Friday, January 19, 2018

The Best Investment for 2018

I came across a great article the other day from HumbleDollar outlining the best investment you can make in 2018. Sorry, but it isn't anything too exciting - it's paying down debt. Specifically mortgage debt. Not that I needed any additional validation, but it’s nice to see this since we are planning on reducing our mortgage balance in 2018 by over $30k.

This year marks 9 years since we paid off our non-mortgage debt and at one point since then we had our mortgage balance as low as $85k with a line of sight to be mortgage free within a year.

OUR CURRENT MORTGAGE


In 2013, I took a new job and we moved to a new state. We had a good chunk of home equity built up and when we sold we took all the old equity and put it towards our new house, still borrowing $260k. Our house is larger than our last house, but more important (to us), we now live near the best public schools in the area (our last house was in a terrible school district, but our kids were small enough we didn't really care).

Fast forward to today and 5 years into our 30-year mortgage we are 95 payments ahead of schedule (that's like 8 years!). Our mortgage website has a cool calculator that shows how much time and interest we've saved assuming we only make minimum payments from here on out. You already know that that isn't happening, so every month this view looks better and better.


Since 2013, my income has grown a lot, allowing us to put more and more towards the mortgage each year. Our first couple of years we had some expensive home repair projects, plus at the beginning of any mortgage it takes a while before it feels like you’re making any headway as the interest part of the payment is so high. But since about 2016 we have started to get into a groove and now the payoff is gaining some traction.

MORTGAGE PAYOFF


We’ve made some additional tweaks to our budget that will allow us to increase what we pay each month. I've also made some high-level assumptions about how the new tax law will change our take home pay. Our plan is to have all extra $ will go towards the mortgage. As of now, our current projection is that we will be mortgage free in 2022.


If we only ever paid the minimum, our interest payments would have totaled $173k over 30 years. Yuck. Paying $52k in interest is also lame, but way better. One of the biggest excuses you’ll hear for keeping a mortgage is for the tax deduction. With the new US tax law doubling the standard deduction, even fewer households will itemize deductions. Now mortgage interest will be deducted by even fewer households. Even more reason to get rid of this mortgage as soon as we can.

1 comment:

  1. Paying down debt might not be a sexy investment, but it has a guaranteed return. Love the visual your family is using to represent the number of payments you've go left. I may need to borrow that for some of my own financial goals!

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