There has always been the debate if one should pay off their home mortgage or not. One can argue that if the interest rate of my home mortgage is 3.75% or lower, why would someone pay off the balance of this mortgage, when you can earn a potentially higher rate of return in other investment vehicles. There are so many blog posts about the Pros and Cons of Prepaying your mortgage I couldn’t even decide on a reference to link for you. I’m not a die-hard Dave Ramsey follower, or follow one philosophy in particular. I feel that we can, maybe, learn little bits from many people. That’s what has me so pumped about personal finance. You can listen to many people, learn many things, and use this to help guide you. But the kicker is Personal Finance is just that, it’s “Personal”. It’s different for everybody. Everyone may have different goals, different want’s vs. needs. Different things that have value, and things that one person may splurge on, while another will go without.
I also feel that when it comes to debt, it can make you go a little nuts. It plays with your mind. Having a car payment, a credit card payment, a student loan payment, a mortgage payment. It can beat you down. All these payments, and debts can make you feel depressed and at sometimes hopeless. There is a big connection between mental health and money. I learned a lot, and If you’d like to learn more about this check out this episode of the Fairer Cents Podcast, where they talk about how our mental health has been impacted by money and how we’ve let money dictate how we take care of our mental health.
This is why, personally, choose to not have any debt, If I can help it. This is one of the main reasons I decided to pay off my home mortgage. It’s psychological. It is freeing. It changes so many things. It changes the way you think, the way you feel, and the way you care for your home. Knowing that this is mine and owned by me and not the bank. The frame, the walls, the floor, the lot, the lawn…it’s all mine and take some pride in ownership. It does change your thinking. Paying off one debt allows you to do some amazing things. Once you no longer have this major living expense, you can funnel this into paying down other debt, extremely fast! In my case, I crushed my auto loan. We’ll talk about this in future post. But this allowed me to accelerate my auto loan payments and pay off my five year auto loan in about a year. Then once this was gone, I could dump a bunch of money into an emergency fund. I was able to stockpile 5-6 months of necessary living expenses within a year. Keep in mind, I no longer have a mortgage or auto loan payment. So the emergency fund is all necessary utilities, bills, food, and such. This emergency fund actually doesn’t have to be as large as we think. I then could bump my retirement account contributions up to over 15% of my earnings.
I paid off my mortgage because it allowed me to accelerate many other saving and spending goals. I was able to satisfy other debt as well as fund other accounts. This also made it much easier to help my daughters with buying their first used cars, by matching what they had saved, and I was able to pay for my upcoming vacation, this fall, in cash.
Let’s talk about how. There wasn’t really any special sauce, or magic recipe. I’ll just run-through the thought process of how I was able to do this. And how it was a series of events that got me there.
My Dad was one of the coolest guys I had the privilege of knowing, and I was lucky enough to be his son. While he was still working, I recall him mentioning how he was accelerating paying off the mortgage on his home. One day he said to me, I’m doubling, and sometimes tripling the payments to pay off his home. It wasn’t until my father was forced into retirement due to diagnosis of advanced stage pancreatic cancer, that this really started to click for me. When my dad got sick, went through radiation and chemo, he couldn’t work. Having his home paid for with no mortgage, lessened any burden of paying a mortgage every month. It helped that he now had money to help pay for the care he needed, and keeping him comfortable up until his passing.
Okay, let us fast forward… following my fathers passing, I now had his house to sell. It was difficult. My childhood home with tons of memories! First girlfriend, band practice, sneaking out with friends. It was full of fun times. You may recall in my Part One post here, that for many years I was paying my mortgage faster by paying every two weeks. I had made a substantial dent in my mortgage prior to me refinancing, now that I was single. After selling my childhood home, I used the funds from selling, along with a little bit of my own savings to satisfy my own outstanding balance. I had thought long and hard at the time as to what would be best. Should I place this money in the stock market, buy mutual funds, or many other investment vehicles? To this day, I feel my dad would’ve wanted me to do this. I absolutely could not have done, or can continue to do what I’m doing without my dad, and his help. I’m grateful every day. He helped me understand what it means to work hard, to save, to be debt free, and the freedom that comes from it.