We bought our house 4 years ago. The idea of taking on all that debt scared the bejeezes out of me. So before we signed the papers I sat down and figured out a reasonable amount of money to pay extra. I tried not to get crazy about it. Sure, I wanted to pay every extra dollar towards the mortgage. But I couldn’t expect my family to live with no disposable income for 10 years while I get rid of the mortgage payments. I mean, come on.
So we decided on $50 a month extra and a lump sum payment once a year of $1,000. Fine and dandy. We started it from day one. Paying $50 extra right from the get go was easy. We were excited to be in our new house and were adjusting to home ownership so really, it was actually kinda fun. (I just totally revealed the finance dork that I am. I called paying extra towards debt “fun”.) Now that we’ve lived here a while and it’s not new and exciting anymore that $50 is just part of the payment and we don’t think anything about it.
Over the years we’ve paid about $7,000 extra towards our mortgage. We should have 25 years 10 months left to pay. But according to their website, our lender says we have 22 years 10 months remaining. That $7,000 has taken three years off our loan. Wow. At $920 a month (principal and interest only) we have saved $26,000 in interest. Holy cow. Plus it let us get rid of our PMI early. I’m not even counting those savings.
I know numbers have been run showing that it’s better to invest that $50 a month. That the interest I’m saving on my mortgage isn’t as much as what I could be making in the stock market. I got one question for you, Dr. Phil style, “How’s that workin’ for ya?” I’ve been investing regularly in the stock market since 2002. At this point I’ve actually lost money. I have less money in my account then the amount I’ve contributed. I would have been better off putting that money under my mattress.
Now, I’m not saying that you shouldn’t invest. I will continue to invest in the markets. Yes, please save for retirement. But I’m glad that I also took the time, money, and thought to put some money else where as well. There were times when someone would corner me and go on and on about how I’m wasting my money by paying down my mortgage. They would have charts and graphs to show me how much less money I will have at the end of time. But so far, I’m glad that I continued to work towards my goal of being totally debt free. It’s important to have balance in all aspects of your life and money is no different.