It was June in Texas and we were experiencing the hottest day of the year so far.
Of course, standing over the grill frying up burgers and hot dogs wasn’t helping.
We had nearly 100 people both inside and outside our house, pushing our air conditioning unit to its limit. (Maybe that’s why it died 2 months later.)
But the truth was that we were too excited to notice the sweat running down our cheeks. 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 certainly a 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, and when the bank forecloses on your house, they don’t give you back all that money you’ve been “paying yourself” every month.
Now, 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 somebody else for something we don’t yet own.
The Truth About What We Were Celebrating
The ugly truth that most people seem to ignore when it comes to homeownership is that what we are truly celebrating is the signing of a document (ok…lots of documents) saying we promise to pay a certain amount of money to the bank every month for the privilege of living in their house.
That’s right. In simple terms, we weren’t living in our house. It belonged to the bank.
We were celebrating the bank allowing us to live in their house.
How crazy is that?
Think of it like this. Let’s say you own a rental property. Then you lease it to a tenant. Would the tenant ever say they bought a house? Or that they own the house? No way. It’s your house, not theirs. And you can certainly evict them if they don’t follow the rules in the lease agreement.
So why do we somehow feel like we own our home when the bank fronts 80% or more of the money to purchase the house and has the right to kick us out of we don’t pay our contractual monthly payments?
That’s how messed up our idea of homeownership has become.
When someone else has the right to take something away from us, that doesn’t sound like ownership. It sounds a lot like debt.
Slowly Paying Off Our 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.
Knowingly or just subconsciously, 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 all the live-long day.
And that might happen.
But what they often neglect are the equally viable risks.
- They could lose their job.
- Get really sick.
- Be hospitalized.
- Lose a loved one.
- Get in a car accident.
- Receive an unexpected diagnosis.
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.
While the bank’s thumb was only slightly hovering over us at the time we signed the mortgage contract, we knew that thumb was willing and able to start applying pressure at a moment’s notice.
At the time, 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 5 years, or in 10 minutes.
That was the risk we weren’t comfortable stretching out for 30 years.
But, if our house was completely 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.
Read Also: Paying Off Your Mortgage Early: Should You or Shouldn’t You?
Firing Up “Operation Mortgage-Be-Gone”
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.
We had already come a long way in our budgeting proficiency, so we knew which areas we could trim our lifestyle to find those few extra dollars to put towards our mortgage.
Read Also: The Power of the Budget
(And yes, we realize now that we probably should have opted for a 15-year mortgage from the very start, but we’ll rectify that later in this post.)
Honestly, 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 after buying our home, two things happened that really accelerated our plan.
1. Refinancing to a 15-Year Mortgage
One day my wife called the bank to ask 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 nearly 2 percentage points lower than our current interest rate, and our monthly bill would only increase by about $30.
This was a no brainer! We made the decision right then on the spot.
The real kicker, though, was the psychological effect of knowing that paying our house off in 15 years wasn’t just some pipe 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 our mortgage had been refinanced to a 15-year loan and we were off to the races with boosted morale and some wind in our sails.
That was the first event that reinvigorated our efforts to kick our mortgage to the curb.
2. Our Mortgage Was Sold…Twice.
The second event was when our mortgage was sold from the original bank we trusted and had a solid relationship with to some rando mortgage company we had never heard of.
Then, just a year later, it was sold again.
No longer were we dealing with a bank that we knew and trusted. The bank with stellar customer service and always there to make sure our mortgage payments were processed correctly.
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.
It became clear that we were just a monthly ATM machine for 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!
Mortgage Rockstars Are Not a Thing
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 monthly 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 our mortgage principle, on top of our regular mortgage payment for years. This had worked fine with all the previous companies.
Yet somehow rando 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 and managers the horrible mistake they had made in processing our payments.
After these multiple weeks, all we truly knew was that these people hated us, they hated their jobs, they hated their computer system, hated their company, and likely hated puppies as well, 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.
Ditching our Mortgage (Company)
This was truly the event that solidified our determination. We weren’t just destroying our mortgage, we were now determined to destroy our need to rely on this incompetent mortgage company.
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. It was go time!
We paid our regular monthly mortgage payment each month (they seemed to know what to do with that), but then we put every spare dime we could find directly into our own bank account. (We weren’t trusting those clowns with even an extra penny.)
My wife checked our statement every single month and made sure they had processed our regular payment 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 one final check to pay off the mortgage in full.
Boom! Our mortgage was paid off!
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 in 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 to the mortgage company.
“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 Free!!!
We bought our house in 2008 and paid it off back in 2015.
While we were always investing a minimum amount into my 401k at work, once our mortgage went away our monthly retirement investments got a serious boost.
So much so that today we’re retired.
Part of our ability to retire has been because we’ve been investing for retirement for far longer than just the past 5 years, although these large investments years without the mortgage certainly haven’t hurt. 😜
But we are also retired partly because we simply don’t have a mortgage anymore. Without a monthly mortgage payment, our monthly cost of living is a lot lower than it would have been otherwise, and that would have required me to work even longer.
So for us, paying off our mortgage has been a double blessing. It’s possible it could be for you as well.
What are your thoughts on paying off your home early versus keeping the mortgage and investing the rest for retirement? If you’re 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 extra money now? I’d love to hear your thoughts in the comments below.
Alien on F.I./R.E. 🔥
What a thought-provoking post and clever mindset Aaron!
As I am currently debating the same, your input has certainly helped.
One common argument I often read is that it is mathematically more beneficial to not payoff early and invest those extra payments instead; however, in my case (1) there is no guarantee I would be investing beyond my current monthly amount, (2) nor is there any guarantee on the rate of return, and (3) looking forward to the peace of mind brought about by no longer having this large monthly expense.
Live Your Wage
Sounds like you’re thinking it through well, Alien. The beauty is that either choice is a good financial decision. Which decision is “the best” is likely impossible to know in the moment. Honestly, we probably would have been better off financially if we had invested the extra money these past 10 years, but we didn’t know that at the time. And we certainly aren’t beating ourselves up about it. Now we’re completely mortgage-free and moving forward. Make the best decision you can and keep moving forward. Best of luck on your journey!