I set a goal to pay off the mortgage by 2020. Now it’s time to think about what it’s really going to take, and how I’m going to do it.
First, let me address something briefly.
Doesn’t investing provide a better return on investment than paying down the mortgage?
Yes, it does. I’ve read plenty of personal finance books, websites, blogs, etc. I understand that expected returns for investing are north of 8%, 10% or even 12%. I understand that I’m only getting a return of less than 3% by paying down the mortgage, once you factor in the tax deduction for mortgage interest. I understand that I am potentially “missing out” on 6-10% compounding over 5 years on over $100,000. I should be investing instead of paying down the mortgage.
But let me explain why I won’t be doing that. Expected returns aren’t guaranteed returns. The market could take a wild downswing, and those expected returns can turn into real losses.
Think of it this way. You are completely debt-free. Would you borrow $178k at 3.25% so you could possibly gain about 8-12% on it? For most, the answer would be a resounding “YES, PLEASE! WHERE DO I SIGN?!” For me, the satisfaction of being completely debt-free is worth much more to me than taking on debt to potentially have an additional few thousands of dollars.
The rich rule over the poor, and the borrower is slave to the lender. -Proverbs 22:7
With that being said, I want to say that I do believe in investing. All of my retirement accounts as well as my wife’s retirement accounts are invested in the market (stocks and mutual funds). We continue to invest 15% or more of our income plus employer match into retirement accounts. I’m just saying I don’t want to use debt as a tool to invest.
What will it take to pay off the mortgage in 5 years?
It’s February 2016, and the mortgage balance is currently $178,304. I have to pay it off in 58 months to reach my goal by 12/31/2020.
$178,304 / 58 = $3074.21, and that’s not factoring in interest.
The current principal and interest payment (P+I) is $827.76. According to the amortization estimator I’m using, if I pay an additional $2,500 in principal every month in addition to the regular monthly payment, the last payment will be due on 12/1/2020.
In addition to the big goal I set, I’ve set some intermediate goals to ensure I’m on pace for achieving the goal.
I’ll keep track of my goal of paying off the mortgage below.
Month | Months left | Intermediate goal | Actual balance | On pace for goal |
2/19/2016 | 58 | $178,304 | $178,304 | Y |
3/18/2016 | 57 | $176,700 | $174,480 | Y |
4/19/2016 | 56 | $173,600 | ||
5/19/2016 | 55 | $170,500 | ||
6/19/2016 | 54 | $167,400 | ||
7/19/2016 | 53 | $164,300 | ||
8/19/2016 | 52 | $161,200 | ||
9/19/2016 | 51 | $158,100 | ||
10/19/2016 | 50 | $155,000 | ||
11/19/2016 | 49 | $151,900 | ||
12/19/2016 | 48 | $148,800 | ||
1/19/2017 | 47 | $145,700 | ||
2/19/2017 | 46 | $142,600 | ||
3/19/2017 | 45 | $139,500 | ||
4/19/2017 | 44 | $136,400 | ||
5/19/2017 | 43 | $133,300 | ||
6/19/2017 | 42 | $130,200 | ||
7/19/2017 | 41 | $127,100 | ||
8/19/2017 | 40 | $124,000 | ||
9/19/2017 | 39 | $120,900 | ||
10/19/2017 | 38 | $117,800 | ||
11/19/2017 | 37 | $114,700 | ||
12/19/2017 | 36 | $111,600 | ||
1/19/2018 | 35 | $108,500 | ||
2/19/2018 | 34 | $105,400 | ||
3/19/2018 | 33 | $102,300 | ||
4/19/2018 | 32 | $99,200 | ||
5/19/2018 | 31 | $96,100 | ||
6/19/2018 | 30 | $93,000 | ||
7/19/2018 | 29 | $89,900 | ||
8/19/2018 | 28 | $86,800 | ||
9/19/2018 | 27 | $83,700 | ||
10/19/2018 | 26 | $80,600 | ||
11/19/2018 | 25 | $77,500 | ||
12/19/2018 | 24 | $74,400 | ||
1/19/2019 | 23 | $71,300 | ||
2/19/2019 | 22 | $68,200 | ||
3/19/2019 | 21 | $65,100 | ||
4/19/2019 | 20 | $62,000 | ||
5/19/2019 | 19 | $58,900 | ||
6/19/2019 | 18 | $55,800 | ||
7/19/2019 | 17 | $52,700 | ||
8/19/2019 | 16 | $49,600 | ||
9/19/2019 | 15 | $46,500 | ||
10/19/2019 | 14 | $43,400 | ||
11/19/2019 | 13 | $40,300 | ||
12/19/2019 | 12 | $37,200 | ||
1/19/2020 | 11 | $34,100 | ||
2/19/2020 | 10 | $31,000 | ||
3/19/2020 | 9 | $27,900 | ||
4/19/2020 | 8 | $24,800 | ||
5/19/2020 | 7 | $21,700 | ||
6/19/2020 | 6 | $18,600 | ||
7/19/2020 | 5 | $15,500 | ||
8/19/2020 | 4 | $12,400 | ||
9/19/2020 | 3 | $9,300 | ||
10/19/2020 | 2 | $6,200 | ||
11/19/2020 | 1 | $3,100 | ||
12/19/2020 | 0 | $0 |
That is a rather ambitious goal. Good luck sir.
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I’ll be following your journey and cheering you on!
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Despite the investing being more profitable. I agree that being debt free offers peace of mind and a secure feeling you can’t always get with a stock or mutual fund. Good luck, it is a great goal !
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love the blog! Love the plan! I have a less ambitious goal of paying off the mortgage by the time the kids start college. We chose not to fund a 529 plan and put the same amount of money towards the mortgage. Our debt-free house should be worth more than a 529 by that time. Plus, we’ll enjoy the benefits even after the kids’ college years.
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Thanks! I don’t have a 529 right now either, and I’m not totally convinced if it’s worth it at this point. Good luck with your goal!
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Love your goal. I’m in the same camp that I want to pay my mortgage off first.
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Awesome! Keep us posted on your progress!
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