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: $776,217 (down $4,585 since last month's post). For the most part, home prices have steadily increased this year; unfortunately, the increase came to and end this past month. Prior to this past month, we saw four consecutive months of increasing values. Always sad to see loss in value but certainly make it much easier to swallow having come after a nice little streak of gains!
Honestly, whether our home prices rise or fall, it really doesn't mean much to our family as we have no intentions to sell or otherwise move. We are very lucky to be able to say that we love were we are and couldn't see ourselves living and/or raising our family any other place. :)
Honestly, whether our home prices rise or fall, it really doesn't mean much to our family as we have no intentions to sell or otherwise move. We are very lucky to be able to say that we love were we are and couldn't see ourselves living and/or raising our family any other place. :)
$326,390 (down from $328,154 from last month)
Percentage Owed:
42.0% (stayed flat at 42.0%)
Home Equity:
$449,827 (down from $452,350 from last month)
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. :)
The truth is that as long as my mortgage balance continues to go down consistently each month, I am happy. Nevertheless, our journey is currently laid out where if all we do is make our exact mortgage payment each month, the mortgage will be paid off a few months after my planned retirement date.
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 12 years and 2 months so we are setting out to pay off our mortgage on or before my retirement date. Right now we are a few months behind the target retirement date. Currently, we have 12 years - 11 months (155 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.
The truth is that as long as my mortgage balance continues to go down consistently each month, I am happy. Nevertheless, our journey is currently laid out where if all we do is make our exact mortgage payment each month, the mortgage will be paid off a few months after my planned retirement date.
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 12 years and 2 months so we are setting out to pay off our mortgage on or before my retirement date. Right now we are a few months behind the target retirement date. Currently, we have 12 years - 11 months (155 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:
Assuming you pay it off in 12 years, 11 months, what will be the total time the mortgage took to pay off?
ReplyDelete12yrs-11months is actually the true 15-yr payoff date. We will likely payout the loan sooner. Personally, I'm targeting 10 years and then use the last approx. 2 years to invest and pad our retirement accounts. :) AFFJ
DeleteThats a great rate! Let me tell you, paying off your mortgage is one of the best feelings out there. We paid off ours last year and it was awesome. Keep on truckin and good luck with your goal!
ReplyDeleteAdam - The historically low rate is really what has kept us from pushing forward full steam to pay off our mortgage. But hopefully investments in the side, which remains more liquid in case we need it, will continue to grow and one day we may decide to cash it all in to pay off our remaining balance.
DeleteWith a low interest rate. Is the money better invested in safe dividend yielding stocks for this period?
ReplyDeleteyes, we aren't putting extra money towards the principal right now. we are putting more into dividend stocks account and retirement accounts. Should at least match the 2.875% interest but unfortunately there is no stocks that are really "safe" from a pull back. Any money we invest in the market is considers long term money that we don't need for at least 5-10yrs. AFFJ
DeleteAFFJ,
ReplyDeleteKnocking that mortgage balance down! I have been making $500 extra quarterly payments to my mortgage ($2K per year) to wind down the time for my 30 year mortgage life. I think it will take me between 18-23 years to pay it off as right now... we will see. I am 4 years in, so looking to have it drilled down. My rate is 4.375%, so I make a few extra payments due to the market's current stance.
-Lanny
Way to reduce the 30-year time frame. Keep using whichever technique works for you. You'll be thankful you did later. đ AFFJ
DeleteLike you, I do not include my home's projected value in calculating my net worth. My focus is primarily on preparing for retirement and the requisite income, and since my home is not a factor in that, it is better forgotten. As I often note, people are better off viewing their primary residence as a home and not part of their financial plan. In fact, I don't even include a rental property in my retirement calculations at this point. I have yet to decide if I will sell it at some point prior to retirement or maintain it and draw a little passive income.
ReplyDeleteJames - exactly, I made no sense to us to include it in our net worth of we have no intention of downsizing. maybe when we retire and downsize, it will become part of our net worth. For now, it's just a place for shelter that we also call home. :)
DeleteSurprised you don't consider your rental though. Especially if there is equity. either way, hopefully you at least have positive cash flow from it.
Thanks for visiting and commenting. Best regards, AFFJ
Awesome! We are also on track to get our home paid off prior to retirement. We both have 401ks with our employers but I'm thinking we need some other investments. Do you have any recommendations? Anything that is pretty simple - just put some money in and leave it alone? Thanks!
ReplyDeleteSeattle Gal - Everyone's risk tolerance is different so its hard to say what would be appropriate for you and your family. It also depends on how much time and effort you want to put into the research, follow-up, etc. If you want minimal work, I would recommend that you find a quality financial advisor (we use Edward Jones for our set it, and forget investments). However, if you want to be more involved in the investing, consider following a few bloggers from the DGI community for tips and ideas. Many reveal their buys and portfolios directly on their blog. You can find links to many through our blogroll. The DGI blogging community is a wealth of information. But again, if you want little effort, go with a quality financial advisor. Just make sure you interview them beforehand.
DeleteBest Wishes! AFFJ
How is the payment going now? It would be very satisfying to hear in your blog if ever you fully pay your mortgage. All of that sacrifice and budgeting will surely be fruitful. The time that you set is pretty decent enough for you and your family to fully pay the mortgage, and I think you can accomplish it even before the schedule date. Thanks for sharing this unexpectedly helpful and detailed look at paying a person or family’s mortgage!
ReplyDeleteTasha Reeves @ West Coast Mortgage Group
Tasha - We continue to make the minimum payment and invest the excess monies above our set expenses. With the market in the middle of a correction, I think we will continue to do so for a while longer. But if or when we feel the market is overbought or over price, we may dial down our other investments and try to pay off our mortgage sooner.
DeleteIf we do one day decide to pay off our mortgage to be debt free, we bet we it will be posted on this blog for everyone to see. Secretively, I can't wait for that day. Just want to make sure I find the best path to get there. Hope to you are still following along the day we get to announce our FI!
Thanks for visiting. Regards. AFFJ