The 4-year mortgage payoff plan

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
User avatar
WolfpackFan
Posts: 370
Joined: Mon Mar 08, 2010 2:18 pm

The 4-year mortgage payoff plan

Post by WolfpackFan » Wed Jul 18, 2012 4:24 pm

Hi Friends,

The wife and I have decided to endeavor the ambitious plan of paying off our 15 year 3.75% mortgage in the next 4 years.

Now, before I go further, I'd like to request any quarreling about whether this is the correct financial move please be spared from this thread. We're fully aware and unconcerned of the risk that other investments could return 3.8% or more annually over the next 4 years. If you want to discuss the probability of that, please do it in one of the many other threads.

So with that appeal behind us, let me give you some history and details of the arrangement.
- We refinanced from a 5.75% 30-year mortgage to our current 3.75% 15-year last August (2011). So as of today we are only 11 months into the new mortgage.
- We have more than adequate emergency fund. In fact, as you'll see later, this fund will be instrumental for us to hopefully achieve our goal.
- Here's the guts of the plan. We looked at the cost of all of our repeating bills and other known future expenses and totaled that monthly figure. Then we gave ourselves $1,000/month budget for all non-repeating bills expenses (i.e. food, gas, clothing, entertainment) and added that to the previously mentioned total monthly figure. Subtracting this figure from the combined income of my wife and I is the amount we are pre-paying to the mortgage
- Here's where it could get dicey. If we outspend our $1,000/month budget, the idea is to borrow from our ample emergency fund. However, if we under spend against that budget, then we'll add the excess to the emergency fund. Using this method my calculations show that we should be able to consistently contribute enough each month to be mortgage free in 3 years and 11 months. But hey, let's be conservative here and set the goal at 4 years. A month of buffer might prove useful down the line.

My reasons for posting my plan for the boglehead community to read? My hope is that by putting my plan in writing and posting it for the world to see will serve to keep me accountable and prod me to stick to the plan. I'd love to be able to keep this a running thread to track my progress, read encouragements, get advice, read the inevitable derisions to fuel my fire, and perhaps even to inspire others to be mortgage free if they choose.

The plan starts in a couple of weeks, on August 1st, 2012. Hope to see you guys August 2016 mortgage free!

Cheers
WolfpackFan

P.S. The other goal I have is for the Wolfpack to win a basketball National Title by 2016. It's a darn shame I have no control over that.
Last edited by WolfpackFan on Thu Jul 19, 2012 6:51 am, edited 1 time in total.

User avatar
runner9
Posts: 2016
Joined: Tue Aug 02, 2011 8:49 pm
Location: Ohio

Re: The 4-year mortgage payoff plan

Post by runner9 » Wed Jul 18, 2012 4:32 pm

Sorry, I don't even know what school the Wolfpack are for. :)

My wife and I are planning to pay off in 5 years. I just figured out what the payment would have to be, as we'll be making it with an eye on or Emergency fund and knowing that we can adjust it if needed.

If you're all for budgeting than I guess your plan makes sense but to me it seems a lot of work for the same outcome as just meeting sure the Emergency Fund stays stable, as long as you're disciplined with spending.

Another option if you're sure you can do it in under 5 years, depending on your LTV ratio would be the Pen Fed Home Equity Loan at 1.99% and no closing costs, but it would lock you in to a 5 year timeframe.

Goodluck!

NYBoglehead
Posts: 1588
Joined: Fri May 25, 2012 9:38 am

Re: The 4-year mortgage payoff plan

Post by NYBoglehead » Wed Jul 18, 2012 5:12 pm

Good luck WolfpackFan. I'm all in for the no-debt crowd. No one has ever been burned for having too little debt. I'm looking forward to tracking your progress, I'm about a year away from buying a house myself and would like to pay it off way before the life of the mortgage.

User avatar
Steelersfan
Posts: 3425
Joined: Thu Jun 19, 2008 8:47 pm

Re: The 4-year mortgage payoff plan

Post by Steelersfan » Wed Jul 18, 2012 5:25 pm

I think that's a good plan, and setting a goal to replenish your emergency fund if you have to dip into it will be a good way to keep score and motivate you to stick to payments that don't make you do it.

I don't know that sharing it with anonymous people on the internet will get you much, but putting it in writing and getting other involved parties on board certainly will.

etarini
Posts: 615
Joined: Sun Jan 24, 2010 6:46 pm

Re: The 4-year mortgage payoff plan

Post by etarini » Wed Jul 18, 2012 6:55 pm

Sounds like a good plan!

Many people on this board find that their satisfaction at being mortgage-free far outweighs other perhaps more lucrative uses of the money. I count myself as one of those people, having paid off two mortgages well before their terms. It's hard to explain why it's so compelling to some of us...but it is. Many also find that the missing mortgage payment is "found money" and it can jumpstart increased savings.

Eric

johnny72
Posts: 224
Joined: Wed Jun 20, 2012 10:35 am

Re: The 4-year mortgage payoff plan

Post by johnny72 » Wed Jul 18, 2012 7:02 pm

.....
Last edited by johnny72 on Fri Aug 03, 2012 6:35 am, edited 1 time in total.

User avatar
ram
Posts: 1004
Joined: Tue Jan 01, 2008 10:47 pm
Location: Midwest

Re: The 4-year mortgage payoff plan

Post by ram » Wed Jul 18, 2012 7:57 pm

I paid within 4 yrs and am happy. Plan was to be debt free before the second kid goes to college (next month).
It feels good to be debt free.
Ram

DonDraper
Posts: 122
Joined: Sun Mar 25, 2012 3:34 pm

Re: The 4-year mortgage payoff plan

Post by DonDraper » Fri Jul 20, 2012 5:10 am

Wolfpack,

You failed to disclose your current mortgage balance. I'm of similar mindset and would be curious to know what size mountain you are about to climb. I might use your thread as motivation.

KLM14
Posts: 64
Joined: Thu Jan 10, 2008 7:11 am
Location: Atlanta, GA

Re: The 4-year mortgage payoff plan

Post by KLM14 » Fri Jul 20, 2012 7:05 am

Go Nevada!

No concern over losing this tax write-off? Not enough details to know if that is hurting your overall picture.

Good luck with it!

User avatar
Jay69
Posts: 1801
Joined: Thu Feb 17, 2011 9:42 pm

Re: The 4-year mortgage payoff plan

Post by Jay69 » Fri Jul 20, 2012 7:33 am

Sounds like a sane plan to me, good luck and keep us updated.

How is this for a thought, if you want to use the Bogleheads as support group edit your top post with the total and subtract each month or every quarter etc. It may inspire others and for those of us who have done this already we can relive our past dreams to be debt free. Its just 48 posts, thats nothing :wink:
"Out of clutter, find simplicity” Albert Einstein

User avatar
WolfpackFan
Posts: 370
Joined: Mon Mar 08, 2010 2:18 pm

Re: The 4-year mortgage payoff plan

Post by WolfpackFan » Fri Jul 20, 2012 10:42 am

Sorry, I don't even know what school the Wolfpack are for. :)
Hopefully you'll know about them in a few short months! We're in the top #10 pre-season rankings. :happy
Go Nevada!
No concern over losing this tax write-off? Not enough details to know if that is hurting your overall picture.
ha! not the Nevada Pack! The other Wolfpack on the east coast! As far as tax consequences go, we are unconcerned. The idea is that we like the ~$25,000+ saved in interest payments over the tax benefits.
You failed to disclose your current mortgage balance. I'm of similar mindset and would be curious to know what size mountain you are about to climb. I might use your thread as motivation.
Currently sitting at ~$160,000 balance.
if you want to use the Bogleheads as support group edit your top post with the total and subtract each month or every quarter etc.
Thanks for the input. The plan is to try and post at least once every month to give updated status.

Here's a quick update: I sold my single holding in Pepsi stock in my "speculation" account and will use those proceeds towards the 8/1 payment coming up! I only had a few shares, so only ~$1,600, but that should knock off a couple of payments. No more speculating with individual stocks for the next four years.

Also, I failed to mention some information in the OP. The budget we devised does include continued current payments to both 401k and maximizing both Roths. We felt it was important to continue funding the tax sheltered accounts.

With the stock sale we're on target to pay over $4,000 in additional principle next month! I'll post again for sure after the payment to share interest saved, how many months cut down from the mortgage, etc.

Thanks for the comments of encouragement and interest. Have a great weekend yall!

User avatar
Watty
Posts: 13365
Joined: Wed Oct 10, 2007 3:55 pm

Re: The 4-year mortgage payoff plan

Post by Watty » Fri Jul 20, 2012 11:48 am

If you will not be able to max out all your tax preferred retirement account too then it might be better to max those out first even if that meant taking a few more years to pay off the mortgage. The tax deductions could be worth a lot more than the interest you will save.

You would need to have a good fall back plan but another option would be to refinance the mortgage into a lower cost home equity loan. This would save you some interest but you would then be committed to you plan so something like a layoff could be a big problem. PenFed has these at 1.99% for a five year loan and as I recall they only cost a couple of hundred dollars to set up. Compared to your current 3.75% mortage that could probably save you about $2,000 the first year after the costs and taxes.

https://www.penfed.org/Home-Equity-Loans-Overview/

johnny72 wrote:OP, you and I have the same plan. I'm 3 months into a 3.00% 5/5 ARM and am not a fan of investing on margin which is what I think after tax investment beyond an emergency fund are while you still have a mortgage.

Should be paid off in next 4 years, 9 months.
PenFed just dropped it to 2.875%

Do feel too bad though I have the same one at 3.25% with about a seven year(or less) goal of getting the mortgage paid off.

https://www.penfed.org/55-Adjustable-Rate-Mortgage/

User avatar
WolfpackFan
Posts: 370
Joined: Mon Mar 08, 2010 2:18 pm

Re: The 4-year mortgage payoff plan

Post by WolfpackFan » Thu Aug 02, 2012 3:06 pm

Here's an update on our payoff plan! We just made our first additional principal payment which whittled away 6 months from our total mortgage! We were able to do this extra from the proceeds of selling our Pepsi stock. We won't typically be able to pay that much extra. Our $1,000 spending budget started yesterday. We just got back from vacation at the beach where we've already spent $82 of it, however we're excited to see if we can come in under this budget. Only a short 3 years, 11 months to go!

|X-----------------------------------------------|
my aesthetically pleasing ascii progress bar (X = paid month)

New mortgage balance: $155,012.45

johnubc
Posts: 709
Joined: Wed Jan 06, 2010 6:54 am

Re: The 4-year mortgage payoff plan

Post by johnubc » Thu Aug 02, 2012 3:57 pm

Have you thought of refinancing with the new lower rates - with the lender credit, it could be (almost) free - and your payments will be lower - meaning, more money going towards principle.

mptfan
Posts: 4428
Joined: Mon Mar 05, 2007 9:58 am

Re: The 4-year mortgage payoff plan

Post by mptfan » Thu Aug 02, 2012 4:15 pm

johnubc wrote:meaning, more money going towards principle.
principle=principal.

johnubc
Posts: 709
Joined: Wed Jan 06, 2010 6:54 am

Re: The 4-year mortgage payoff plan

Post by johnubc » Thu Aug 02, 2012 6:04 pm

mptfan wrote:
johnubc wrote:meaning, more money going towards principle.
principle=principal.
thanks MPTFAN - that spell checker-fixer really gets in the way sometimes.

User avatar
stemikger
Posts: 4755
Joined: Thu Apr 08, 2010 5:02 am

Re: The 4-year mortgage payoff plan

Post by stemikger » Thu Aug 02, 2012 6:35 pm

Great thread. I didn't read all the replies yet, but I found this very inspiring. I know the numbers don't always add up, but I'm 5 months from being mortgage free myself and IMHO there is nothing like this feeling. I was like you and decided to draw a line in the sand years ago. In 2008 when many of my co-workers and good friends got laid off after 20 years of service, I got the eye-of-the-tiger and really got motivated. Some months I really made great progress and other months I could not send a dime extra, but I never gave up. By this December 2012 I will be mortgage free and I will be paying my mortgage off 11 years earlier than my original loan was scheduled for and saving somewhere around $65,000 in interest, but that is beside the point. My real goal was to have a paid off home.

You were very smart to state in the beginning that you didn't want the naysayers to debate this. Don’t let them talk you out of this plan and don't give up!! Keep your eye on the prize even when you have a month or several where you can't send extra, just keep the dream alive and trust me you will see how worth it it is.

Good Luck!!

I plan to post my thread in December when I burn the mortgage note.
F R E E D O M!!!!
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

User avatar
runner9
Posts: 2016
Joined: Tue Aug 02, 2011 8:49 pm
Location: Ohio

Re: The 4-year mortgage payoff plan

Post by runner9 » Thu Aug 02, 2012 6:46 pm

I don't think there have been any naysayers but at least a couple of us have mentioned a refi for a lower rate. PenFed still at 1.99 for a HEL and now at 2.875 for a 5/5 ARM, the first with only a $300 appraisal and the second with no closing costs at all.

scone
Posts: 1447
Joined: Wed Jul 11, 2012 4:46 pm

Re: The 4-year mortgage payoff plan

Post by scone » Thu Aug 02, 2012 6:47 pm

Also, I failed to mention some information in the OP. The budget we devised does include continued current payments to both 401k and maximizing both Roths. We felt it was important to continue funding the tax sheltered accounts.

This is a wonderful plan. And if you hit a roadblock, no big deal, you can just deal with it and get right back on track. If you need a cheerleading section, just holler and I'll be there. Living debt free is the best! :D
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore

harikaried
Posts: 1196
Joined: Fri Mar 09, 2012 3:47 pm

Re: The 4-year mortgage payoff plan

Post by harikaried » Thu Aug 02, 2012 7:58 pm

WolfpackFan wrote:15 year 3.75% mortgage in the next 4 years
Watty wrote:PenFed just dropped it to 2.875%
Just to see if I'm running the numbers right assuming a $160k principal balance.

current 3.75% mortgage: pay $3595 a month, $12,549 total interest over 4 years
refined 2.875%: pay pay $3533 a month, $9568 total interest over 4 years

So that saves $2981 of interest overall or ~$62/mo. Or maybe ~$45 after interest deduction, but it would also lessen monthly payments by $62/mo.

User avatar
SurfCityBill
Posts: 395
Joined: Tue May 01, 2012 10:15 pm
Location: Western United States

Re: The 4-year mortgage payoff plan

Post by SurfCityBill » Thu Aug 02, 2012 10:04 pm

Refi'd a 4.5% 15 fixed to a 3.5% 7/1 Interest only 30 year mort 2 years ago with a plan to pay off in 7 years when the 3.5% is eligible to increase to as high as 8.5%.
So far 22 payments in I'm on target. Looking forward to BofA's form letter crossing my final payment in the mail advising me that I now will be paying 8.5%.

-B

User avatar
White Coat Investor
Posts: 13294
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: The 4-year mortgage payoff plan

Post by White Coat Investor » Thu Aug 02, 2012 10:30 pm

If I were planning to pay off my mortgage in the next 4 years I'd do a no-cost refinance into an ARM that has a rate that varies every month. Even if interest rates skyrocket, well, you've only got 4 years of payments to make. You could get a rate under 1% like that.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

Grt2bOutdoors
Posts: 18219
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: The 4-year mortgage payoff plan

Post by Grt2bOutdoors » Fri Aug 03, 2012 7:54 am

EmergDoc wrote:If I were planning to pay off my mortgage in the next 4 years I'd do a no-cost refinance into an ARM that has a rate that varies every month. Even if interest rates skyrocket, well, you've only got 4 years of payments to make. You could get a rate under 1% like that.
Sometimes the best laid plans can go awry. OP is smart in having note with an extended repayment plan, some thoughts why this works:

1) If some unfortunate event occurs and you need all available liquidity to address it, you can defer making extra principal payments.
2) If Item 1 occurs, OP will not be in default by making the normal payments. However, if you refi a 15 year into a shorter term note, your payment due will be significantly higher.
3) This is your house we are talking about, not a finance related transaction for the company you own or work at. Nor is it an interest arbitrage investment or part of your investment portfolio. You fail to make payments as due, they will take said house away from you. Unless you have the full amount of mortgage principal due in your bank account, I would not play with fire.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

User avatar
G-Money
Posts: 2864
Joined: Sun Dec 09, 2007 7:12 am

Re: The 4-year mortgage payoff plan

Post by G-Money » Fri Aug 03, 2012 9:04 am

EmergDoc wrote:If I were planning to pay off my mortgage in the next 4 years I'd do a no-cost refinance into an ARM that has a rate that varies every month. Even if interest rates skyrocket, well, you've only got 4 years of payments to make. You could get a rate under 1% like that.
Have you seen this? If so, can you share?

I have a 4 year pay-off goal, and PenFed's 5-year HEL at 1.99% was the best offer I could find.
Don't assume I know what I'm talking about.

User avatar
Kenkat
Posts: 4064
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: The 4-year mortgage payoff plan

Post by Kenkat » Fri Aug 03, 2012 9:25 am

WolfpackFan wrote:We're fully aware and unconcerned of the risk that other investments could return 3.8% or more annually over the next 4 years.
I think you might consider the risk that other investments could return 3.8% or more over the next 15 years (not four) as that is the liquidity you are giving up by paying early.

Not to discourage you from being mortgage free as it is a guaranteed return as well as a sense of security, but the other side of the coin is to maintain your current 15 year schedule since rates are so low and you don't end up with all your capital tied up in an illiquid asset over the next 15 years.

The 70's and 80's were times when it generally was not to your benefit to pay down debt early as inflation favored debt holders at the expense of debt issuers.

My main point is not to discourage paying off the mortgage (since you specifically asked people not to do that) but rather point out that the analysis should be over the life of the existing loan and not the planned payoff period. If it still works, then go for it!

DonDraper
Posts: 122
Joined: Sun Mar 25, 2012 3:34 pm

Re: The 4-year mortgage payoff plan

Post by DonDraper » Fri Aug 03, 2012 8:58 pm

kenschmidt wrote:
WolfpackFan wrote:We're fully aware and unconcerned of the risk that other investments could return 3.8% or more annually over the next 4 years.
I think you might consider the risk that other investments could return 3.8% or more over the next 15 years (not four) as that is the liquidity you are giving up by paying early.

Not to discourage you from being mortgage free as it is a guaranteed return as well as a sense of security, but the other side of the coin is to maintain your current 15 year schedule since rates are so low and you don't end up with all your capital tied up in an illiquid asset over the next 15 years.

The 70's and 80's were times when it generally was not to your benefit to pay down debt early as inflation favored debt holders at the expense of debt issuers.

My main point is not to discourage paying off the mortgage (since you specifically asked people not to do that) but rather point out that the analysis should be over the life of the existing loan and not the planned payoff period. If it still works, then go for it!
Keep in mind the original poster already stated he will still be maxing out his retirement plans as he's doing this mortgage pay down. Even if stocks go on a nice 15 year bull run he will still participate due to the large contributions he's making to those plans. One could argue the opposite, not paying down his mortgage is making an overweighted bet on the stock market. I like his plan. The fact he can do this and max out his retirement makes this a no brainer in my eyes.

Then again this thread was not supposed to be about debating the merits of the early payoff.

User avatar
stemikger
Posts: 4755
Joined: Thu Apr 08, 2010 5:02 am

Re: The 4-year mortgage payoff plan

Post by stemikger » Sat Aug 04, 2012 1:13 am

DonDraper wrote:
kenschmidt wrote:
WolfpackFan wrote:We're fully aware and unconcerned of the risk that other investments could return 3.8% or more annually over the next 4 years.
I think you might consider the risk that other investments could return 3.8% or more over the next 15 years (not four) as that is the liquidity you are giving up by paying early.

Not to discourage you from being mortgage free as it is a guaranteed return as well as a sense of security, but the other side of the coin is to maintain your current 15 year schedule since rates are so low and you don't end up with all your capital tied up in an illiquid asset over the next 15 years.

The 70's and 80's were times when it generally was not to your benefit to pay down debt early as inflation favored debt holders at the expense of debt issuers.

My main point is not to discourage paying off the mortgage (since you specifically asked people not to do that) but rather point out that the analysis should be over the life of the existing loan and not the planned payoff period. If it still works, then go for it!
Keep in mind the original poster already stated he will still be maxing out his retirement plans as he's doing this mortgage pay down. Even if stocks go on a nice 15 year bull run he will still participate due to the large contributions he's making to those plans. One could argue the opposite, not paying down his mortgage is making an overweighted bet on the stock market. I like his plan. The fact he can do this and max out his retirement makes this a no brainer in my eyes.

Then again this thread was not supposed to be about debating the merits of the early payoff.
:sharebeer
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

User avatar
SnapShots
Posts: 915
Joined: Wed May 09, 2012 12:39 pm

Re: The 4-year mortgage payoff plan

Post by SnapShots » Sat Aug 04, 2012 7:56 am

Have you looked into making two payments a month? That method decreases the interest payments more than making one payment a month.

Look forward to your updates and it's great to be mortgage free. :moneybag
the best decision many times is the hardest to do

Nummerkins
Posts: 253
Joined: Tue Jun 01, 2010 4:41 pm

Re: The 4-year mortgage payoff plan

Post by Nummerkins » Sat Aug 04, 2012 8:33 am

Great plan! My wife and I am doing a very similar 1.5-year payoff.

My mortgage was originally 6% which I refinanced to 4.875% a few years ago. I got married September 2011 and we are on track to be mortgage-free by February 2013 thanks to dual incomes.

We have an emergency fund that is sitting until the final payment. This provides security in case something should happen so close to the finish line. Our budget has no allocation for savings (beside minimum needed for 401k match) until the mortgage is gone but I have still managed to set aside $5k over the past year though credit card cashback and bank bonuses. This is also used if we overspend but replenished each month as I find more free money. Once the mortgage is paid this will become our new emergency fund and continue to grow.

I cannot wait for the mortgage to be gone and be 100% debt-free! I've got all kinds of uses for the old mortgage payment lined up as well as personal goals which will be much easier.

User avatar
stemikger
Posts: 4755
Joined: Thu Apr 08, 2010 5:02 am

Re: The 4-year mortgage payoff plan

Post by stemikger » Sun Aug 05, 2012 9:29 am

Nummerkins wrote:Great plan! My wife and I am doing a very similar 1.5-year payoff.

My mortgage was originally 6% which I refinanced to 4.875% a few years ago. I got married September 2011 and we are on track to be mortgage-free by February 2013 thanks to dual incomes.

We have an emergency fund that is sitting until the final payment. This provides security in case something should happen so close to the finish line. Our budget has no allocation for savings (beside minimum needed for 401k match) until the mortgage is gone but I have still managed to set aside $5k over the past year though credit card cashback and bank bonuses. This is also used if we overspend but replenished each month as I find more free money. Once the mortgage is paid this will become our new emergency fund and continue to grow.

I cannot wait for the mortgage to be gone and be 100% debt-free! I've got all kinds of uses for the old mortgage payment lined up as well as personal goals which will be much easier.
:beer Sounds like a great plan also. Good Luck!! Hey to you and the OP I want to hear your progress. You will be hearing from mine in December. Christmas is going to be a little extra special this year when I say goodbye to Chase!!! I'm 48 and will have no mortgage!!!!
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

RenoJay
Posts: 746
Joined: Tue Nov 17, 2009 11:20 am
Location: Nevada

Re: The 4-year mortgage payoff plan

Post by RenoJay » Sun Aug 05, 2012 10:05 am

So are you in Nevada or North Carolina? (I found two Wolfpacks.) As my name implies, I'm in northern Nevada and having been on the home ownership roller coaster here, I can understand the desire to pay down the mortgage early and be done with it. (I'm in the process of doing so on my vacation home.) One comment regarding the $1,000/month you're setting aside for the other stuff: Where did that number come from? I started using Mint.com earlier this year and got a good sense where the money goes month to month. If you're not doing so, I'd recommend using Mint. Also, regarding better returns over the whole 15 year period from other investments, after four years you'll have a ton of extra income to put into stocks or other investments for the long term so I think you're making a sensible decision and I wish you luck.

Jane61
Posts: 10
Joined: Sun Jul 29, 2012 5:48 pm

Re: The 4-year mortgage payoff plan

Post by Jane61 » Sun Aug 05, 2012 10:42 am

Wofpack et al,

All the best in executing your plan. You've set a goal to burn it off in 4 years. And after 4 years, enjoy your freedom.

I love the idea of being mortgage free. (To be honest, mine is a horrifying - by today's standards - 6.625% 30 year fixed and I have never refinanced, partially due to having my head in the sand in the early years of my mortgage and currently because at this stage of the game I dont' think it pays - come Oct I'll be entering my 15th year of the mortgage payment.) However, if I focus on putting my after tax bucks into the mortgage, I won't be able to continue accumulation and, though high by today's standard, I think my mortgage rate is actually kind of low compared to rates in 1998 when I started.

Goes to show you, it sure is handy having a second salary to grow your wealth by. Enjoy!

User avatar
WolfpackFan
Posts: 370
Joined: Mon Mar 08, 2010 2:18 pm

Re: The 4-year mortgage payoff plan

Post by WolfpackFan » Sun Aug 05, 2012 3:31 pm

RenoJay wrote:So are you in Nevada or North Carolina? (I found two Wolfpacks.) As my name implies, I'm in northern Nevada and having been on the home ownership roller coaster here, I can understand the desire to pay down the mortgage early and be done with it. (I'm in the process of doing so on my vacation home.) One comment regarding the $1,000/month you're setting aside for the other stuff: Where did that number come from? I started using Mint.com earlier this year and got a good sense where the money goes month to month. If you're not doing so, I'd recommend using Mint. Also, regarding better returns over the whole 15 year period from other investments, after four years you'll have a ton of extra income to put into stocks or other investments for the long term so I think you're making a sensible decision and I wish you luck.
Hi RenoJay. I'm a fan of the North Carolina State Wolfpack (one word - as opposed to the Nevada Wolf Pack). There was no magic formula for determining the $1,000/monthly figure. It was picked arbitrarily, a nice round figure, with the hopes we would be able to stay in that budget. We've never lived on any kind of strict budget before and are excited to exercise some discipline. This is the first month, so hopefully the excitement does not wear off. If we're able to bound ourselves to this number though, paying down our mortgage over 4 years should be doable.

As for the refinancing suggestions, we likely could save some money over the next four years, but the poster GRT2BOUTDOORS did a wonderful job above of expressing our (perhaps overly conservative) concerns regarding that issue.

Quick Update: We're down to $710 remaining of our monthly budget and only 5 days into the month, with a dog teeth cleaning bill on the horizon to be paid this month! Should be a tight finish to stay on target!

Thanks for all the kind & encouraging comments, everyone! :happy

msj16
Posts: 246
Joined: Tue Oct 19, 2010 1:16 am

Re: The 4-year mortgage payoff plan

Post by msj16 » Sun Aug 05, 2012 4:16 pm

It is great that you are being disciplined savers. I am doing the same thing - first refinanced the mortgage into 3.65 rate in early 2011 and now have now decided to aggressively pay it down. It will be paid off in one year. I love the thought that soon a big financial goal will be accomplished. I even have to hold myself back from using part of the emergency fund to pay it all off right now since the balance is so low.

User avatar
runner9
Posts: 2016
Joined: Tue Aug 02, 2011 8:49 pm
Location: Ohio

Re: The 4-year mortgage payoff plan

Post by runner9 » Sun Aug 05, 2012 6:12 pm

I've wondered how my wife and I will feel with 1 year left (hopefully in 3 or a bit under years) One one had emergency fund would more than cover balance, on the other we'll be paying something like $9 a month in interest.

Breezy
Posts: 133
Joined: Mon Jul 11, 2011 11:38 am

Re: The 4-year mortgage payoff plan

Post by Breezy » Mon Aug 06, 2012 10:01 am

Yeah, as the payoff date nears, I'd probably use some of the emergency fund and Roth contributions (if you contribute monthly) to just get it done, then build the EF back up and make larger Roth contributions toward the end of the year or into April, depending on your timing.

My mortgage has been paid off for a couple years now, and it's great. You've got a good goal!

User avatar
stemikger
Posts: 4755
Joined: Thu Apr 08, 2010 5:02 am

Re: The 4-year mortgage payoff plan

Post by stemikger » Mon Aug 06, 2012 12:14 pm

runner9 wrote:I've wondered how my wife and I will feel with 1 year left (hopefully in 3 or a bit under years) One one had emergency fund would more than cover balance, on the other we'll be paying something like $9 a month in interest.
I would use most of the EF. Just think how fast you can rebuild it without a mortgage.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

Grt2bOutdoors
Posts: 18219
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: The 4-year mortgage payoff plan

Post by Grt2bOutdoors » Mon Aug 06, 2012 12:27 pm

stemikger wrote:
runner9 wrote:I've wondered how my wife and I will feel with 1 year left (hopefully in 3 or a bit under years) One one had emergency fund would more than cover balance, on the other we'll be paying something like $9 a month in interest.
I would use most of the EF. Just think how fast you can rebuild it without a mortgage.
$81 in annual interest expense (after-tax) is less than the monthly utility bill. Pay it off at your leisure - I wouldn't be in such a rush to pay it off at this level.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

WorkToLive
Posts: 610
Joined: Thu Nov 12, 2009 2:19 pm

Re: The 4-year mortgage payoff plan

Post by WorkToLive » Mon Aug 06, 2012 9:13 pm

If all goes well, we will have ours paid off five years from when we started aggressively paying it down. It is exciting to see the balance shrinking each month. We have an annual budget so we feel pretty comfortable with our goal. The one unknown is our tax burden.

Congrats on your plan and I love to motivate others that it can be done. We have about a year and a half left.

User avatar
stemikger
Posts: 4755
Joined: Thu Apr 08, 2010 5:02 am

Re: The 4-year mortgage payoff plan

Post by stemikger » Tue Aug 07, 2012 12:53 am

GRT2BOUTDOORS wrote:
stemikger wrote:
runner9 wrote:I've wondered how my wife and I will feel with 1 year left (hopefully in 3 or a bit under years) One one had emergency fund would more than cover balance, on the other we'll be paying something like $9 a month in interest.
I would use most of the EF. Just think how fast you can rebuild it without a mortgage.
$81 in annual interest expense (after-tax) is less than the monthly utility bill. Pay it off at your leisure - I wouldn't be in such a rush to pay it off at this level.
This is correct, but sometimes it goes beyond the numbers and the emotional well-being many people get from having their home paid off is a good trade off. Not everyone gets this emotional benefit, but I think many do.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

travellight
Posts: 2762
Joined: Tue Aug 12, 2008 5:52 pm
Location: San Diego

Re: The 4-year mortgage payoff plan

Post by travellight » Tue Aug 07, 2012 1:39 am

Good luck with it and stay the course! I have a similar 5 year plan to pay off 1.5 million. I like the idea of taking advantage of the lowest interest rates.

User avatar
stemikger
Posts: 4755
Joined: Thu Apr 08, 2010 5:02 am

Re: The 4-year mortgage payoff plan

Post by stemikger » Tue Aug 07, 2012 2:50 am

travellight wrote:Good luck with it and stay the course! I have a similar 5 year plan to pay off 1.5 million. I like the idea of taking advantage of the lowest interest rates.
Wow! You must have a big shovel.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

travellight
Posts: 2762
Joined: Tue Aug 12, 2008 5:52 pm
Location: San Diego

Re: The 4-year mortgage payoff plan

Post by travellight » Tue Aug 07, 2012 10:04 am

I calculate that I am living on about 20K per year (not including the huge mortgage payments of course) during these 5 years.

User avatar
stemikger
Posts: 4755
Joined: Thu Apr 08, 2010 5:02 am

Re: The 4-year mortgage payoff plan

Post by stemikger » Thu Aug 09, 2012 8:20 am

travellight wrote:I calculate that I am living on about 20K per year (not including the huge mortgage payments of course) during these 5 years.
Wow!! Way to go!! That is a big chunk you will be paying off. Good Luck.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

travellight
Posts: 2762
Joined: Tue Aug 12, 2008 5:52 pm
Location: San Diego

Re: The 4-year mortgage payoff plan

Post by travellight » Thu Aug 09, 2012 8:40 am

Thanks!

User avatar
Sunny Sarkar
Posts: 2417
Joined: Fri Mar 02, 2007 1:02 am
Location: Flower Mound, TX
Contact:

Re: The 4-year mortgage payoff plan

Post by Sunny Sarkar » Thu Aug 09, 2012 8:46 am

Hi WolfpackFan,

During these 4 years of paying off, are you temporarily suspending contributions to roth, 401k, 529, etc.?
"Cost matters". "Stay the course". "Press on, regardless". ― John C. Bogle

User avatar
Optimistic
Posts: 327
Joined: Tue Sep 28, 2010 5:05 pm

Re: The 4-year mortgage payoff plan

Post by Optimistic » Thu Aug 09, 2012 9:15 am

SnapShots wrote:Have you looked into making two payments a month? That method decreases the interest payments more than making one payment a month.

Look forward to your updates and it's great to be mortgage free. :moneybag
This would only work if your mortgage interest was calculated daily (like a credit card or HELOC). This is typically not the case.

mike_slc
Posts: 980
Joined: Fri May 16, 2008 11:04 pm

Re: The 4-year mortgage payoff plan

Post by mike_slc » Thu Aug 09, 2012 9:41 am

4 years seems like an awful long time to live like a monk.

User avatar
G-Money
Posts: 2864
Joined: Sun Dec 09, 2007 7:12 am

Re: The 4-year mortgage payoff plan

Post by G-Money » Thu Aug 09, 2012 9:50 am

Optimistic wrote:
SnapShots wrote:Have you looked into making two payments a month? That method decreases the interest payments more than making one payment a month.

Look forward to your updates and it's great to be mortgage free. :moneybag
This would only work if your mortgage interest was calculated daily (like a credit card or HELOC). This is typically not the case.
Also works for many HELs, including PenFed's. But I agree, for mortgages, this does not typically work.
Don't assume I know what I'm talking about.

User avatar
Optimistic
Posts: 327
Joined: Tue Sep 28, 2010 5:05 pm

Re: The 4-year mortgage payoff plan

Post by Optimistic » Thu Aug 09, 2012 10:09 am

G-Money wrote:
Optimistic wrote:
SnapShots wrote:Have you looked into making two payments a month? That method decreases the interest payments more than making one payment a month.

Look forward to your updates and it's great to be mortgage free. :moneybag
This would only work if your mortgage interest was calculated daily (like a credit card or HELOC). This is typically not the case.
Also works for many HELs, including PenFed's. But I agree, for mortgages, this does not typically work.
Actually, I have a Home Equity Loan from PenFed and inquired about it. I was told by the member service representative it would not work.

Post Reply