Reflections on Home Ownership: 18 Months In

As we speak, I am coordinating the installation of improving the closet storage space in my master bedroom. Hello home ownership! I’m so excited for this improvement as I’m utilizing very little of the existing closet space, which has been frustrating me lately. You’ll see the cost of that update in the December/January net worth updates and the 2 Year home ownership check-in.

If I sold my condo today for the exact same amount I bought it for 1.5 years ago, I would have spent about $13,301.33 more than I would have renting over the same time period. If the market has truly gone up by as much as it looks like it has by the sale prices around me, buying would be cheaper than renting today by $32,808.67. Buying should be cheaper than renting at my purchase price by the end of 2014.

The mortgage balance at the end of December sat at $187,552.40. It was at $229,752.70 at the end of June, so I have paid down $42,200.30 in the last six months, for a total of $98,447.60 in the 18 months that I have owned my condo, while still maxing out my 401(k), Health Savings Account, Roth IRA, maintaining my $20,000 emergency fund, and occasionally adding to my taxable investments. I now have 47.5% in equity and have paid off 34.4% of the original mortgage balance. The mortgage is currently projected to be paid off by June 1st, 2016 with no intervention from my savings account.

Now let’s compare the charts to where the mortgage was six months ago!

With my December 1st payment, I paid barely over $400 in interest and will pay about $390 with the January 1st payment. I paid $480 in interest with my June 1st payment.

Mortgage Payment Interest Versus Principal Mortgage Payment Interest Versus Principal Dec 2013

 

I’ve paid so much of the mortgage down that I’m now tracking towards a 3.5 year payoff rather than the original 5 year plan. I’m about $26,000 ahead of the 5 year payoff target for the end of 2013, and about $7,000 behind the 3.5 year payoff target.

Mortgage Paydown Versus Five Year Track Mortgage Paydown Versus 3.5 Year Track Dec 2013

 

I’m projecting that with my next update at the end of June, the mortgage balance will be sitting at around $145,284.12 or another $42,268.28 gone!

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  1. #1 by monika on January 3, 2014 - 9:21 am

    awesome progress!!! you’re definitely on a roll and this is incredibly inspirational as i’m looking into purchasing a condo. keep up the great work :)

    • #2 by Leigh on January 3, 2014 - 11:37 am

      Thanks Monika! Good luck with buying your condo – it was a huge process for me, but I’m so glad I did it and I love my place!

  2. #3 by Executioner on January 3, 2014 - 6:03 pm

    Way to demolish the mortgage. Like you, we planned on a 5-year payoff but got rid of our mortgage in less than 3.5 years. Once it’s gone, you won’t regret it.

    • #4 by Leigh on January 3, 2014 - 6:26 pm

      I love watching the mortgage disappear! I’m partially regretting it now vs investing, but I don’t doubt that I will never regret it once it’s paid off.

  3. #5 by Sara on January 4, 2014 - 10:38 am

    For now, renting is still cheaper than buying for us (we have lower standards for rental apartments than we do for a condo we would consider purchasing. But it is really interesting to follow along your payoff plan, knowing that we’ll want to do something similar when we buy.

    • #6 by Leigh on January 4, 2014 - 1:42 pm

      I am comparing renting a nice one bedroom apartment to buying a nice two bedroom condo. There’s no way I would rent a two bedroom apartment by myself, but I also wouldn’t buy a one bedroom condo either. I’m glad to hear you guys are continuing to rent when it is cheaper for you than buying! So many people don’t think about that before buying.

  4. #7 by Money After Graduation on January 4, 2014 - 1:12 pm

    you are so awesome I can’t even handle it. Almost $100K in 18 months while still maxing out all your other accounts? Amazing.

    • #8 by Leigh on January 4, 2014 - 1:44 pm

      Thanks Bridget! I was going to send a principal only payment in late December to round it out to an even 100k paid down, but then I decided to have closet organizers installed. Oops! But I’m going to love them, I know!

  5. #9 by plantingourpennies on January 4, 2014 - 7:11 pm

    Pictures of the new closet, please? =) I love good organization too much. We’re almost done with the garage and are already starting the planning phase of what’s going to be the biggest interior home project yet – new floors for the main room and kitchen and an entirely new kitchen design. We need better organization – our cabinets are horribly designed – to utilize the small kitchen and dining nook better. I am sooo excited! But I digress… I just want to live vicariously through your closet organization fun when it’s installed.

    Do you have a post on why you decided to go for the 5/1 ARM instead of locking in a fixed 15-year at a slightly higher rate?

    • #10 by Leigh on January 5, 2014 - 11:48 am

      I will send you some photos! I’m so excited to pull my dresses out from the other bedroom closet and have SHELVES in the closet! Also, two layers of hanging space, one for off season and one for current season clothes. Also, keeping my sweaters on the shelves rather than in random drawers and then forgetting about them and spreading my clothes out everywhere along the top of the hanging space…

      Ooooooh improving your kitchen organization! Sounds awesome :) I have a wonderfully large kitchen with a huge pantry and I love it! I do have an appliance I would like to sell though that I don’t use (think extra fridge/freezer type thing). I have at least unplugged it so it doesn’t use any electricity, but I’d love to have that space back to use as a utility closet!

      When I originally bought, my 5/1 ARM payment was around $1,200/month and the 15 year payments were around $1,900/month, which seemed really high. I still sort of have this picture that I “only” make my starting salary which was around $7k/month gross and on that, $1,900/month mortgage payments seemed quite high! Especially when property taxes + HOA dues are about another $500-600/month. In hindsight, I probably could have taken a 15 year fixed and the interest rate was actually the same, but it seemed far scarier to me. I also would prefer to have the mortgage paid off before I get married so that it is clearly 100% mine – it gets confusing on who owns it if joint income is used to pay the mortgage payments. I talked about that a bit in the comments on this post: http://leightpf.wordpress.com/2013/07/09/reflections-on-home-ownership-12-months-in/?relatedposts_exclude=1750

      Here are some more posts that might help answer your question:
      * http://leightpf.wordpress.com/2012/03/12/why-i-picked-an-arm-or-adjustable-rate-mortgage/
      * http://leightpf.wordpress.com/2012/07/02/my-mortgage-pay-off-plan/
      * http://leightpf.wordpress.com/2011/11/04/numbers-on-buying-a-place-picking-a-mortgage-term/

      • #11 by plantingourpennies on January 5, 2014 - 7:42 pm

        What’s the random appliance like? We actually spent a brief moment looking at a horizontal fridge/freezer (to see if we could eliminate the ugly vertical fridge aesthetic), but the ones we saw were really expensive.

        “it gets confusing on who owns it if joint income is used to pay the mortgage payments.”
        I never really thought about that. For the first 2.5 years of our marriage, our finances were totally joint, but the house was in my name only since we closed before we were legally married and it was easier to have it go through my finances alone since Mr PoP was self employed at the time of purchase. When we refi’d to the 15yr loan in 2011 it was weird because we actually had to pay a separate fee (luckily not huge) to get Mr PoP’s name on the deed. If it was just up to me I wouldn’t have bothered, but Mr PoP thought it was worth it to make it easier in case I ever die, so we did. =)

        • #12 by Leigh on January 6, 2014 - 7:34 am

          Definitely easier in case you ever die to have both of you on the title! I’m not married though and my worry is that I’ll have built up a fair amount of assets by the time I do get married and I would like to protect those assets, if possible/necessary.

        • #13 by TJ on January 6, 2014 - 5:31 pm

          @Leigh I’d be just as much concerned about emotional ruin as a financial ruin in a divorce scenario. I’m not sure what I would do, I would imagine that a prenup talk could be quite awkward, especially if you are of similar means.

          Interesting about paying off your property before marriage. I hadn’t considered that, I’m not sure how the property would be handled post-marriage, in my case, it would still be a rental property with operating costs and income. Then again, going into marriage, thinking that divorce is a possibility seems so incredibly sad to me. I wouldn’t want to get married if I wasn’t 100% sure, and I try to stay away from women who come from broken homes to help with that, though perhaps that makes no difference.

          My sister said she wants to wait until she’s married to buy property. It kind of makes sense. I was a bit pressured by the parents to buy when there was the $8,000 tax credit and the “tax deductions”. I think it will end up a good long term investment (it’s already appreciated a lot), but I think the interest deduction is definitely overrated for the average joe. When I re-fi’ed to a 15 year loan, the interest just wasn’t that significant. I think the interest is down to like $3k a year.

        • #14 by Leigh on January 6, 2014 - 8:44 pm

          @TJ, sure, that’s fair to worry about as well, but you can’t protect against that one. I’m not saying that I would get a pre-nup for sure – that depends on the circumstances of both partners at the time of marriage and is a personal decision. If a pre-nup talk is awkward, then that is not the right guy for me. Marriage isn’t just an emotional commitment – it’s also a legal and a financial commitment. People say that a pre-nup isn’t romantic, but nor is getting married 100% romantic. And you know what? If you don’t sign a pre-nup, you are agreeing the marriage contract of your state, which can vary in every state. Pre-nups aren’t just about protecting financial assets – they can be about other items as well. My primary stance on them is that my potential spouse and I should know each other’s assets and debts prior to deciding whether we want one and how valuable it would be.

          Your sister is smart – sometimes I wish I had waited until I was married, but I think this will turn out alright. And the interest deduction is mostly useless. I was somewhat pressured by my parents to buy as well.

        • #15 by TJ on January 7, 2014 - 9:39 am

          I agree with you, it’s easy to talk about now, but I’m not sure it’d be so easy for me to just walk away if someone tells me I’m being ridiculous if I bring up a prenup. I would assume that by the time you get to that point, you’ve had already invested a lot of time and emotions, and possibly $$ into that person.

          Then again, you’re a programmer, so you must be logical, and you only date programmers, so they must be logical too, so you should be fine.

          You never hear about women being taken to the cleaners in divorce court, but I’m sure it does happen.

        • #16 by Leigh on January 8, 2014 - 8:20 am

          @TJ Yep mostly only date programmers :) I feel like it’s less weird to ask for a pre-nup when both partners have high incomes as well.

  6. #17 by Alicia on January 5, 2014 - 6:33 am

    Astounding. Such aggressive mortgage repayment. And even if you do wait another two years to invest a bit more (even though your other accounts are maxed), you will be so ahead of the curve!

    • #18 by Leigh on January 5, 2014 - 11:51 am

      Thanks Alicia! I figure that it’s not so bad considering that I am maxing out my retirement accounts while doing this. I should actually have enough in my retirement accounts to live off of post 60 in another 2-3 years!

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