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.
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 saw that housing prices can definitely go down, that tax deductions don’t make up for a mortgage payment you can’t afford, and 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 is we were celebrating with all our friends because we signed 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.
And you know how my wife and I feel about debt.
But that didn’t stop us from taking out a 30-year mortgage on our house. Of course we had no plans to make slow, easy monthly payments for 30 long years. No way! Thirty years is a long time and who knows what could happen.
We all assume that we’ll just get a little older, get better jobs, make more money, and have beautiful well-behaved kids that frolic in our lush green grass.
Or we could lose our jobs. We could get really sick. Be hospitalized. Experience severe damage from weather or a pipe could burst destroying everything. Who knows? I 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. Month.
We didn’t like having that burden hanging over us.
But if our house was paid off and we did lose our jobs, we wouldn’t risk losing our house too. We could get sick and be hospitalized, and not have to worry about paying a mortgage bill. We could experience damage from severe weather and focus solely on working with our insurance company to get it fixed without hassling with the real owner of the house…the mortgage company.
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.
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.
Then, 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 rate was about 2 percentage points lower than our current rate, and our monthly bill would only increase by about $30.
This was a no brainer. We didn’t need to run the numbers financially. We knew we could afford the extra $30 payment. But the real kicker 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 to another company. Then sold again.
No longer were we dealing with a bank that we knew and trusted. Now we were dealing with an unknown mortgage company that we had no relationship with – a company that made us feel like just a number. Not that anyone is supposed to have deep loving feelings for their mortgage company, but in our minds we weren’t just 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!
But 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 better for them.
At best we were that customer that was getting off cheap and not paying “full price” for our mortgage. Rockstars? Definitely not in their eyes.
But the selling of our mortgage to a nameless, faceless corporation wasn’t entirely the event that reignited our passion to destroy this debt. It was when said faceless corporation started screwing up our extra payments we had been making to knock it out.
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. But this latest company hadn’t been putting our extra payment to principle. They decided to count them as “pre-payments” on our mortgage and conveniently chose not to tell us.
In fact, 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, and more hours than we could count, working with several different mortgage processors who clearly cared nothing about us, our mortgage, their inability to process our payments correctly, or how much of our time they were wasting.
This was the event that solidified our determination to rid ourselves of this company for good. This company clearly didn’t care about us. They just wanted our monthly payments and their regular interest on our debt. We were done with them.
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 and put every spare dime we could find directly to our mortgage. Valarie 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 we finally sent off that final check to pay the mortgage off in full.
From the day we signed the original mortgage documents and got the keys 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 faceless 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 called them. It turns out this event that was a huge victory for us was clearly just another day at the office for them.
“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!!!!!!!!!
Do you have a plan to pay off your home early? What keeps you motivated each month? Maybe your mortgage is already gone! What are you doing with the money now? Tell me your story in the comments.