Goodbye mortgage

It was early morning yesterday I was up before the dawn and you have really made me pay but I must be moving on.

Goodbye mortgage, it’s been nice.

We were able to pay off the mortgage in ten years and saved over $150,000 in interest.

We paid off the principal of our mortgage in March of this year. Making the choice to live below our means has allowed us to pay off our mortgage early. Any time we considered moving to a larger more expensive house with a longer mortgage, we talked ourselves out of it. We also could have invested the money in other areas while we slowly paid on our relatively low-interest mortgage. We valued the freedom of not having a monthly mortgage payment now rather than later in life.

Right after we paid off the mortgage I was talking with a friend at work that I hadn’t seen in a while. He asked what was going on. The answer in my head was that we just paid off the mortgage. But that isn’t the typical thing people talk about. I just stared at him thinking about what else I could talk about when all I could think of was the mortgage. The only people we had told are at that point were our parents. For the most part, it is a hidden status symbol which as status symbols go is kind of worthless. It can be difficult and awkward to flaunt.

Now that it has been nine months since we paid off the house, more people know including the friend at work. He bought a much bigger house and made the comment that no one actually owns their house, everyone just has a mortgage. Since he brought it up I was able to comment that we actually do own our house. A few more family members know and a few other friends know, but it remains a hidden status symbol.

I really shouldn’t have to discuss this, but I imagine that some people think we are foolish because we are losing out on the tax deduction from mortgage interest. I covered this in detail here. The current standard deduction is based on the assumption that homeowners pay mortgage interest. Please stop using the tax benefit as an excuse to not pay off your mortgage.

Our mortgage strategy

After refinancing our mortgage in 2012, we started paying $100 extra principal payments every month. We recorded each payment in an amortization spreadsheet and would occasionally increase or decrease the amount we paid depending on our budget at the time.

In 2015 we increased the amount and frequency of principal payments and were able to make a large lump sum payment. For most of 2016, we were busy with a home remodel and only continued to pay the extra $100 per month. At the end of 2016, we completed the home remodel and were able to make a couple of large payments again. This kickstarted us and in 2017 we started making extra payments out of each paycheck and since we were paid biweekly on alternate weeks we could make a principal payment every week. This was our favorite strategy. Paying off a mortgage is a long term goal but making weekly progress made the goal more tangible. After each payment, we would put the amount into the spreadsheet and watch the final amount decrease.

To pay off a mortgage early you have to really spend. The amount of money we paid towards the principal over the last two years is equivalent to about a year of our collective income.

We made paying off the mortgage in 2019 one of our goals. With large payments at the end of 2018 and in the spring of 2019, we paid off our mortgage in under ten years (October 2009 to March 2019).

We have had to perform some special accounting to come up with our savings rate including mortgage principal as savings. That works fine when times are good and you have the income to pay the mortgage, but a mortgage isn’t an optional investment. Stop paying and the bank will take the house.

What’s next?

At the time paying off the mortgage is so exciting because there are not many other financial goals like it. But you should be aware of hedonic adaptation. We still enjoy talking about having no mortgage but the endorphins have worn off. It is back to the reality that life hasn’t changed that much, we still have the day to day chronic stress of work and school. Paying every week was motivating and we haven’t found another goal to replace it.

2020 will be our first full year without a mortgage and we are debt-free.