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: $778,807 (up $2,502 from our February post). Housing has cooled down a bit from the highs last summer but as long as interest rates remain low, home buying should remain steady. This should bode well for the housing market.
$331,670 (down from $333,421 in February)
Percentage Owed:
42.5% (down from 42.9% in February)
Home Equity:
$447,137 (up from $442,904 in February)
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. :)
But like the stock market, one shouldn't constantly look at the values. As long as my mortgage balance continues to go down consistently each month, in the long run, I know we will be in a good position at retirement. We love our home, our neighbors, the schools, local markets, etc. We have no plans to move anytime soon.
Mortgage Background:
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. Right in line with my retirement goal, we have 13 years - 4 months (160 months) left on our mortgage. Nevertheless, I would like to have it paid off in another 10 years (or less). If we accomplish that, I plan to use the last few years to aggressively build our passive income to help supplement our retirement and defer tapping into the 457K as long as we can so it can continue to grow.
Right now we are not putting any extra money towards the principal given our low 2.875% 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.
But like the stock market, one shouldn't constantly look at the values. As long as my mortgage balance continues to go down consistently each month, in the long run, I know we will be in a good position at retirement. We love our home, our neighbors, the schools, local markets, etc. We have no plans to move anytime soon.
Mortgage Background:
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. Right in line with my retirement goal, we have 13 years - 4 months (160 months) left on our mortgage. Nevertheless, I would like to have it paid off in another 10 years (or less). If we accomplish that, I plan to use the last few years to aggressively build our passive income to help supplement our retirement and defer tapping into the 457K as long as we can so it can continue to grow.
Right now we are not putting any extra money towards the principal given our low 2.875% 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:
AFFJ,
ReplyDeleteGreat progress on your mortgage. I like the fact that you are considering equity separately from your other investments. Too many people for to long relied on equity in a home as their sole investment for retirement. Unfortunately, as we and many know, home values are predominately outside of our control. That's why I think it is smart to watch this separately.
The great news is that you are over halfway done! Keep at it and it'll be gone before you know it.
Bert, One of the Dividend Diplomats
Thanks for stopping by and the kind words...glad to hear I'm not alone in considering home equity separate from other investments. I know I have more equity than my current loan balance but, in my eyes, the amount is still too high. The good news is with such a low interest rate, a big portion of our payment does go to the principal. :)
DeleteBest wishes. AFFJ
Hi AFFJ,
ReplyDeleteThat's great progress on your mortgage. We're doing the same by treating home equity and other investments separately.
Thanks Tawcan. I guess there are more individuals than I thought that do not count their home equity in their net work. There certainly are arguments for both sides so its really a matter of preference I guess. Either way, I'm glad to hear I'm not alone with my choice. :)
DeleteBest Wishes. AFFJ
It looks like we're in a pretty similar position, albeit on opposite sides of the Atlantic. We also have a very low rate 1.99% at the moment, so we are putting our money into investments, since they are growing much faster than it would take to use the same money to pay off the debt.
ReplyDeleteI wish you all the best,
Cheers!
Awesome rate Theres Value! We thought we had a great rate but yours is even more impressive. It's hard to pay extra with such low interest rates. After all, you can put those extra payment into a stock like AT&T and make a fairly steady dividend of more than twice your APR. :)
DeleteWishing you nothing but success in your personal journey! AFFJ
That is a nice chunk of equity you have.
ReplyDeleteTypically I would be in the same boat of not throwing extra money at the mortgage above and beyond the principal.
The problem I have is that the market is at all time highs and as of today is 6 years and 300% off its lows. Obviously no one knows when the market will turn, but you can be sure that the market goes up and at some point it corrects in the other direction.
The longest bull run lasted 10 years before we saw a recession, so we still could have another 4 years. But until we see prices lower by at least 20%, I will continue to throw extra money at the mortgage and try to get it paid off in 7 years or before I am 35.
But that doesn't mean I am not putting money in the market. I still max out my 401K, and IRA for my wife, we have an investment property, and plan to pick up a second one in the next 6-12 months.
Anyways great progress.
Gen Y, I agree that we've been pretty darn lucky to have enjoyed a fairly long bull run of 6 years. I understand there are no guarantees that the bull run will continue but, with our interest rate of 2.875%, I am willing to roll the dice on solid dividend paying stocks at or above our APR that are priced well and have a good track record of dividend growth.
DeleteI must admit that I do ultimately want to pay off my mortgage before it is due, I just think my money is better served with outside investments. Nevertheless, I wish you the best of luck wiping out your mortgage in 7 years and before age 35. Whether you succeed or not, it sure sounds like you have a VERY bright future ahead of you. Way to also max out those IRAs and diversifying your assets with investment property.
Wishing you continued success! AFFJ
Hi AFFJ,
ReplyDeleteIt's great that you're over the hump on your mortgage and that the principal payments exceed the interest!
I don't include home equity either although I use the term wet-worth to differentiate since the assets I include are only liquid ones and I also exclude retirement accounts. I do include the mortgage debt in my wet-worth but as long as the overall number is positive then I don't feel any pain from carrying debt at a fairly low rate since I'm net positive.
Like you I also don't pay my mortgage down but I put money aside each month in a separate investment fund that I'll use to pay it off sooner - I'd rather take the tax deduction on the interest payments right now.
Best wishes,
-DL
Dividend Life - I must admit that seeing more of the paying go towards our principal as opposed to interest is such a great feeling. :)
DeleteGlad to here yet another blogger out there who excludes home equity from their net worth. Although I must say I have not here the term wet worth before, very clever!
Best wishes! AFFJ
I love reading about your mortgage progress! It’s great to know how disciplined you are in limiting your expenses and sticking to your plans. I’m pretty sure you’ll be able to clear all your liabilities, if you religiously follow your budget all the time. Anyway, I look forward to reading your mortgage updates in your future posts. I wish you all the best!
ReplyDeleteBruce Edward Schwartz
Thanks for the kinds words Bruce...please feel free to follow along. If nothing more, I hope our progress provides you with more drive and motivation to succeed in your personal finance journey!
DeleteCheers to progress! Until our next post. AFFJ
I guess there is something to be said for the psychological sense of freedom that mortgage freedom would bring. But the economics of it just don't work right now. If we were paying 4% like many people are right now, I would definitely try to either re-mortgage, or pay off as quickly as possible.
ReplyDeleteI have to say that if our APR was anywhere near 4%, we may at times put a little extra towards the mortgage principal. But in the high 2s, its hard not to want to invest your money outside of your home, rather than have it tied up in your equity. :)
DeleteThanks for stopping by and for your comment. AFFJ
That is a very sound financial plan. Whatever you can pay right now should be dealt with, and the rest should be put into resolving the mortgage. Which is why it is more than wise that you have decided to not wait it out for a few more years, and finish the payments a bit earlier than your retirement. It is important that we be frugal so that we can pace our expenses a lot more and give ourselves more of a leeway. A breathing room, so to speak. Anyway, thanks for sharing your thoughts on the matter. Good day!
ReplyDeleteTasha Reeves @ WCMTG
Thanks Tasha. Having the mortgage paid off a few years before retirement should allow us to pad the retirement funds a bit, if needed. And if not, then maybe we could entertain the thought of retiring a few years earlier than planned. The options are certainly there. :)
DeleteThanks for visiting and leaving your comment. AFFJ