Reflections on Condo Ownership: 6 Years In

Rightsizing your space for your needs is so important. We have worried we didn’t have quite enough off and on. Without plans to have children, however, a large two bedroom apartment is really a great size. It’s forced us to change our packrat mindsets and get rid of stuff we don’t need, which is great.

In 2017, this condo cost just shy of $15,000 in housing expenses (mortgage interest but not principal, condo fees including special assessments, property taxes, condo insurance, electricity, and repairs). Despite minimal income from me in 2017, our housing expenses are still quite low compared to our income for the year. That’s the pro side of buying a reasonably priced place when your income is lower. We are currently budgeting about $2,000/month for our 10 year mortgage payment, condo fees, property taxes, and condo insurance, which includes a parking spot, in-unit laundry and a storage unit and sees about $800/month going to principal of the mortgage payment. For a similar rental apartment nearby, we would pay at least $3,000/month before even getting a parking spot. Purchasing this condo when I did was an incredible financial decision and has substantially influenced the wealth that we now have.

Although we didn’t meet my original five year payoff plan, we have made substantial progress on the mortgage over the years. The balance has dropped by $30,715.48 since I last made an extra payment in December 2014. We have now paid off 60.7% of the original mortgage. We refinanced to a 10 year amortization, which means we have at most 10 years left on this mortgage. We have a new plan to pay it off within 5 years from now and should see the balance drop to five figures sometime in early 2019. We also have enough in cash to pay off the current mortgage balance due to our cash holding preferences.

When you’re buying a condo, you read through so many documents. You get access to condo association meeting minutes for the last while, budgets, and nest egg (this is not the technical term, but the technical term seems to vary regionally) information. You do due diligence then. You have to keep doing that due diligence even after you’ve bought. Every year, you should get a budget, updated fee schedule, and nest egg information. You need to ask questions.

People complain about condo fees being “high”. Take a look at what your condo fees cover. Condo associations do need to pay for items that you don’t have to pay for when you own a house, such as filing a tax return and other fees, licenses and permits related to being a non-profit association, management fees, ridiculous costs of photocopying and postage, regular studies on the building’s nest egg, elevators, fire systems, and a phone line for the callbox. Never buy a house with an elevator – they’re expensive as all hell. The condo budget also covers building insurance (why our condo owners policy is so cheap), water, sewer, garbage, cable TV, cleaning of the common areas, outdoor landscaping, roof maintenance, plenty of plumbing, electrical, and repairs of many structures including windows. Those fees aren’t a waste of money, though they surely feel high when it’s one single chunk coming out each month instead of small dribbles.

I remember when I was looking at condos, everyone talked about how special assessments are bad, without much discussion of why they are bad or how they happen. In my experience, they happen when the people running the board don’t plan for the future, but also, when unexpected events arise. Our condo building is now older and needs a fair amount of work done in the next several years. The board in the past had chosen to never save money for future maintenance issues and to only raise money from homeowners each year for the maintenance that they planned to do that year. That turns into a problem when you need to replace the elevator, windows, roof, decks,and siding all at the same time, to the tune of a five figure amount per homeowner (about $25,000 at the maximum).

Thanks to some turnover, this year, the board in our building chose to raise our monthly condo fees by a bit more than 50% to start saving money for the future. They also did a small special assessment (< $1,000 for our portion), though presumably a larger one will be coming in 2019 or 2020 as we still have a low five figure amount to pay according to the last nest egg analysis.

The money part is a smaller portion of the issue to us – coming up with a low five figure sum to pay the special assessment when we've been spending so little on housing the last several years isn't a huge deal. The more frustrating part to us is realizing how much maintenance has been deferred (roof, elevator, windows, siding, as well as ongoing pipe issues – basically all of the major projects), how out of the loop homeowners not on the board have been kept, how little control we have over the general maintenance level of the building, and how much random power the board thinks they have. I spent 2017 on the Board, which increased our knowledge of what was going on, bringing with it, the stress of how chaotic the board was and how no one on the board really agreed with each other other than that all maintenance should be future owners' problems and not current owners' problems. The Board has, on multiple occasions, done work that affected our unit without notifying us or shown up at our door without notice to do work, both of which are against the actual policies the building has.

Well, that future is now. The maintenance is the current owners' problems because it needs to be taken care of.

All of this led us to open houses of small-ish single family homes. You can't, however, find a single family house as centrally located as we are. And then instead of being frustrated with the condo board not doing the maintenance, we would need to take care of it all. A house is a substantial lifestyle change from our current situation. A house that meets all of the requirements we laid out would end up moving us to a new neighborhood, increasing commutes, not necessarily come with a garage, be further from lovely walking trails, and its purchase price would be somewhat more than what we estimate we could sell the condo for at the moment. All to avoid being in a condo association. Is that worth it?

So in the end, which compromises do we want to make about our housing situation?

For now, we concluded that we should work on improving our cash position over the next few years to get ourselves in a position that we could buy without selling stocks, if we wanted to. The financial plan that I drew shows that we could save a 20-30% down payment on our ideal house's price over the next two years, depending on how much we choose to invest and how much income I add to the pot. Our current idea is to invest 1/3 of our available money for savings and save the other 2/3 for a house, which we can adjust depending on how we are feeling as the plan goes along. We'll also likely stick to our new five year mortgage payoff plan as a hedge of staying, it has a small impact on our overall cash flow, and we would roll any condo equity into a house.

Would I have still bought this place if I went back in time? Probably. I would have done more research into state law on condos though and more due diligence each year.

Readers, how have you decided to move in the past?

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Adjustable Rate Mortgages adjust eventually: time for a new one!

If you’re a long-time reader of the blog, you’ll know that I’m a big fan of my Adjustable Rate Mortgage (ARM). When I bought my condo, I took out a 5/1 ARM with a 3% initial rate. I refinanced six months later to a 5/1 ARM with a 2.5% initial rate.

It’s now over five years later (almost six in the condo!) and I didn’t actually pay off the mortgage like I had planned I would. I/we have paid off just over 60% of the original balance though! Back in early June 2017, we got a letter from our mortgage company explaining how the reset would work, with what the interest rate was then. Then again in early December, we got another letter, which is when they committed to an interest rate and new payment for the year. That letter explained:

• The new interest rate: 4.125%
• The new payment: $614.48 (versus the old payment of $1,027.32)
• How much of the new payment would go to interest versus principal ($395.23 versus the prior $242.80 would go to interest)

This was a huge jump in interest, which we were not happy about. Yes, it was mitigated by the extra principal payments that I had previously made, but it still seemed unnecessary. I had been doing research haphazardly and had found a lender a few years ago that offered low cost refinances, which was really important with the fact that our mortgage balance is now in the low $110,000 range. It’ll take about 3 months to break-even, so we will only save about $500 on interest in 2018, but we’ll save about $2,000 in 2019, especially since our current mortgage would have continued to reset annually (and at today’s rates, it would go to 4.875% at the next reset). We concluded back then though that we should wait until the rate reset to refinance again and that we would probably go with a 10 year amortization.

Research was done, spreadsheets were made, and I eventually won my husband over that we should refinance to another ARM! I was pretty surprised he came on board with the ARM. He attributes it primarily to realizing what the mortgage balance will be in another 5 years on a 10 year amortization – it will sit around $60,000 and by then, we will likely have gotten bored of it finally and paid it off. We did ponder this quite carefully though because it seems once your mortgage balance goes under $110,000, you can’t get as good of rates any more, so that means that this is our last chance to refinance to a more favorable rate. When we first started looking, the 10 year fixed rate mortgage was 3.19% and the 5/1 ARM with 10 year amortization was 3.09%, so the fixed rate seemed like a better choice. By the time we actually applied though, the 10 year fixed rate was up to 3.59% and with a 0.5 percentage point difference, we pulled the trigger on the ARM!

We’ve also discussed our strategies for paying off the rest of the mortgage, after letting it go with “just” the required payments for the last 3 years. (I say just in quotes because they paid the balance down by $28,465 or just about $10,000 per year thanks to all of those extra principal payments I had made in the first 2.5 years.) We’ve tossed around two main ideas:

1. Paying it off when one of us receives a bonus that is more than the remaining mortgage balance
2. Paying enough each year to keep it on track to pay it off before the rate resets in 5 years, which works out to about $12,000 per year or $6,000 twice per year

If we let it ride for the remaining 10 years, don’t pay anything extra, and the interest rate resets in the worst way at each adjustment date, then we have $25,415.07 left to pay in interest, which is a huge improvement over the $300,000+ that I started the mortgage with back in mid-2012, so no matter what we decide, it doesn’t have nearly as huge of an impact anymore.

Refinance by Day

It turns out that applying for a mortgage when your annual salary income is more than the mortgage balance is really easy and quick to be approved! It was a relatively calm refinance, compared to my previous one that involved stressing over whether the appraisal would come back high enough to give me 30% equity! They didn’t even ask our condo association for any information beyond the building’s insurance records. I was really worried that they wouldn’t put both of us on the mortgage since I currently have no income, but that wasn’t a problem at all, likely because we are married and our loan is under 20% of the condo’s appraised value.

Day 1: Saturday of a long weekend, we applied for the new mortgage, right after filing our taxes. An exciting date night!

Day 2: Second business day after we applied, both of our credit was pulled and we got a request for my husband’s 2017 W-2, 30 days of paystubs for him, and our photo identification. We uploaded the documentation and signed some documents.

Day 3: The appraiser contacted me to set up a time to come out and measure and photograph our place.

Day 4: The appraiser came out. The loan was approved based off of our income, though still contingent on the appraisal.

Day 14: The appraisal came back and all of the contingencies on the loan have been removed.

Day 28: We received the preliminary closing disclosure, which contained the original numbers from the application.

Day 29: We were contacted by the title company to schedule closing, which we scheduled for the following week.

Day 30: We received the closing disclosure.

Day 36: Closing day! We signed 90+ pages of documents and gave them a check that covered our $295 closing fee, $98 in fees to pay off the previous mortgage loan, interest for all of March and a bit of April to the old loan company AND interest for most of April to the new loan company.

Day 42: Loan disbursement day. The old mortgage was paid off this day and has been marked as paid off on my credit report. It feels a bit anticlimactic to log into the online banking and see the mortgage paid off when a new one is still coming, with a different bank.

Conclusion

We don’t have to make a payment to the new mortgage company until June 1st, so we calculated how much we missed paying in principal since we paid all that interest at closing, but no principal. I’ve already made a $670.85 principal only payment to the new mortgage this month and we will make a similarly sized one in May, plus any interest we get back from the old mortgage, which should hopefully come in the next couple of weeks.

The other side benefit of this is that now both of our names are on the mortgage and the deed of the condo! Now my husband has a better response for when his friends sass him about this being “my” condo and not ours or his. (Yes, this means we settled up the equity in the condo so we both own half of it. It’s really nice to have a decent sized taxable account of my own now!)

I’m really glad I didn’t let myself be scared into a 30 year mortgage when I bought the place six years ago. I went from a 3% 5/1 ARM to a 2.5% 5/1 ARM and now to a 3.09% 5/1 ARM with a 10 year amortization. Thanks to reducing the amortization so much (from 25 years to 10 years), the rate we have now is really not that different from my first rate six years ago and the required payment is even lower than my first payment was ($1,205.79). I’m glad I didn’t take out a 15 year fixed rate mortgage six years ago – that would have left me with a $1,975 required monthly payment, which felt huge on my monthly salary at the time. Instead, I took out a 5/1 ARM with the same interest rate and made extra payments when I could, with my non-salary income.

 

Reflections on Homeownership: 4.5 Years In

 

Life was so busy this summer that I forgot to write my annual reflections on homeownership post, so here I am at 4.5 years in instead. I cannot believe that I am coming up on my five year anniversary of buying this wonderful condo come this spring! This fall marks 5 years since I started looking for a piece of real estate to buy.

There have been many discussions lately over the fact that in today’s hot real estate markets, you need to decide pretty quickly whether you are committed to spending several hundred thousand dollars on a particular piece of real estate. Yet, every week it seems we discover something new and fascinating about this condo in which we live.

Lately, one question has been “How much did I really think through this neighborhood selection?” Within a mile radius, we have what I thought was pretty much everything one needed: a post office, courier services, multiple grocery stores, a library, a drug store or two, a hair salon, barber shop(s), a gas station, park(s), and multiple restaurants. Yet, whenever we want to go to a restaurant, our first choices are never the local ones, which results in Uber’ing to another neighborhood. There is no takeout in the area that I like. (Is that a good thing or a bad thing? Probably not so bad for the wallet.) Our friend in the nearest proximity is a full mile away. It is pretty easy to get downtown and it’s easy for friends to park near us if they drive to visit. The commute to my job at the time was pretty good, as it is to my husband’s job, but my commute to campus is a bit inconvenient, as was my commute to my last job.

We finally finished the furniture tetris game I mentioned last time we talked about my ideas on homeownership. We now have furniture that we both love and that we chose together. We repainted many rooms. We’ve decorated together. It really solidly feels like our place. It is wonderful. Our home brings us joy again.

A realtor told me that they would list this condo of mine for ~45% more than what I paid for it. Two more years or so and that would run up against the $250,000 single capital gains exemption for home value increases, though we may not need to worry about that as we got married and that increases the exemption to a ludicrous $500,000. (I’m unsure what exactly the requirements are to qualify for the married exemption over the single one, however.)

In 2016, this condo cost a whopping $14,000 in housing expenses (mortgage interest, HOA dues, property taxes, condo insurance, electricity, repairs, interest lost from having the equity locked up, and tax savings).

I was pretty conservative in my calculations when I bought this place, which has now put my husband and I in the situation where our housing costs (including the full required mortgage payment of which only the interest is included in the $14,000 figure) are around 6% of our combined gross income in 2016. If you take out the principal portion of the regular payment, it’s even lower.

Perhaps I skipped the 4 year post back in the summer because we were super busy going to open houses every weekend. We were frustrated with our furniture tetris and unsure that we would ever figure it out, so we became convinced that we might need a larger place. This condo has two bedrooms and is relatively spacious in the lower 1000 sqft range, but we were not utilizing the space particularly well. With our then-existing furnishings, there wasn’t enough room for each of us to feel like we had personal space to pursue our home-based hobbies. The increasing market ranges mean that we would need to spend about 40-50% more than the value of this condo to get a three bedroom townhouse. We developed the mantra “Is this cheaper than moving?” (which is pretty much true for everything when your alternative is to spend several hundred thousand dollars) and we started trying new hypotheses. We hired an interior designer to help us refurnish the living room, who came up with ideas that we never would have. It was expensive, yes, but it sure was cheaper than moving. The designer asked us early in the process “How long do you plan on staying here?” and our answer was “So long as we stay in this city and don’t have children, quite possibly decades.”

Homeownership means that our lives revolve around our central home, rather than our home moving as our lives shift.

Hindsight on Years of Aggressive Mortgage Pre-payment

I have written in depth about my mortgage and my aggressive payoff plans. I really hope that you don’t follow in my example and treat your mortgage like a pants on fire debt emergency like I did because that was a huge mistake. Keep in mind that while aggressively paying down my mortgage, I also maxed out my pre-tax 401(k), my HSA when it was available, and my Roth IRA. I also maintained a healthy six month emergency fund and another six months across liquid stock index funds and bonds.

I regret aggressively paid down a 2.5% mortgage. Over the course of 2.5 years, I made $126,000 in extra payments. At my current expense level including my required mortgage payment, that is 2.6 years of expenses. Instead of hiding $126,000 in my Vanguard taxable investment account in the form of stock index funds or in a cash savings account, I hid it in my mortgage, from which the only ways I can extract equity are by applying for a HELOC currently priced at ~4.25% in advance of when I need the funds or by selling half of the condo to my husband over time.

Doesn’t this chart look motivating? I made such huge strides on eliminating that mortgage debt pretty quickly: within the first 2.5 years, I paid off exactly 50% of the original mortgage balance.

Why did I do this?

I was scared of my mortgage.

My original mortgage balance was 3x my gross base salary when I bought the condo. I had never had debt before (no student loans or credit card debt) and having 3x my base salary in debt was HUGE.

15 year fixed mortgage rates and 5/1 ARM rates were the same when I bought my condo. A decent portion of my income came in the form of deferred compensation and I didn’t want to lock myself into the payments of a 15 year fixed rate mortgage, so I thought that a 5/1 ARM was the perfect compromise – the rate of a 15 year fixed rate mortgage with a 30 year amortization. I didn’t trust in my then-income level enough to lock in the 15 year fixed rate payments. The difference between the two payments? $1,900/month versus $1,20o0/month when the lower payment caused me to see zero increase in my annual expenses over renting and I was stashing $2,000/month into savings on top of maxing out my pre-tax 401(k) and Roth IRA.

I didn’t understand compound interest.

My parents preached that debt is bad, anyone who carries debt is financially irresponsible, and no one should hold their mortgage or student loans or any other debt any longer than minimally necessary. I’m not really certain of their investing strategy because they think the stock market is too risky and you should invest entirely in bonds, real estate, cash. That’s a debate for another time. I started saving for retirement while I was in college (back in 2007), but all of that was put into certificates, not into the stock market. No one explained compound interest to me until I found the financial blogosphere back in 2011 and despite the number of advanced math classes I took in high school and college, I never figured it out either. You don’t have to save nearly as much for retirement if you frontload it in your twenties and thirties and invest in stocks. The Vanguard S&P 500 Index Fund, for example, has an average annual return of 10.83% since its inception in late August 1976. That’s just over 40 years ago. That is pretty much unheard of in cash returns! At least in my lifetime that I can remember.

I was scared of the stock market.

Yes, I had no comprehension of compound interest, yet somehow I was perfectly happy locking away money in retirement accounts for many decades and investing in stocks there, while being scared of investing in the stock market outside of my retirement accounts. I would rather get a guaranteed 2.5% return than incur the increased risk of the stock market that could possibly get me a 10.83% return. (For the record, Vanguard currently tells me that I have seen a 9.0% return over the last 6.5 years that I’ve had accounts with them or 9.8% over the last 5 years, which is when I started hunting for a condo.) I was so scared of losing money, of seeing my account balances go down, that I took the guaranteed 2.5% return instead.

Why was this a huge mistake?

Liquidity.

I’m sitting on a desire to take a sabbatical from my highly paid tech job and I’ve spent much of 2016 setting aside additional liquid funds in order to finance that. Had I not paid down the mortgage so aggressively, I would have already had that fund. Assuming I had invested the exact same amounts I paid extra on the mortgage into Vanguard Total World Stock Index Fund on the exact same days that I made extra mortgage payments, I would have had $148,924.73 in the index fund on 10/1/2016 and I would have been ahead. Now, the stock market has done reasonably well over the past 4.5 years, so in the following chart I also compare aggressively paying down the mortgage to aggressively saving in a 1% interest earning savings account:

Notice how the green line and the red line are pretty much on top of each other? Cash currently would be worse than aggressively paying the mortgage by a mere 2%. Investing has been at best 19% better than aggressively paying the mortgage and at worst, $215 better, thanks to a rising stock market over the last several years. You look at this second chart and wonder why I paid the mortgage so aggressively when I could have accomplished the same net mortgage balance within $2,000 by just keeping the extra funds in cash.

What does this math show?

If I could have been convinced to not blow all of the money I threw at the mortgage over the last 4.5 years, I would have been better off leaving it in a 1% savings account than throwing it at the mortgage quite so aggressively. That would have left me with significantly more liquidity.

In late 2011, I wrote a post entitled “What to do with extra monthly and bonus cash flow?” in which I explained several ideas I was tossing around:

1. Split the money up three ways into investments, pre-paying the mortgage, and saving for a 20% down payment on a house
2. Split the money up 50/50 into investments and pre-paying the mortgage
3. Split the money up 50/50 into pre-paying the mortgage and saving for a 20% down payment on a house
4. Invest all of the money
5. Use all of the money to pre-pay the mortgage and pay it off really quickly

My conclusion? “Right now, I prefer the first option since it still allows the extra funds to be diverted back to mortgage pre-payments or investments at any point. The fifth option isn’t very flexible and the fourth option is the riskiest.” Yet, that is not at all what I did. I went with the fifth option.

But then, once I bought a place, I picked a 5/1 ARM, set out to pay it off before the rate reset, which was absolutely a side effect of the fear of the rate resetting, and got addicted to the high of paying down the mortgage. It was so much higher than any high I have ever experienced from saving. I was really convinced that the mortgage would be paid off before the rate reset, before life happened in the form of my now-husband moving in, a job change that unexpectedly reduced my income, starting grad school, and getting married. I’ll talk later about how we plan to handle the mortgage going forward in our marriage.

Back in July 2012, I thought “I’m not the sort of person who would *not* take out a loan to invest. I’m the sort of person who would have more job security if I lowered my yearly fixed expenses by $14,469.48 than by having a larger amount of money in the bank.” I no longer believe that to be true and I can’t take back the large payments I made on the mortgage without doing a cash-out refinance or opening up and drawing down a HELOC. I was addicted to the fact that early on in the mortgage, I could pay $X in an extra payment, which was about Y normal monthly payments and shave off 2*Y regular monthly payments off the end. I got addicted to paying down my mortgage.

It’s all incredibly irrational. Personal finance is all so personal. But that chart doesn’t lie – I would have been better off keeping my mortgage payoff fund in cash.

Aggressively paying down my mortgage being my biggest financial mistake shows how much financial privilege I have. If you hate debt as much as I do, I am absolutely on board with paying extra on your mortgage, but not this all or nothing approach for several years like I did. That said, buying this condo is quite probably the best financial decision that I have ever made – by a stroke of luck, it has appreciated an average of 11% annually since I purchased the property. I didn’t even need to pay the mortgage any extra to get the benefit of that appreciation.

Cash could have been turned into extra mortgage payments later.

Liquidity is king.

Reflections on Homeownership: 3 Years In

It was three years ago this month that I bought my condo. I was pretty staunchly single then and life has definitely changed quite a bit, but the two bedroom condo that I bought has been able to evolve with my life, which is really great. We’re still working on the furniture tetris game from my boyfriend moving in. We at last know exactly what we’re doing with all the furniture, even if it hasn’t happened yet, and we’re planning on re-painting a room and have mostly picked a color. By the end of 2015, it should definitely feel like a shared living space rather than just my place. We both feel like we’ve finally found the right way to balance sharing living costs! I pay for all of the costs related to the condo, we both have separate insurance policies, and he covers a similar dollar amount in other costs, which right now works out to the internet and electricity bills, groceries, music services, small appliances and furniture, and eating out together.

I’ve stopped comparing whether renting vs buying is better because as of February, assuming I could sell my condo for the exact same amount I bought it for 3 years ago, buying was cheaper by $1,500. A realtor from the brokerage I used to buy my place contacted me in February and he mentioned that he would list my place at about 25% more than what I paid for it. Based on the emails I get about similar units near me, I think it’s up about 30% from purchase price now, but I’m going to leave it at 25% up in my net worth calculations. I am so, so glad I bought when I did! It has been such a slam dunk in terms of being cheaper than renting and the market is so much crazier than when I bought.

In 2015, I expect this condo to cost a total of $13,700 in housing expenses (mortgage interest, HOA dues, property taxes, condo insurance, electricity, repairs, interest lost from having the equity locked up, and tax savings. If we wanted to rent a similar place, we would be paying about $36,000 to $40,000 per year in rent between the two of us, so somehow I have a feeling we would have moved to a cheaper part of town if I hadn’t bought this condo.

In the last year, the mortgage hasn’t moved nearly as much as it was in the past. Last June, it sat at $152,167.66. Now? It’s at $138,600.73. Meaning I’ve paid it down by $13,566.93 in the last 12 months, about 2/3 of which came from the regular payments. I have 13.25 years left on the mortgage and have paid off 51.5% of it. Why has the mortgage paydown slowed down so much? I’ve been prioritizing other things like changing jobs, taking a couple months off unpaid, setting aside money for tuition, textbooks, and a larger emergency fund in planning for grad school, and contributing even more money to retirement accounts. It’s still on my radar, but I doubt I’ll make any substantial progress on it until 2016.

I don’t care that much about how much my condo has appreciated (that’s just icing on the cake) because our housing costs are pretty much dirt cheap for how much money we make. My housing costs are approximately 9% of my expected gross income this year, which ignores the fact that my boyfriend also makes a decent income and he also has pretty minimal fixed expenses, which means that we have pretty decent savings power between the two of us.

As much as I like to run the numbers on buying vs renting, homeownership is also a lifestyle choice and I’m so glad I chose it. It is a really good fit for my personality and my boyfriend’s and I could see us staying in this condo for many more years. Neither of us are big on moving and keeping fixed expenses low is pretty sweet for being able to spend more money in other areas of your life, like travel and/or putting more into savings and investments.

2015 Mortgage Payoff Plan

With my current savings calculations, I’ll have about $2,788.33 leftover if I pay off my mortgage at the end of 2015. My current plan involves making the following extra payments to stay on track:

February 28th: $18,710.71 – net of my signing bonus and savings from February paychecks

March 31st, April 30th, May 31st: $1,873.21 – savings from paychecks

June 30th: $25,873.21 – emptying my savings account down to $20,000 and savings from June paychecks

July 31st, August 31st: $1,873.21 – savings from paychecks

September 30th: $11,461.73 – a small bonus and savings from September paychecks with Social Security tax done with for the year

October 31st, November 30th: $2,542.42 – savings from paychecks

December 31st: $66,906.33 – savings from December paychecks, plus the proceeds of selling all of my ESPP funds (which my honest plan is to sell them as soon as the holding period is up, but I don’t know when that’ll be so for now I’m assuming I’ll just sell them all at the end of the year), emptying my savings account, selling my Series I Savings Bonds, and my taxable investments. I’m not completely sold on the idea of selling the taxable investments since I would then end up re-buying them at a higher cost basis not long after, so it would seem a waste of paying the capital gains taxes. If I don’t sell the taxable investments, then I’ll make a $33,252.89 extra payment in December (also leaving my savings account in place) and make a few more payments early in 2016:

January 31st (2016): $1,873.21 – savings from paychecks

February 29th (2016): $6,377.71 – a small bonus and savings from paychecks

March 31st (2016): $22,182.55 from savings from paychecks and emptying my savings account would leave $321.25 remaining, which I could then just pay off since there is $1,027.32 in the budget for the required mortgage payment :)

 

This is my only real goal for 2015 financially – paying off the mortgage. We’ll see how that ends up going. I’ll make my 2015 Roth IRA contribution in February from my savings account, but I won’t worry about the 2016 contribution until 2016. I’ll also contribute the maximum to my 401(k), contribute a bit to my Health Savings Account (my employer will contribute quite a bit, so I don’t “need” to contribute that much), and contribute to my Employee Stock Purchase Plan with a good discount, which I’ll then sell later to pay down the mortgage. I’ll come up with a more specific investment plan for the year later, but this is my general plan.

Readers, what is your plan for your finances in 2015?

Can I pay my mortgage off in 2015?

I’m going to be a bit slow in setting my 2015 goals with some job stuff out in the air. Last year, I set a goal to pay off my mortgage by the end of 2015. I’ve also doubted this plan occasionally. Now that we’re a year in on that plan, how am I doing?

After making my November mortgage payment, the balance is sitting at $147,700. I will make no additional payments until I start a new job so my mortgage balance will sit at $147,000 after the regular December mortgage payment is made. That post from last November calculated that I would need to have a balance of $91,284.28 at the end of this year in order to pay the mortgage off at the end of 2015.

I still think it’s possible. Or so my spreadsheets say. I’ve been following a more irregular repayment plan the last few months than I was. My income in 2014 turned out to be a bit under my optimistic projections. I will likely end up with an unpaid break between jobs. I still don’t have an accurate picture of my 2015 savings plan. But I’m still optimistic that I can pay off my mortgage in 2015, based on my current income predictions.

My plan all along has been to empty my savings account and possibly other non-retirement investments in order to pay off the mortgage entirely. My calculations show that with the mortgage paid off, I’ll be able to save $4,500/month after maxing out my 401(k). All of my past “emergencies” have cost under that amount: my car getting broken into, needing to move on short notice, and non-emergencies such as last-minute trips. Plus, any medical issues should be covered my Health Savings Account funds. Future emergencies could include replacing any number of the 10+ year old appliances in my condo, but unless they all break at once, $4,500 should suffice to replace the dead one(s). That means that emptying my emergency fund to pay off the mortgage isn’t that scary, especially considering that I will be saving just over 2 months’ expenses each month with the mortgage gone.

I’m still going to make my 2015 Roth IRA contribution at the beginning of the year and max out my 401(k) for the year, especially since it’s looking like the mortgage will be paid off very cautiously in December if it is paid off in 2015. I’ll hold off on making my 2016 Roth IRA contribution though until the mortgage is paid off in full.

Here’s to ending 2015 with no mortgage!