Reflections on Home Ownership: 12 Months In

6 month post

I’m having a really hard time distinguishing between home ownership and this being the place I live in now. Do I love this place because it’s my favorite of all the places I’ve ever lived in or do I love it because I own it? Maybe it’s a little bit of both. I’ve changed some of the little things that I don’t love about the place, learned to live with the others, and will change more as time goes on. I may not be the home decor fiend like many other home owners are, but I’ve definitely made this place my own.

I’ve been watching the real estate market around my place and I think that I could sell it for enough to make buying make more sense than renting already, one year in. Isn’t that crazy? If I could sell my place for the exact amount I bought it for, buying would be cheaper by the end of 2014, so another year and a half.

Now that it’s been a year, I want to take a look at the math on renting versus buying so far.

  • Over the course of the last 12 months, I’ve paid out $14,096.17 in mortgage interest, HOA dues, property taxes, condo insurance premiums, electricity bills, repairs, and improvements. I also saw credits to the tune of $227.52 when I refinanced my mortgage loan back at the end of 2012 and saved $906.81 on my federal income taxes due to itemizing thanks to paying the mortgage interest, among other things. I’ve lost out on $879.14 in interest by buying the condo and pre-paying the mortgage instead of leaving my entire amount of equity in an Ally savings account earning 0.84%. So, one year in, I’ve paid out $13,840.42 to own and live in my condo.
  • If I had continued living in my previous apartment, I estimate that I would have paid out $22,618.27 in rent, parking fees, building utilities (water, sewer, gas, trash), renter’s insurance, and electricity, which is $8,777.85 more than I’ve paid out to own and live in my condo over the last year. At that rate, it would take me slightly over 3 years with these numbers to recoup the transaction costs of selling the place.
  • Assuming I could sell my place for exactly what I paid for it, I would be out $13,921.98 if I sold it today. I expect staying here to break even (assuming no change in sale price) by February 2015. If the market has truly gone up as much as it looks like it has by the sale prices around me, buying would be cheaper than buying today by $23,846.65.
  • The mortgage balance at the end of June sat at $229,752.70. It was originally at $286,000.00 when I bought the place last June. I’ve paid down $56,247.30 (19.7%) of the mortgage balance over that year 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. That means that, at this time, I am pretty much on track to pay off the mortgage in five years from origination. I also now have about 35.7% in equity and will be pretty close to 50% in equity by the end of 2013.

Now for some charts! Note that these were accurate as of posting and assume only the normal payment for the rest of the year (August 1st payment and on), which is unlikely to happen :)

I am paying SO much less interest than when I first started out last year, especially since the refinance. My first payment was $708.07 in interest. The first payment with the refinance was $527.60 of interest. I’m estimating to pay less than $400 in interest by the January 1st, 2014 payment. It’s been really fun to watch the interest go down each month and the principal portion of the payment go up.

Mortgage Payment Interest Versus Principal

I feel like this chart doesn’t really do justice to the fact that I have paid down over $56,000 of the mortgage in just 12 months. Or very close to $60,000 if you count the pre-payment I sent in with my July 1st regular payment. That is a pretty decent chunk to pay down in just one year. This chart shows how I’m doing against the 5 year payoff balance for each month. As you can see, I’ve paid off enough as of today that I am ahead of schedule through September 1st. With the lump I plan to send in later this month, I should be ahead of schedule through January 1st, 2014.

Mortgage Paydown Versus Five Year Track

Today, I’m glad I bought. I love this place so much and it’s turned out to make a good deal of financial sense so far. Paying down the mortgage is pretty addicting too.


42 thoughts on “Reflections on Home Ownership: 12 Months In

    • Thanks Emily!! Some days I think the just over $4,000/month chunks I send at the mortgage (including the regular payment) aren’t making much of a dent, but then I look at the overall charts and realize that they really are! I think it would feel more real if I was withdrawing cash from the bank and sending that to the mortgage company.

  1. You are doing great! We are still thinking about whether or not we want to sell our current house and buy another or stay put. Lately we have been leaning more towards staying put a little longer.

    • Thanks Michelle! If it were me, I’d stay put as long as possible really. Transaction costs are high and you could change your minds again! Besides, your patio looks gorgeous from the photos you’ve shown. I can’t wait to see your engagement photos tomorrow :)

  2. Looks like you are better off than you would have been living in your parents apartment. You are really moving on those payments you must be doubling up to knock it down that much and you are saving great work. We are looking to buy some rental properties but are glad we bought when we did as interest rates seem to be climbing again.

    • I’m a bit confused – I was never living in my parents’ apartment. I was living in rental apartments in my city. I’ve been throwing my residual at the mortgage each month (about $2,500/month and soon to be $3,000/month) and all of my bonuses.

  3. That’s fascinating to watch the principal amount in your payments grow
    your. Its like you’re gaining ground. I agree with Emily, you’re Killing it!

    The question is, do you feel compelled to move? Hoe long do you see yourself there. The investment will just get better and better.

    • Thanks! It is! I am gaining ground :)

      I see myself living here for at least as long as I am single aka unmarried. We’ll see how things change after that does.

  4. Looking great Leigh. I’m getting very interested buying a place of my own within the next 18 months.

    Just curious about your selling calculations; you said if you sold your place today you’d be out $13,921.98. I was under the impression that the seller *usually* pays the buyer’s commission upon selling (about 6%) and about another 1% for closing costs (~$360k place * .07 = $25.2k). Just curious if you’d plan on selling without a realtor.

    Keep up all the great work!

    • Thanks Mark. Good luck with your home ownership process.

      I apologize – “being out $X” was the wrong phrasing. What I meant was that buying would have cost me $13,921.98 more than renting if I sell today. That includes the 6% realtor’s commissions and some other math.

  5. Having done something similar myself, I think that for those with the means to do so, setting a plan to aggressively pay off a mortgage in a very short timeframe is the way to go. Once the housing payment is removed from the budget, it opens up a huge variety of possibilities. That portion of the income could be used to aggressively invest, or cut back on time spent at work (earning an income), or buy a second property for income (to mention a few examples).

    Also, in a worst-case scenario, you’re guaranteeing yourself a place to live for the rest of your days if you need to. It’s good that you like it so much. Nice progress so far!

    • Thanks! I definitely prefer focusing on one goal at a time. I find it helps to get it accomplished faster and motivates me better. My estimated pay-off date keeps coming in earlier! I’m looking at early to mid-2016 right now.

  6. That progress on your mortgage is impressive! I wonder sometimes if we love our house objectively or in part because we own it (Endowment Effect) and I agree, it’s likely some of each.

    • Thanks! Looking at my chart that forecasts what the balance will be at the end of this year and just how soon I’ll hit $100,000 (early 2015) is really motivating.

  7. What a coincidence, I also owe $230k on each one of my properties… but my mortgage started out at less than $240k… so I really haven’t paid down anything ;)

    Great to see you executing on your 4 year plan! Glad everything is working out well. Keep at it!

    • Thanks! Next time I’ll include a line on the chart that shows what it would look like if I hadn’t made made any extra payments ;)

    • Thanks! I’ve been sending the residual from my paychecks (~$2,500, soon to be $3,000 now that I’m just about doing paying Social Security tax for the year) and most of my bonuses at the mortgage. I’m also only paying 2.5% in interest, but most of the principal reduction is from my own savings and not the regular payments. Congrats on the new job!

  8. I bought my house in 1999 for $140k. Put 50% down and took out a 15 year mortgage for $70k. Got married after 9/11/2001, which was a struggle making money a few years after that. Eventually we got on our feet and with the help of my wife we paid it off in 2008. I must say that being DINK made a big difference. The problem now is that we want to upgrade our housing situation and unfortunately it’s a seller’s market and interest rates are going up (also our combined incomes doesn’t compare to yours ;P)

    Have you ever considered taking in a roommate to aid you in your quest to pay off the mortgage even faster?

    • Why are you upgrading your housing? How will that help you?

      I have considered taking on a roommate, but I really value my privacy and space and so I’ve decided not to for now. After college, I decided that I was going to live by myself until I moved in with a significant other. I still stand by that for now.

      • Our neighborhood has gone downhill since the housing bubble burst in 2006. There is no HOA to keep the scummy renters in line so I come home to a street filled with garbage, both literally and figuratively… Then again, maybe we are too snobby?

        • Wow, that sounds super frustrating. I’ve always thought HOAs were weird with houses, but kind of necessary with condos. I guess there are ways that they are useful with houses too!

  9. I have a certain friend who has had 3 girlfriends in the time I’ve known him and each time after about 6 months or less, they moved in together. Now I have a hunch it was because he liked splitting the rent, what do you think about that? :)

    • Hell nawwwwwwwwww. I am not living with someone unless we’ve dated for at least a year and we are planning on getting married to the extent that I have a ring on the ring finger on my left hand. It’s just too financially complicated and stuff and I hate moving. Saving an extra $800/month would be pretty sweet – that would up my savings rate to ~75% before bonuses. But I’m not going to live with someone for financial reasons when I’m already saving 2/3 of my income ignoring bonuses. It has to be for the right personal reasons.

      Besides, I’m quite happy being single now :)

  10. What are you thoughts when you hear people say low mortgage rates are practically free money, an inflation hedge, and that you should stretch it out and invest more?

    • One of my friends has been trying to convince me of that and that I should invest instead of paying down the mortgage at all. There are multiple psychological/personal reasons why I’m paying it down aggressively that I won’t talk about here, but one that I will talk about is that I want to own the place free and clear before I get married so that in a pre-nup, it is quite clear that the place is 100% mine since if shared money (i.e. income while married) is used to pay down the mortgage, it gets wishy washy on who owns how much of the property. Then when I sell the place, those proceeds will most likely get invested according to my IPS. If my net worth projections continue as they have been, I should grow it by over $100,000 each year and be getting quite close to $1 million by age 30, so I want to be careful about how I protect myself for when/if I do get married.

      In short, if I was married, I probably would be investing the money instead of paying down the mortgage. One of my biggest fears in life is marrying someone who somehow manages to walk off with a good portion of my money after working really hard for it pre-marriage.

      I definitely go back and forth on this. Every few months, I’ll throw a bit more into taxable investments instead of at the mortgage. I am maxing out my 401(k) and Backdoor Roth IRA. But those together only account for about 20% of the money I’ll save this year. As I’ve realized that I will probably end up paying it off well ahead of the 5 year marker, I’ve debated slowing down my pay-off plan. I’m also debating quitting the extra principal payments once I am fully on track to have it paid off before the rate resets, at which point I could pay it off at any time with my cash reserves.

      It’s one of those decisions where I’m not really sure which option is best, so for now I’m picking one side and sticking to it (mostly). This month though I’m realizing exactly just how many months’ expenses my bonus is (~5 if you include the mortgage payment, 7.5 if you don’t) and how awesome that would be to stash it away in investments instead of throwing it at the mortgage (paying down ~5% of the original balance). I know I could do a combination of both, but I find that I’m more effective at things when I concentrate on one thing at a time.

  11. I thought I was the only person who thought of making sure things were 100% mine before getting married (while having no short term plans to marry on the horizon).

    I also think (I vaguely remember reading once, but don’t remember the source), you can pull something similar with investment accounts if it is a separate account number you never add to once you are married.

    My apartment has no mortgage and there is definitely huge psychological value, though mathematically, maxing out debt to invest when fixed interest rates are low is likely the right move long term, if you just consider which results in higher net worth. While I often regret buying vs renting (again for mostly nonfinancial reasons – I prefer there being low friction to moving, even when I am happy where I am), I never regret not having mortgage.

    • I thought I was the only one too! I’ve read that too, but I don’t know how reliable of a source it is. I will also use that of starting new account numbers once I get married. This is a reason I’m hesitant to acquire rental properties now too because you would need to make sure that the accounts for them were fully padded before you get married or it gets confusing on who owns them when you add married money to them. It’s pretty scary how much of a financial commitment marriage is when you’re already well-set financially. If I didn’t have the means to pay it off entirely in a few short years, I probably wouldn’t be paying it down extra at all and instead investing. My original goal was before the rate reset in July 2017, but with the refinance that is now January 2018 and it’s looking like the mortgage will be paid off sometime between late 2015 to mid 2016. We’ll see how I adjust the pay-off plan as we get closer to the end.

      There are a variety of reasons why I won’t be moving any time soon from my city, so I don’t mind owning, but I definitely some days regret buying on my own rather than waiting to buy as part of a couple. I am still with you on the preferring low friction to moving thing though! I definitely don’t regret buying a condo over the townhouses I was originally looking at though. Did you pay off your mortgage early or did you buy without one?

      • Bought without one a little over 3 years ago (due to rental percentage, my building was pretty much a cash only building anyway – which happily depressed prices) – wiped out most of my savings to that point, but I’m now nicely past where I was when I bought (though only slightly past in taxable account).

        Yeah, I have no desire to ever own a house – there is more than enough DIY in an apartment for me. I’d much rather have other people handling most issues that come up.

        For rentals, I keep considering it, but hold back for other reasons (did not reach the point where I thought of marriage reason for this yet, though I guess that is another one), among them –
        – cap rates in my area are super low,
        – reluctant to invest outside my area (where I will have no local knowledge, which people will likely take advantage of)
        – being a landlord is a job, even if you hire a management company (I have both read and heard this repeatedly).
        – I hate the idea of personally signing for debt (and if I pay cash, even higher cap rates are needed) – I guess this might relate to the marriage issue as well, now that I think of it, though considering that spouses can get pieces of companies that you own pre marriage, but enhance post marriage, I would not be surprised if they can get pieces of real estate owned by a company too, even where you own the company (LLC) 100% pre-marriage and any debt the LLC has is in the LLC name.
        -one of the few people I know who does it professionally at a large scale (1-2 generations older), basically told me to leave it to the professionals and stick to stock market investing.
        – when I talk to some people who do it on a smaller scale who do talk about how great it is, once I really dig down, I find out how much they are viewing their investments through rose color glasses (and are often somewhat mathematically challenged).

        But still, every time I play around with monte carlo analysis type calculators, or read some research paper and re-internalize how low stock market safe withdrawals rates are, due to standard deviations and sequencing, the more I find the idea of investing in rentals, even assuming a similar return profile, attractive due to lower SD (if this assumption of mine of lower SD for real estate is correct – I believe it is, especially if you have multiple tenants), which means it could therefore support higher spending at the same return. I would not really want to start with one tenant in any place with decent cap rates due to concern of SD, but more tenants likely increases the work. I have a feeling I am always going to find reasons to hold back from real estate investing unless something amazing drops in my lap (unlikely).

        • Interesting. My building has a very low rental cap, so I will pretty much have to sell when I want to move out, which I’m okay with since I have no interest in being a landlord and this place probably has really bad numbers for rental.

          If you have no desire to ever own a house, do you not plan on ever having kids? I’ve watched other people buy houses around here and it just seems like they all have so many problems. Either the house is new and far out and long commute or not so long commute and old and lots of problems. You can’t really win. It’s also really common around here to only have one bathroom even in a three or four bedroom house, which seems absurd to me. My building has three bedroom / two bathroom condos and I think that if I ended up having kids, that would be a preferred option over a house. People complain about the HOA dues with a condo, but I like paying $X00/month in fees rather than having to repair a roof or something immediately after moving in. I guess you can get special assessments, but those generally don’t seem as bad as house repair costs can be.

          My parents have a rental property and it just always seems to have problems. It hasn’t been a bad option overall for them, but way too many things have gone wrong for my liking. And having debt on that seems even scarier to me than on a personal residence. I’m definitely with you on rental property outside of where one lives. It really does seem like you probably need a lot more invested to get enough cash flow out of stock market investing than you do with RE investing, but RE investing seems far scarier to me. Maybe since you could lose 50% of your stock investments at any given time, but you could have to repair a roof on a rental house for $30k, which you never get back?

          Yeah. Marriage is pretty much the scariest financial thing I will probably ever do. Well maybe kids, except I’m still not convinced I’ll go down that life path. Even buying a condo isn’t as scary. Women can have to pay alimony/child support too. And FI doesn’t reduce your child support/alimony payments.

  12. Undecided on having kids. Currently, I have no desire to have any (and am a bit perplexed why people want them – seems very follow the herd on a huge life affecting decision to me), but in the future, who knows. If I did, I would not have a house but get a larger apartment-either rent or buy depending on the financials of it at the time.

    Three or four bedrooms and only one bathroom is not something I’ve really seen in a house near me (though 3b/1ba is not uncommon with apartments).

    I have friends and family, including some with quite high incomes, who moved to the suburbs so they can have kids. While they start with affordability as their reason, the only convincing based on their likes/dislikes reason I have heard for doing so is a true desire to have backyard (though my reply to this is to live near a park, which they don’t find convincing). Mostly, I think it ends up coming down to having their kids grow up in a similar environment to how they grew up. Financially, it actually rarely turns out to be better than the city alternative (though you do get more unneeded space), as transportation goes up, people end up spending similar money on the house then they would have on the apartment, sometimes private school cost gets added. Also, having a longer commute is one of the few things people do not adapt to in terms of happiness levels.

    I’ve never heard from people of monthly maintenance (what we call the HOA equivalent here) as the reason for a house instead of apartment. This may be an area specific thing. I think monthly maintenance is lower in cost than what people actually end up spending on house improvements and maintenance for similar priced houses, and as you said, other people are doing the work instead of you.

    I actually think in the growth stage (saving for retirement), real estate without leverage, and possibly, though less likely, even with leverage, does not beat stock market indexing returns long term, but during the withdrawal/retirement stage (or as you said, for the purpose of being able to count on cash flow), it wins. However, it is precisely during the withdrawal stage that I will be less willing to put up with the job like nature of a real estate investment. This is kind of a lose-lose scenario – I have not found the holy grail here, but am still searching.

    Agree on the scariness – trick, and I initially wrote this jokingly, but it is probably sadly (due to rarity) true, is to find someone wealthier than you and/or of a similar mindset on financial matters.

    • There are definitely a lot of social expectations around having kids, especially as a woman. I’m young enough that I’m not seeing it that much yet, but I remember a conversation with a female friend who is in her early thirties who doesn’t understand how I don’t know if I want kids or not. I’d rather lean towards the ‘not’ camp if I’m unsure since it’s not really a decision you can take back. I do think though that if I have kids it will be post-FI at this rate, which will provide for a lot of flexibility financially.

      The main reason I’ve heard for moving out of the city is the schools. But then you’re still paying an arm and a leg for your house in some areas here… If I only have one kid, I see no reason to move out of my place since it is two bedrooms. No kids and it would still be perfect :) There are parks close to my place and water parks too. I see tons of little kids at them when I walk home from work.

      That’s interesting that you also live in the US and people call ‘HOA dues’ something different.

      I have mostly dated engineers, I won’t date anyone with debt, and I mostly date guys 2-3 (max 5-6) years older. It’s really hard to guess someone’s net worth though… Then again, if I don’t have kids, I’m not completely convinced that getting married is something that I will do at all. You can’t just find someone who is wealthier/higher-earning than you though since they might also be higher spending. It’s really, really hard to filter for any of that on dates too.

      Thanks for starting some good conversation!

  13. Congrats on hitting the one year mark! The real estate market where we live is hot hot hot and I think even more so where you live. We hit the one year mark next month and I am so thankful for the timing. Now you have to put an offer in right after you see the place.

    We’re still pre-paying our mortgage. I know rates are so low and now going higher, making our rate from last year amazing, but we just really want the lifestyle advantages having no mortgage affords- namely not being so tied to your job and being able to pick jobs based on work and opportunity rather than paycheck. That being said, we still invest in our retirement accounts and taxable accounts so we’re not going all in on the mortgage prepayment.

    • Definitely seems like it! My estimates show that I could probably sell this place for $50k more than what I paid for it last June, which is insane! That’s more than a 10% increase. I’m so glad that I bought last year and that I locked in a 2.5% interest rate.

      I am still investing in my retirement accounts too. I’m with you on wanting to pick jobs based on work and opportunity rather than paycheck. I hope you’re enjoying your break this month! I think that I could take a $30k pay cut on my base pay and lose my RSUs and still save “enough” with how low my mortgage and other expenses are.

  14. Trying for FI at a young age is already bucking social expectations – if I do end up having kids one day, I think it more likely to happen due to significant other at the time wanting it, then social expectations on me (though I agree the social expectations are huge). There are a pretty limited set of people (and not my parents), with whom I have shared that I have no desire to have kids.

    By me, there are plenty of good school districts in the city (though the areas where there are good schools districts are mostly quite expensive – but then almost everywhere I’d like to live, irrespective of school districts is expensive).

    Two bedroom near parks sounds ideal.

    On HOA dues, yeah it is mostly co-ops here, where they call it maintenance (and real estate taxes are embedded). In condos, they officially call it common charges (and taxes are separate), but probably because co-ops are much more common than condos, people almost always say maintenance when referring to the monthly amount apartment buildings charge. For some reason, when I hear HOA dues, I think of something a neighborhood association charges, and not a building charge, though HOA dues is what I hear people calling their apartment maintenance in other cities. It is interesting that different terms are used for (what I think) is the same thing.

    Agree, very difficult to filter, at least without knowing the person for quite a while pre dating – though by wealthier, I meant assets, not income – though assets is even harder to filter than income. I would guess engineer increases the odds, but I have no data on that. Do you ask people straight out if they have debt – because if not, I would guess the context that lets you know whether they have debt would also give you a decent idea of their finances, when you combine that with knowing what their job is. I remember seeing some article a while back (I think in nytimes), about either people or dating sites (I don’t recall which) filtering based on credit score becoming a common thing.

    • Yup – that’s why I say that my goal is to be able to retire by 50 and don’t actually mention the fact that I am really striving for 30 ;)

      Do you have a one or two bedroom apartment? Yep, my property taxes are separate from my HOA dues. Co-ops aren’t very common here and it’s hard to get a mortgage for them, which keeps their prices lower than condos. I own from the paint in on the walls of my unit and have full access to my balcony and parking spot, though legally they are common areas.

      I don’t ask straight out if they have debt, but you can make some guesses based on other questions. Considering that I’m now almost 4 years out of college, anyone who came out with a small amount of debt would have paid it off already. You can tell by who is buying a condo / who owns a car who didn’t have student loan debt. I’ll usually talk about where people went to school and that can give you some ideas, private or public, lived at home or not. Guys tend to be proud of working their way through college and will talk about that if they did or paying off their student loans quickly. One guy did actually straight out tell me he had $XX,000 of debt and we’d gone through the same program, so I thought that was an absurd amount. Do you ask people if they have debt? Guys also seem to like to gloat about their income on dates. I had someone rave about how hard he’d worked for his salary…which was $100,000 less than mine. I just played along nicely with his story though, I wasn’t about to put him down.

      • I actually have a studio. 1 bedrooms pretty much start at 400K here for a small one. The main difference between coop and condos here is that coops generally have more stringent restrictions on renting your apartment (when allowed in the first place, having to live there first for 2 years and then allowing you to rent out 2/5 years is a common one, though my building has no restrictions). People generally are able to get mortgages for coops here (though some coops have pretty high percent down requirements. While you officially need approval for certain types of renovations, I believe that is true here for condos as well. There are also certain coops (way outside my price range) where the boards are pretty tough in terms of letting people buy (either financials and/or pedigree/social circles).

        I don’t ask people, but then I don’t date very often. Not really many car owners here and buying an apartment pre getting married is not so common, so both those indicators are generally unavailable. Don’t think I’ve ever brought up my salary, either to a date or to friends, though I tend to answer when asked (feel with a bit of work, you could figure it out, so I am not that secretive about it)–I would probably be a bit thrown, though, if someone asked me what I make on a first date.

        But knowing someone’s job gives pretty good visibility into how much money they are making, and people do tend to reveal their approach to finances in things they say.

        Job + where they live combined with whether they have roommates+ how often they go out to restaurants (this can really add up) and the like paint a picture of their financial health. Fairly common for people to share what they are paying in rent because that’s something everyone is interested in.

        High student loan debt is very common here and I feel student loan debt is something where I can give people a pass (especially if they could pay it off (faster) if they want to and choose to invest instead).

        But bottom line, if someone in their 20s here is not making >100K, odds are they are spending everything they make (and sometimes getting help from their parents too), as there is a lot to spend money on if you are not smart about it (and plenty of peer pressure to do so).

        • Wow, $400k for a one bedroom? That’s more than my 2 bedroom place cost! You definitely need approval for certain types of renovations in condos here, though it depends on the particular condo board whether you need approval to do X or not.

          No, no, I would never ask someone how much they make while on a first date. That’d be weird! People can definitely live here on less than $100k reasonably easily – you just can’t live downtown. That tells you that someone most likely doesn’t make $100k if they live out of downtown or by the building they live in. It’s interesting how different everyone spends their money and what they value! Housing is reasonably expensive here, but it sounds like it’s much more expensive where you are. I’ve found that sports result in less peer pressure to spend money than other activities. So sure, I spend ~$100/month on sports, but that’s much cheaper than spending 3-4 nights/week hanging out at bars with my friends and way more fun.

  15. I actually think your wise in paying off your house early. Interest payments are so high during the first part of your mortgage. Banks do this so they can be sure to recoop as much money as early on as possible. So by accelerating your mortgage progress in the beginning, your making sure more of your principal gets applied to the loan instead of being given to the bank as interest payments. It’s easy to tell by just looking at amortization table.

    • Interest payments are so high during the first part of the mortgage because the balance is higher. On any given month, I can calculate how much interest I will pay with my next payment by using the following formula:
      B x 2.5% / 12
      where B is the balance at the time I make the payment.

      So when B is higher, there is more interest being paid. The amount of the regular/required/minimum payment is calculated so that you pay the same amount each month for 10/15/20/30 years, even though slowly, less interest is being paid and more of the payment is going to principal each month. If you make extra payments, the length of the amortization is reduced since you’ll keep making the same payment for the rest of the time period.

      I’m paying so much less in interest now because a) I refinanced to lower the interest rate from 3% to 2.5% and b) I’ve paid off over $74,000 of the original balance in the last 13 months. $74,000 x 2.5% is $154 in interest per month. Now that’s a pretty huge difference!

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