If you have viewed our family's Net Worth Page, you probably already know that it does not include the equity in our home. Although, we do realize that it is technically part of our overall net worth, we decided that since our home equity is not an asset that we can count on for income (unless we sell and buy something cheaper) we would exclude it from our net worth calculation.
For the purpose of this blog, we are more interested in documenting our loan balance rather than our home equity. With that said, we will use the current Zillow value as our estimated home value and use it to figure out the percentage we owe on our home. For those interested, we will include the amount of our home equity, but know that we are less concerned with the equity since we have no plans to cash out or otherwise sell our home. Our main goal is to pay off our home on or before my retirement date.
According to Zillow, our home is currently worth: $849,688 (up from $798,131 in July). The housing market in our area has been steadily climbing in the last few months. This past month was no different as we saw another roughly $50K gain since last month. I have my doubts on the accuracy of Zillow though, especially since the 30-day difference is listed as -$938 though. I'm not quite sure why...the only think I can think of is that the figures are only calculated starting on the 1st of the month and this is a reflection of a 1-day loss since my Zillow screenshot was captured on 9/2/2014.
Although it is nice to see home values go up, the reality is it is simply a paper gain until we actually go to sell our home. Meanwhile, the higher value translates to more property taxes.
Although it is nice to see home values go up, the reality is it is simply a paper gain until we actually go to sell our home. Meanwhile, the higher value translates to more property taxes.
$341,961.35 (down from $343,687.93 in July)
Percentage Owed:
32.65% (down from 43.06% in July)
Home Equity:
$507,726 (up from $454,443 in July)
For those that have not read the Preface on our home equity, we currently hold a 15-year fixed rate mortgage at the incredibly low rate of 2.875%. My goal is to retire within 13 1/2 years so we are setting out to pay off our mortgage on or before my retirement date. We have a little less than 14 years left on our mortgage but I would like to have it paid off in another 10 years (or less) so I can use the last few years to aggressively build our retirement nest egg.
Even though we don't consider home equity as part of our net worth, since I am sort of a statistics nerd, I still like to look at the numbers and draw fancy comparisons. :) This last month was an amazing month in that our home equity grew another $53,283 (10.5%). Because of the huge month, we saw our home equity go above $500K for the first time. As for percentage owed, the number decreased from 43% to 32.6% mainly due to the large growth in our equity.
Right now we are not putting any extra money towards the principal given our low interest rate. We feel that we could make our money grow faster by investing it and while keeping the money more liquid. At a certain point, maybe in 8-10 years, we may consider using money from our investment accounts to wipe out the remaining mortgage balance. Until then, we will continue to grow that money outside, rather than have it locked into our home.
Right now we are not putting any extra money towards the principal given our low interest rate. We feel that we could make our money grow faster by investing it and while keeping the money more liquid. At a certain point, maybe in 8-10 years, we may consider using money from our investment accounts to wipe out the remaining mortgage balance. Until then, we will continue to grow that money outside, rather than have it locked into our home.
Click on the link below to view our mortgage balance history:
That's great that your house value is increasing. Sure it's paper gain only but it's a nice feeling. Hopefully your property tax isn't going up too high. :)
ReplyDeleteTawcan - Psychologically, it does give us a little boost. :) And since we will likely downsize in retirement, eventually we will cash out that paper gain.
DeleteMeanwhile, sad to report that our property taxes are continuing to rise. I love our home and neighborhood, but writing the check for our property taxes each year does hurt. :(
Thanks for visiting and for your comments. Best Wishes! AFFJ
Certainly you might have explained this elsewhere, but wouldn't "aggressively building" your nest egg in the last couple of years be counter-intuitive as you would lose the compounding gained by investing that money now? A few thousand dollars today will certainly be worth more than the freed up assets you'd be able to put to work right before retirement, right?
ReplyDeleteEither way, you're in great shape considering that you will likely downsize your house at some point in retirement, freeing up some of that equity for other income producing pursuits.
W2R - I guess I should clarify that what I do in the last couple of years does not impact what I am doing today. What I meant by that was when the debt on our house clears, and since we have not other debt, we have the ability to through practically our whole income towards building wealth.
DeleteI completely agree that it is counter intuitive to building wealth in the later stages, that is why we only pay the amount of the mortgage payment and do not pay extra towards principal. Any extra money we have or receive right now goes towards building wealth.
Thanks for visiting and for your comment. Best Wishes. AFFJ
I agree with you on focusing on other investments if you have a low interest rate. We have a low rate as well and are more concerned on accumulating other assets for the present. Very nice increase in value though!
ReplyDeleteAgent Dividend - Given our low interest, it has been a no brainer to not put any extra monies towards our principal. Plus, the monies are much more liquid as they are not stuck as equity inside our home. Glad to hear others agree that it is the right thing to do. :)
DeleteThanks for stopping by. Best Wishes. AFFJ
You definitely know how to look at the numbers. If things turn out the way you calculated them to be, you’ll get rid of that mortgage debt way sooner than expected. Good luck growing that money through investment! I hope you’ll be able to use them someday to fully pay your remaining mortgage balance. Here’s to a debt-free future!
ReplyDeleteChad Nelson @ Iron Point Mortgage
Thanks Chad. The plan is to pay off the mortgage before retirement, whenever that ends up being. For now, it is in approx. 13 years (hopefully sooner). Definitely don't want to bring any debt into retirement so debt-free future is definitely the goal!
DeleteCheers to a debt free retirement! Best Wishes. AFFJ