It was June and we were experiencing the hottest day of the year so far. Standing over the grill frying up burgers and hot dogs wasn’t helping.
It was over 100 degrees outside and we had nearly 100 people visiting, pushing our air conditioning unit to its limit. (Maybe that’s why it died 2 months later.)
But the truth is we were too excited to notice the sweat running down our cheeks from the blistering heat. We had just bought our very first house and our friends and family had all come over to help us celebrate this exciting moment.
It’s a scene I suspect many first-time home buyers experience. The joy of buying your very own home is definitely cause for celebration. But it’s a celebration that comes with a very real dark side – debt.
House Debt is Good, Right?
Most of us have been trained to believe that house debt is “good” debt. After all, the price of a house only increases over time, you get a sweet tax deduction off the interest you pay, and it’s really like paying yourself back every month, right?
In the dark days of The Great Recession we all learned
- housing prices can definitely go down.
- tax deductions don’t make up for a mortgage payment you can’t afford.
- when the bank forecloses on your house, they don’t give you back all that money you’ve been “paying yourself” every month.
I’m not against mortgages. We willing signed up for one. But I do think we need to stop labeling any debt as good and just call it what it is, an obligation to pay for something we don’t yet own.
The Truth About What We Were Celebrating
The truth is we had all our friends over to celebrate our signing of a document (ok…lots of documents) saying we promised to pay a certain amount of money to the bank every month for the privilege to live in our house.
That means it wasn’t actually our house.
In a very real sense, we were celebrating the bank allowing us to live in their house. They fronted almost all the money, not us. And they had full legal rights to take the home away from us if we didn’t make those monthly payments. When someone has the right to take something away from us, that doesn’t sound like ownership. It sounds like debt.
So Slowly Pay Off Your Mortgage Over 30 Years, Right?
But that didn’t stop us from taking out a 30-year mortgage on our house.
We know lots of folks that say that the interest rate is low and we should take our time paying off the house and put our money to better use by investing it.
This strategy is fine for some, but it wasn’t for us.
It’s a Risk Tolerance Thing.
Those that take the view of paying their mortgage off slowly and reaping the fat juicy rewards of the stock market are betting that they know the future. Not the future of the stock market, or even the future of the housing market.
They are betting they know the future of the next 30 years of their life.
They are betting that they will slowly get a little older, get better jobs, make more money, and have beautiful well-behaved kids that frolic in the lush green grass in the lazy summers.
And that might happen.
But what they often neglect is the very real risk that they could lose their job. Get really sick. Be hospitalized. Lose a loved one. Get in a car accident. Who knows?
I certainly don’t. And neither do you.
What we did know is that our house was really owned by the bank, and that meant that if something bad were to happen to us, we were still on the hook to pay the money we promised to pay.
Every. Single. Penny.
We didn’t like having that burden hanging over us. The housing market looked great. The stock market looked even better. But we had no idea what calamity life could smack us with tomorrow, or in 10 minutes.
That was the risk we weren’t comfortable stretching out for 30 years.
If our house was paid off…
…we could lose our jobs without losing our house.
…we could get sick and be hospitalized, and not have to worry about paying the mortgage.
…we could suffer extreme damage from a storm and work directly with our insurance company to fix it, without a meddling mortgage company to deal with.
Oh, and investing! Without a mortgage payment do you realize how much more money we could be investing every single month? Entire years would be shaved off our working life.
That is the position we wanted to be in, and we knew it was going to take several years and hard work to get there.
Getting Down to Business
Being the debt destroyers that we were, we planned to try as hard as we could to pay the house off in half the time of our mortgage arrangement – 15 years instead of 30. That meant keeping our lifestyle as slim as possible.
(And yes, we realize now that we should have gotten a 15-year mortgage to begin with. Somehow we totally dropped the ball on that at the beginning, but we eventually got our act together. More on that in a moment.)
Was the thought of living a frugal life for several more years exciting? Not really. But the thought of someone else owning our house and demanding money from us every single month was much less exciting.
So we set our minds to the task and from the very first day started paying extra on our mortgage whenever we could.
The Day The Dream Got Real
About 3 years into our home ownership, two things happened that really accelerated our plan.
First, my wife called the bank about refinancing our home to a 15-year loan. She asked what the new rate would be and what that would do to our monthly payment. It turned out the new rate was about 2 percentage points lower than our current interest rate, and our monthly bill would only increase by about $30.
This was a no brainer.
The real kicker, though, was the psychological effect of knowing that paying our house off in 15 years wasn’t just some dream. We had a realistic chance of actually doing it.
Truly believing you can do something is a very powerful force, and now we believed it more than ever before.
Within the week we had refinanced to a 15-year loan, and were off to the races with boosted morale and some wind in our sails. This was the first event that reinvigorated our efforts to kick our mortgage to the curb.
The second event was when our mortgage was sold from the bank we trusted to some rando mortgage company we had never heard of.
Then they sold it again.
No longer were we dealing with a bank that we knew and trusted and had great customer service.
Now we were dealing with some fly-by-night mortgage company that we had no relationship with – a company that made us feel like just a number. We were just a monthly ATM machine to them.
Now lookit, nobody is supposed to have deep loving feelings for their mortgage company. That’s weird.
But in our minds we weren’t just some random customer X. We were the customer that was absolutely killing our mortgage, paying on time, and paying extra every single month!
We were mortgage rockstars!
It turns out mortgage companies don’t care much for mortgage rockstars. They don’t make more money when you pay extra each month. In fact, they make less.
They get rich by charging interest, and the longer they can string out those payments, the more money they squeeze from us.
At best we were that customer that was getting off cheap and not paying “full price” for our mortgage. Rockstars? Not in their eyes.
But then, as if the selling of our mortgage to a nameless, faceless, gutless, heartless corporation wasn’t horrible enough, said corporate monster proved woefully incompetent when dealing with…you know…their bread and butter…mortgage payments.
You Had One Job
We had been paying extra money, directly to the principle, on top of our regular mortgage payment for years. This had worked fine with all the previous companies.
Company #3 was baffled.
It turns out these clowns decided to take our extra payments and just throw them in as “pre-payments” on our mortgage. And they never told us.
We didn’t find out for several months. One day I opened our mortgage bill and noticed the due date on it was almost 6 months in the future. What?!?
My wife took the lead on this one and spent weeks, actual multiple weeks, and more hours than we could count, politely (mostly) explaining to several different payment processors the horrible mistake they had made in processing our payments.
After these multiple weeks, all we truly knew was is that these people hated us, they hated their jobs, they hated their computer system, hated their company, and likely hated puppies but would never admit it on a recorded line for obvious reasons.
They were also clueless about how to turn back time and fix their mistake of improperly processing our mortgage payments for nearly 6 months.
This was truly the event that solidified our determination to rid ourselves of this company for good.
We had about $40,000 left on our mortgage and decided to really buckle down and get the whole thing knocked out as fast as we possibly could.
Turns out a little bit of righteous anger can go a long way.
Fueled by our frustration and a little bit of fear that they would mess up our payments again, we cut back on almost all other spending. We paid our regular monthly mortgage payment each month (they seemed to know what to do with that), but then put every spare dime we could find directly…in our bank account. (We weren’t trusting those clowns with another penny.)
My wife checked our statement every single month and made sure they had processed it correctly.
It took almost 7 months from the time they had mangled our payments, but after making a few phone calls to ensure all the stars were aligned, we finally sent off the final check to pay the mortgage off in full.
We’re Debt Free
From the day we signed the original mountain of mortgage documents and picked up the keys to “our” house, to sending off that final check to that wretched faceless company was 7 years and 4 months – even faster than our 15-year plan.
It felt like a huge burden had been lifted. We finally got our last statement from the clueless mortgage company along with a bland form letter stating the debt was paid in full and they no longer had a legal stake on our house!
We had finally become the owners of our home.
Just to confirm everything was final and fully settled, my wife made one last call.
“Yep, it’s all paid off, ma’am. Is there anything else I can help you with today?”
Nope. Not today. Not ever again.
WE’RE DEBT FREEEEEE!!!!!!!!!
What are your thoughts on paying off your home early versus investing for retirement? If paying off your home early like us, what keeps you motivated each month? Maybe your mortgage is already gone! What are you doing with the money now? I’d love to hear your thoughts in the comments.