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 $846,994 (down $6,856 in the last 30-days). The housing market throughout California appears to be slowing down. We are seeing more inventory and houses staying on the market for longer. Normally, this would be seen as bad news to most, but my wife and I are contemplating the possibility of moving. We both have aging parents whom may eventually need us to help care for them. Our home does not have a down stairs bedroom so that would be a huge problems since we can't realistically expect them to climb the stairs each and every day in the old age. Our plans may take us on a different path this coming year. Stay tuned! ;)
$240,129.54 (down $2020 from our February post)
Percentage Owed:
28.3% (up .1 since our February post)
Home Equity:
$606,865 (down $7,323 from our February 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 3 months (99 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 3 months (109 months) left on our mortgage. Nevertheless, I would like to have it paid off in roughly 8 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 for as long as possible 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 3 months (99 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 3 months (109 months) left on our mortgage. Nevertheless, I would like to have it paid off in roughly 8 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 for as long as possible 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 totally understand the appeal of paying off the mortgage to free yourself from that monthly obligation. However, at such a low rate, and given that you would retire and then lose an income stream, if you ever did need to borrow it would be 1) harder without an income; and 2) more expensive. That said, you could also open a HELOC, which would be a higher rate of interest, but you wouldn't have to draw it down at all -- it's just there. I would open that line well before you retired.
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