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 $836,837 (down $16,738 in the last 30-days). The traditional spring-summer spike in real estate continued to be great for property values, but the reality is whether or not it is up or down, it really doesn't mean much to us since we have no intention of selling our home. We mainly post these updates to see the remaining mortgage balance and keep us motivated to push forward to be debt free (including our mortgage) one day!
$254,167 (down $1,986 from our July post)
Percentage Owed:
30.4% (up .8% from our July post)
Home Equity:
$582,670 (down $25,300 from our July post)
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 8 years and 10 months (106 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 approximately 9 years and 8 months (116 months) left on our mortgage. Nevertheless, I would like to have it paid off in roughly 8-9 years. If we accomplish that, I plan to use the money we use to pay our mortgage and 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.
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 8 years and 10 months (106 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 approximately 9 years and 8 months (116 months) left on our mortgage. Nevertheless, I would like to have it paid off in roughly 8-9 years. If we accomplish that, I plan to use the money we use to pay our mortgage and 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 5-7 years, we may consider using some of the 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.
I think it's smart to measure mortgage payoff over equity. However, to the extent that you can tap into your equity (e.g., via a HELOC or cash-out refinance), it is worth knowing there is a source of income there and how much it's worth. Of course, drawing down a HELOC or cash-out refinancing is accruing more debt. However, it's a lower interest rate than running up credit cards. I used our HELOC to start our real estate rental investing. I also used our HELOC to float my cash flow when I was starting a business (till it became an ongoing concern with more predictable revenue). Finally, I refinanced out equity from one property to purchase another property with the cash. This increased debt on that refinanced property but it was still a good move because it enabled us to pay cash for the other property that couldn't be financed (in Costa Rica). So equity in the property does matter, you can access it, and it can be helpful if used prudently.
ReplyDeleteAbsolutely agree. Although we don't have plans to tap into our equity, it certainly is comforting to know that it is there should we need it. With the equity, we have so many alternatives available to us. Whether it is in an emergency or opportunity situation, we love the position we are in.
DeleteGlad to hear you have used your equity to obtain a business and a second property. We may do that in the upcoming year to finally acquire our first rental property. Hopefully, in cash or close to it.
Thanks for stopping by and commenting. AFFJ
Hey AFFJ, yea I agree with you on not putting any more money toward the principal. That's a awesome low interest rate you have, wish I have that low rates on my rental properties. For me I've been debating if I should invest more in stocks or focus on paying 1 of my rental properties off so I can build up a down payment with the house paid off for another rental property.
ReplyDeleteIt really depends how low your interest rate is compared to what you think you can make in the stock market. Because our APR is so low, we have full confidence that we can make more in the market than what we would save mortgage interest. Of course there is always risk, but we are now trying to build a buy-and-hold portfolio so we feel the investments are relatively safe long term investment. :)
DeleteAppreciate the comment. Best wishes and success on your personal journey. AFFJ
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Great postt thankyou
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