, but I wanted to turn it into a 5-year
company pays us 26 times per year (every two weeks) as opposed to 24 times per
year (1st of the month, 15th of the month). Nicole and I agreed when we bought
the house, we would only live off of 24 paychecks annually instead of the 26 we
twice a year, we have made a BIG payment on the principal with those two
additional paychecks. This consistent biannual payment took a huge bite out of
overall principal balance.
don't always receive bonuses for work. It depends on how my company is
performing or how I perform that year. Last year, I was fortunate enough to
receive one for a solid performance. That unexpected money was also sent to
attack the mortgage.
and I agree to meet every month to create and review a monthly budget. I have
dubbed this the "budget party." She does not find it to be much of a
"party" per se, but I figured if I call it a party she might be more
willing to show up.
monthly PARTY consists of pizza and us developing a zero-based budget through Mint where every dollar that we earn each
month is committed. This way we were controlling our money instead of money
paying off the mortgage is a big deal to both of us, we ensure that the extra
principal payments are included in this budget each month. Since the additional
principal payments are automated, it has become our way of life. It is kind of
like when you set up automated retirement contributions. You don't even allow
yourself to realize you have access to that money.
wife is a good yin to my yang. She likes dreaming for the future with me and
having a little less today so we can have more tomorrow. She also wants to make
sure we're enjoying our lives today.
the madness that sometimes comes with my full-time job and two kids under four
years old, we both agreed that if we're going to do this crazy 5-year mortgage
pay off extravaganza then we still need to have fun.
defines fun differently. For us, it meant things like going to dinner with
friends, having themed birthday parties for our kids, driving to northern
Michigan to visit our family for the weekend, going to Detroit Lions games
(more torture than fun really), and doing spur of the moment trips like going
to Manhattan for a quick weekend.
last thing we want is to be house rich and life poor. I can accurately say
we're having fun and excited about the future. Nicole would agree.
order to keep us motivated and excited about paying off the mortgage, we
constantly remind ourselves why we're doing this.
a paid-off mortgage, we will be able to go on an epic family vacation every
year. We're thinking Mexico for a week during Christmas or Easter. The warm,
beautiful sun will shine on our pale native Michigan skin while we lie on
floating rafts in a picturesque infinity pool. I can see it now!
With a paid-off mortgage, we'll fund our kid's
college funds so they will have the freedom to attend college and not worry
about student loans.
a paid off mortgage, we'll be able to save for our first rental property and
begin generating some true passive income. As the passive income builds over
time, we will be able to retire early.
dreams keep us motivated and excited about the day the mortgage is gone for
three years in now … Including the profit we received from our bungalow, we've
paid over $160,000 of the principal.
of April 2017, our balance sits at $33,000, and we're on track to pay our
mortgage off by December 2017 … and that will truly be a life changing
By Andy Hill - To view
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