By: Revanche

Our mortgage plan in 2019

May 27, 2019

Mortage plan 2019: our long road to mortgage freedomI told Done by Forty that I had nothing valuable to contribute to his bond swoop plan but as I was talking to Penny about her mortgage repayment, the two posts started pulling things together for me. Thanks for sharing, y’all!

I despise our mortgage. I hate that enormous looming debt that chips away at my brain every month because it’s twice the mortgage we had three years ago and I was so close to paying that one off. I hate the opportunity cost every month of the mortgage. This is nothing new.

And yes, we would have some kind of housing bill to live somewhere no matter what we had chosen and this was the most stable way to go in this area. Renting is too iffy with rent increases and comparable homes rent for the same as our mortgage + tax bill at this time. We are, of course, on the hook for maintenance in addition to that bill. We weren’t just being flippant when we bought, it was the right choice at the time.

Our priorities:

  • Replace our current W-2 income with passive income through dividends. I once planned to build a real estate empire but I don’t enjoy our long distance rental ownership. Dealing with the property management and HOA is aggravating so I’m focusing future investments on index funds. That isn’t to imply I would enjoy hands on rental ownership more because I wouldn’t. I like being ethical and having a clean, safe place for people to live who then pay that mortgage but I don’t want to have to be hands on and fix things, or see people and talk to them, or screen tenants. I’m not a people person, they are exhausting.
  • Retire in a reasonable time span (ideally in 7 years but I don’t have an FI date, our costs are too high at the moment).
  • Have no mortgage in retirement – this is one of our biggest expenses at the moment along with childcare but I know it can easily be replaced with healthcare so I want to eliminate it.

Corresponding reality checks:

  • Our incomes are good but not that good. As focused as we are on saving, we still have expenses because we’re  not forgetting to live, to help others, and to learn today. Thus, the paychecks run out very quickly.
  • I can’t make 50% more through overtime anymore and I don’t want to work all hours of the days and nights by picking up a second job since this one pays me rather well to give it my best. Same goes for PiC. We only have 13 more years to do this parenting thing right. We’re not going to sacrifice this limited window of time for arguably an insignificant increase in income.
  • I can’t eliminate this massive mortgage and build our investing portfolio at the same time on these salaries. We have to pick one.
  • There is also my desire to hold onto as much cash as we can from now through whenever the recession breaks, so we can invest at market lows, and focus almost entirely on investing to grow our invested assets outside of real estate.

It’s a sobering realization that we can’t hop skip and jump to retirement like some FIRE bloggers who chose it and bounced their way there in 3-5 years. Kudos to them of course but that won’t be us with a huge mortgage, two dogs, a kid and most non-negotiably, my need for a huge safety net due to chronic health problems. Reading those folks lit a fire for FIRE but also unrealistically got my hopes up that maaaybe we’d be a touch closer than we really are. I acknowledge that part wasn’t so good for me and now I’ve got better perspective on what’s realistic for our lives.

For now, it seems to make the most mathematical sense to focus on investing as much of our money as we can to grow it to be enough for a retirement in which we are still paying down the mortgage for the life of the loan. Our interest rate is fixed for 30 years and is relatively low (but not stunningly low), the money should grow more in the market than 4% annually.

Emotionally, I hate that decision and I hate the mortgage. But for big money decisions, I always prefer to make the most rational and economical choice possible even if I stay grumpy about it.

:: What do you do with your mortgage / housing plans?

13 Responses to “Our mortgage plan in 2019”

  1. Our mortgage doesn’t bother me at all. I can’t explain why; our student loan debt bothered me a lot and our mortgage is much more than that was. But it’s cheaper than renting, and I’m happy with our house. We bought at a good time and don’t expect the value to drop below what we owe on it.

    FIRE for us isn’t on fire, pardon the pun. I’ll be on track to retire in about ten years if I want to, and we’ve been saving for early retirement for the last ten years. It’s not fast by any means, but it works, and we get to have one parent home with the kids; we’re not working multiple jobs or sidehustling away their childhood. I don’t know what we’d do with the extra money anyway, we are just at the point of having maxed out all available retirement account options and I’d have to learn about regular investing or something, and deal with taxes, and I don’t think I have the energy for that.

    And then on the other hand, I’m not even sure that I will want to retire in ten years. I like my job, and it was hard for me to not work. Plus we’ll be staring college in the face around that time. I could work for another six years and pay most or all of their college tuition and set them up with no student loan debt at the beginning of their adult lives – that seems like such a gift, and for very little additional effort on my part.

    I get the drive to work really hard for a few years and retire super early, I guess, but that’s not the same thing as what I’ve ever felt. I’m just happy to know that I WILL be able to retire, and that I can have more control over my life now and in the future in terms of choosing my work and our lifestyle and not living paycheck to paycheck and worrying about the whims of a boss.

    Anyway, that was a tangent. As for our house, we plan to continue paying the minimum indefinitely. We may move to a larger house, and therefore take on a larger mortgage, or possibly even take out a home equity loan to do some $$$$ work that will need to be done if we stay in this house (fixing a cracked and sinking garage foundation, not a new kitchen, le sigh). It would be cool to eventually pay off the mortgage but it’s not a priority that I can see for a long time.
    Little Miss Moneybags recently posted…Five Frugal ThingsMy Profile

    • Revanche says:

      Well that seems logical that your mortgage doesn’t bother you – financially it’s wise (cheaper than renting, and value will hold). While our mortgage is the same as renting, I don’t believe the value will hold at what we paid for it so I anticipate losing money over time.

      I think it’s awesome that you enjoy your work enough to want to do it another ~ 16 years. I do often wonder how I’d feel about that if my health weren’t a factor.

      It sounds very much like your approach fits your lifestyle! 🙂

  2. SP says:

    I bumped mortgage prepayment to the bottom of our priority list for a few reasons. The most crucial is that we have a lot of tax advantaged space (some accessible before retirement age), and I want to take any tax benefits today. ESPECIALLY with the current government.

    I did take some huge whacks at it in the first few years in order to recast to a payment that felt more comfortable to manage on a single income (even though we are still dual income). This is my main motivation for considering any further big payments. If we do retire early it makes the most sense to retire elsewhere OR retire with the mortgage here. I also do not like this answer, and don’t want it to be the answer. But it is.

    (Our priorities are listed at the bottom of my post here: https://stackingpennies.wordpress.com/2018/09/12/planning-for-baby-college-savings/)
    SP recently posted…2019 Spending EstimateMy Profile

    • Revanche says:

      Yeah, all tax benefits today given this gov is something I can totally get behind. I’m sad we’ve already run out of tax advantaged options.

      The recasting was HUGE in making sure we could be comfortable with the payment level, too! Our options are the same as yours, now, and I don’t love it either. Where would you want to retire to, if you were to go elsewhere?

  3. I stopped prepaying our mortgage maybe a year or two ago? I kind of regret the amount I had dunked into it, which iirc was on the order of 40k. Would have done much better in the market or even putting the excess contributions into a renovation fund when we turn the attic into a master suite. I hated our mortgage when I first bought but I am a lot less stressed about it now. The interest rate is low (3.25%) and we pay less in PITI than comparable rent would be by $500-1000, so even with maintenance we’re doing alright.
    Yet Another PF Blog recently posted…Everywhere You Go, There You AreMy Profile

    • Revanche says:

      Hindsight!

      I’m glad that you’re less stressed over the mortgage these days, that’s great.

  4. Bethany D says:

    I love the idea of FIRE and paying off the mortgage early, but I really really don’t love the sacrifices it would take to get there. So – we’re not. Which feels strange given my passion for personal finance and frugality, but it’s what is right for our family. Right now (if we never move or refinance) we’re on track to pay off our mortgage the same year we both turn 65; and (if we continue having just my husband employed) at our current saving rate we’ll have enough saved for retirement that he can quit working at 67. It’s not flashy or splashy but in most reasonable scenarios it will work out okay. And since I will probably go back to work part-time when the kids are older and we might significantly downsize our house after the kids are launched, there’s also a reasonable possibility of doing somewhat better. I’ve done the math and I know that I COULD force my way into FIRE – but it would be at the cost of having the life we want with our kids while they still ARE kids.

    • Revanche says:

      “it’s what is right for our family” – that’s all that matters! There’s zero point in sacrificing the years that we can never get back, with the kids, in order to retire early and not have a good relationship with them, IMO.

  5. Leigh says:

    We could have made a larger down payment on our new place, but we instead decided we are going to invest the proceeds from selling the apartment once we do that. That way, we are more on track to our investment $ goal, which with the value of compound growth, matters more than the mortgage balance. It’s really hard to realize how big the mortgage balance will be, but I believe it’ll be worthwhile to have more in investments instead. And once we’ve hit our cash and investments targets, we’ll go back to tackling the mortgage.

    • Revanche says:

      That makes sense, especially when you can handle the current payments! It’s nice to have company in this particular track 🙂

  6. bethh says:

    Even though my mortgage rate is low (3.375) I’d rather pay down directly. I make my monthly payment + a fixed amount over. I bought my house in 2013 on a 30-year mortgage and started making extra payments in 2016. If I resumed regular payments now, I’d be paid off in 2037 so have saved myself 7 years. If I keep paying at the rate I’m paying now, I’ll be paid off in 2029, saving myself 14 years. I keep trying to push little extra bits toward the mortgage so I can be paid off sooner.

    But I’m a single income household, am in my late 40s, and don’t love my current job, so at best I’m going to be able to retire in my late 50s.

    I started saving for retirement 20 years ago, and I’m currently able to max out my 401k but am not doing a roth or any other big savings (my e-fund is pretty solid). One of my retirement funds is in an account that I can tap before 59 1/2, so IF I pay off my house and IF health care is accessible and affordable and IF the market doesn’t tank and IF I don’t take any big pay cuts or lose my job, THEN I can look at retiring in 10 years. To do what… I’m not certain. I just don’t love giving up 40+ hours/week to make money.

    Sigh. I’m good at living a good life outside of working hours but my 2-3-year focus is going to be improving job satisfaction so IF I have to work later I won’t mind too terribly much.

  7. I desperately want to be done with my mortgage because it’s low enough that I could knock it out in just a few years if I really gunned for it. But. I’m seriously behind in saving for retirement, so that has to take priority. I’m still throwing some extra money at the mortgage — including guest house rent — which means I should be able to knock it out in 6-7 years. But the rest of the funds need to go to retirement asap. And besides, being able to knock out the mortgage in even that short a period of time is pretty great. I just have to settle in for a longer haul than I want. I want to be done with the mortgage TODAY! I’m sure you can relate.

  8. […] Like Revanche, I’m accepting that there are other, higher priorities for our money.  But still, the inevitability of keeping the mortgage is eating away at me. […]

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