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Our Mortgage Payoff Plan

January 1, 2019 By Omar

I remember having a conversation with a group of friends a few years ago. My parents had recently paid off their mortgage (YAY!) at the time in their sixties and a friend was stating that he doesn’t understand how it was possible to pay off a mortgage any earlier than that age range. Immediately my ears went up and once we started blogging I knew I had to write about this.

There are some reasons why my parents took a while to pay off their mortgage: (1) They came from a less fortunate country at the ages of 32 and 39 with (2) limited education and (3) three kids under the age of 10. To put it in perspective, when I graduated from college and got my first job I made more than one of my parents and wasn’t too far behind the other.

Today, with bonuses and stock grants, I probably make a little less than both of them combined at the end of their careers. This particular friend is very successful and makes substantially more than me. Stating the obvious, my friend and I have the ability and thus the opportunity to pay off a mortgage considerably quicker than my parents could given our incomes.

In an effort to be transparent and to show how someone can pay off a mortgage at a relatively young age I’d like to share:

  • where we are currently
  • decisions we’ve made
  • conversations we’ve had to come up with ideas
  • our mortgage payoff plan
  • Kim’s thoughts

We will also be posting monthly or quarterly to give you an idea of the progress we are making.

Where We Are

At the time of this post, Kim and I are both 34. We’ve always talked about how cool it would be to have our mortgage paid off by 40. So that’s the goal that we’re setting for ourselves. We currently owe $135K on our home. Our income varies depending on how much Kim works. Kim isn’t comfortable with sharing all our financial numbers for several different reasons. However, we fall in the middle area of what’s considered a middle-class income. If you’re curious what that is, she said you can Google it just like she did in order to edit out the numbers I tried to share (lol)!

We have been debt free except the mortgage since 2015. Between 2015 and now, we were cash flowing updates to our home. The last major item to do is our bathroom. We’ve actually saved up the cash to do it twice but found better uses for the money.

Decisions We’ve Made

I think the biggest lifestyle decision we’ve made is to do a budget consistently and down to the penny. For the last 6 years of our marriage, we could tell you where every penny was spent. But the budget isn’t just about tracking your spending. It’s about telling your money where to go. It’s literally the turn by turn GPS that gets you from where you are now to where you want to be financially. We want to pay our mortgage off. Therefore, we put a category in our budget named ‘Additional Mortgage Principal’.

The next big decision that we made is that in 2016 we refinanced to a 15-year mortgage at 3%. Not only did we shorten the length of our mortgage but we shaved 1.125% from our mortgage rate. We also eliminated PMI. At the end of this transaction, our mortgage payment was only $200 more. That is definitely worth eliminating 15 years of payments.

  • read: Mortgage Term: 15 Or 30 Years A Slave

Another critical decision we made was to buy in 2013 when the housing market was extremely cool. We still had some student loans to pay off and our original plan was to pay those off then save up a down payment for a house. However, Kim convinced me that buying a house was the best decision at that time because houses were so undervalued then. We could get a nice house in a good school district for considerably less than before the market crash. She was right, and I’m so glad I listened. The truth is we couldn’t afford to live in our current home with what houses are going for now in our area unless Kim was working full-time. Thankfully, we bought when we did.

  • read: 9 Helpful Tips You Need To Know When Buying A Home

Conversations We’ve Had

In the finance world, there are generally two trains of thought when it comes to this topic of paying off the mortgage.

One thought is that you make your regular mortgage payment and invest any free funds in your budget. The idea here is that the performance of the stock market will beat the interest you are paying on the mortgage. This definitely makes sense and I don’t shun people that go this route. Could I do it though? Hell no. My disgust for debt is too great to owe anyone for the full length of a mortgage term whether it be a 15, 20, or 30-year mortgage.

The second thought is that you invest a certain amount of your household income (10 or 15%) and throw all extra funds in your budget at the mortgage. This sounded like a good idea until I started to calculate the additional payments I would have to make to pay the mortgage off by 40. It would take an average of $1150 per month in additional principal payments to pay the mortgage off in 6 years. This could be possible depending on how much Kim works but things would be tight. Too tight! We want to live a little bit! The other problem is that we wouldn’t get the benefit of spending this money until (1) the mortgage is paid off and the payment goes away or (2) we sell the house. That’s a lot of money per month for a loooooooong time to not reap any benefits from it.

After presenting a million different plans to Kim over a few years I finally settled on a plan. Thankfully, Kim likes it because I know she was losing her patience with me (lol).

Our Mortgage Payoff Plan

Our plan is to do a 70/30 split with the extra funds in our budget. 70% will go to savings. This could go towards life expenses (car repairs, daycare/school for our older child, vacation, Christmas, etc.). If we don’t have any life expenses coming up in the near future, we will throw it into a taxable investing account. The remaining 30% will go to the mortgage. The reason we chose a taxable investing account is that our ultimate goal is to build an FU account.

As you can see, this plan is somewhere in between the two trains of thought. My thought is that the taxable account will be more liquid than tying the money up in a 401K or IRA. Eventually, the amount in the taxable account will be equal to the mortgage and we’ll have the option to pay it off or keep a huge stash of FU money. We’ll also still be making more headway on the mortgage than the normal payment. It’s a win/win. Also, a portion of my compensation for the company I work for is stock units. These stock units vest over a certain amount of time. As this stock vests, I plan to cash out half of it to throw lump sums at the mortgage.

Kim’s Thoughts

When we first bought our house and signed up for a 30-year mortgage, I must admit that I didn’t think much about paying it off at first. Hell, I was still wondering how we were going to tackle my biggest student loan. However, as the years passed and we paid off my student loan we started to think again about possible ways to pay off the house sooner.

Between home updates, vacations, emergencies… life, we realized that as good as we were with our money, it felt like something was always competing for it. And we knew then that it would probably be hard to stick to paying extra Every. Single. Month. Not to mention that I told Omar on several occasions that 15 years sounded good to me once we refinanced because I didn’t know how we were going to make it work. But I would always ask him to run the numbers to see how much we had to come up with monthly in order to pay the house off by 40. And then I’d feel annoyed because —-> Where was an extra $1000+ going to come from per month?!

Truth be told, even I’m amazed that we’re at the point of where we’re going to start paying off our mortgage. And I’m even more amazed that we finally came up with a plan that Omar has agreed to stick to and not overthink… anymore (lol).

What Do I Think About Our Mortgage Payoff Plan?

I think doing a 70/30 split is a good idea because it will allow us to still have some fun with our money as well as get down to the business of paying the house off early. As a matter of fact, we actually started doing this in November.

In November, we paid $1700 to the principal and it felt good to start.

  • $794 from our regular payment
  • $910 from our budget

In December, we paid $1284.28 to the principal.

  • $798.15 from our regular payment
  • $486.13 from our budget

I know we have a long journey ahead of us to get this house paid off, but I know it’s something we can do. I’m looking forward to being mortgage free in the future and all the things we can do with that extra money in our budget…like going to the beach!

Final Thoughts

So, we’re setting a goal of paying $23K of total principal to our mortgage per year for the next 6 years. We currently owe $135K. We’re already paying $9600 to the principal yearly from the regular payments. That leaves us to come up with $13.4K.

Where will we get this from?

  • $6000 yearly will come from employer stock (it would be $8K, but you know… taxes).
  • $7400 will have to come from any leftover money in our budget (divided by 12, that’s a little more than $600 per month).

Some months we might not make the $600 target, and some months we might exceed it. Regardless, we will do 30% of any money we have left after our regular monthly expenses and anything we may need or want.

We’ll definitely keep you posted on if this plan changes and on the progress of the mortgage pay down! Time for us to get to work!

MORTGAGE PAYOFF PLAN UPDATES:

  • Jan – Mar 2019
  • Apr – Jun 2019
  • Jul – Sep 2019
  • Oct – Dec 2019
  • Year 2 Goals (2020)

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Related

Filed Under: Personal + Finance Tagged With: debt freedom, making goals, mortgage, mortgage free journey

See what’s happening on Instagram…

thinkingofsomeday

#tbt To last Thursday (1/7/2021) when we became mo #tbt To last Thursday (1/7/2021) when we became mortgage free!! Yes, you read that correctly! We are 100% debt free! Like debt free, debt free. 🤣
⠀⠀⠀⠀⠀⠀⠀⠀⠀
To be honest, it’s been a week and it still doesn’t feel real to us yet. But it was real watching that money disappear from our account and no longer seeing our mortgage balance when we signed into our credit union account. We must say, our credit union works pretty fast! Lol.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
We didn’t even get around to sharing our mortgage payoff goal for the year with one of the little cute pictures explaining how we were going to do it. But here’s a quick recap of the numbers that we were working with...
⠀⠀⠀⠀⠀⠀⠀⠀⠀
• mortgage principal: $54,507.37
• mortgage interest: $35.84
• reconveyance fee: $69.00
• paying off our mortgage... definitely not priceless, but oh so worth it!! 😂🙌🏽
⠀⠀⠀⠀⠀⠀⠀⠀⠀
We’ll share more in depth details soon because you’re probably wondering how we came up with that amount of money 7 days into January. It definitely wasn’t from hitting the lottery! Lol. But until then, just know that...
⠀⠀⠀⠀⠀⠀⠀⠀⠀
WE’RE MORTGAGE FREE!!! #piecesofsomeday
So we took some Christmas / family pictures back i So we took some Christmas / family pictures back in 2020 (as if that was so long ago), but I never got to share them. 😩 So here’s one. I actually like the fact that it’s in front of our house. #piecesofsomeday
⠀⠀⠀⠀⠀⠀⠀⠀⠀
And I also wanted to add that we finally did another blog post after quite some time. Maybe we’re the world’s worst bloggers. 🤷🏽‍♀️🤷🏽‍♂️ But if you’re interested, we’re sharing a recap of quarter 3 and quarter 4 from our mortgage payoff journey. We’re also sharing what our mortgage payoff goal is for 2021. We’re a bit excited about it! You can check it out at the link in our bio.
2020. This has been a year that I’m sure none of 2020. This has been a year that I’m sure none of us will ever forget. While this year has been ok for us for the most part, there are many people that it’s been a really really tough year for. Whether it’s been financially, emotionally, health wise, etc. etc. etc. So here’s to hoping that next year will be much much better, for everyone, but especially for those who had a tough time this year. ✨♥️
We started 2020 off with owning 43% of our house a We started 2020 off with owning 43% of our house and we now own 69% of it. We had paid off 39% of the mortgage loan and we’re finishing the year out at having 66% of it paid off. (These 2 numbers are not the same for us because of our 5% down payment as well as when we refinanced to a 15-year mortgage.) It’s been really exciting to see these numbers increase this year.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
(Annnnnd this concludes our December numbers. I can’t believe I managed to share them all before the end of the year!! 😂)
Q4 was our best quarter by far, mostly due to the Q4 was our best quarter by far, mostly due to the RSUs that we were able to use. However, even if we hadn’t been able to use them, Q4 would have still wrapped up nicely thanks to us still being able to stick to our 70/30 plan.
For December we were able to color in 4 rectangles For December we were able to color in 4 rectangles. This puts our mortgage balance for the end of 2020 at $54,507.37.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
• 132 rectangles total
• 88 rectangles colored in
• 44 rectangles to go!!
The total of our mortgage principal payments for D The total of our mortgage principal payments for December was $3514.74.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
$995.13 came from our regular payment and $2519.61 came from our budget.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
This put us at meeting our second stretch goal of putting a total of $45,000 towards our mortgage principal for the year! Yes, we did a little magic with our budget in order to get it at exactly $45k, but I’m sure that’s what we all do in when we’re trying to hit a certain number!! Haha.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
We’re soooo happy that we were able to meet this goal because we really weren’t sure if it was going to be possible or not!
Am I right? Or am I right? Throughout parts of thi Am I right? Or am I right? Throughout parts of this year it seemed like the days, weeks, months were going soooo slow. And then all of a sudden summer was over and school was starting. Then it went drastically slower again, but yet here we are with only a couple of days left in this year.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
And as usual, time has gotten away from me when it comes to sharing our mortgage payoff numbers. So starting later today and over the next couple of days, I’ll be sharing our December numbers in the hopes of getting them all in before January 1st! 😆 We’ve enjoyed seeing everyone else’s numbers though!
Merry Christmas!! #christmas2020 #piecesofsomeday Merry Christmas!! #christmas2020 #piecesofsomeday
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Comments

  1. Chad says

    January 1, 2019 at 9:42 am

    Love this plan. The hard part is execution and if anyone has the discipline to do that it’s you guys. This plan also doesn’t include future increases in income so it could happen even faster than designed. Can’t wait to scream the debt free scream with y’all!

    • Omar says

      January 1, 2019 at 10:53 am

      Thanks Chad. You’re right. It could possibly go even faster. The stock is the key though. This plan would be waaaay harder without it! I’m definitely thankful for the company I work for.

    • Kim says

      January 1, 2019 at 7:57 pm

      Thank you! I didn’t even really think about future pay raises so that’ll definitely be exciting as well. Looking forward to you doing the debt free scream with us as well!

  2. Katrice says

    January 1, 2019 at 7:02 pm

    Thank you guys so much for sharing this post. I am looking forward to see how this goes for you guys. It sounds like a great plan.

    • Kim says

      January 1, 2019 at 8:00 pm

      Thanks Katrice! It took us awhile to come up with it. Lol. Hopefully it’s something that we’ll continue to like and be able to stick to.

  3. Yvonne says

    January 1, 2019 at 10:49 pm

    Great post!! Great plan!! I am loo looking forward to screaming with you guys too…I am very proud of you both. It is a great feeling.

    • Kim says

      January 3, 2019 at 1:17 pm

      Thank you!! 🤗

  4. Jessica says

    January 2, 2019 at 3:22 pm

    I know you guys can do it, so no questions about that. I look forward to the celebration party after it’s done. Haha! Housewarming when you buy a home, but what do you call the gathering once it is paid off? Lol! We’ll think of something. Great read as always!

    • Kim says

      January 3, 2019 at 1:18 pm

      We have about 6 years to come up with a word for the gathering. Lol

  5. Kris says

    January 4, 2019 at 7:58 pm

    Great plan you guys have for paying off the mortgage. Of course the toughest part is going through with the plan and be consistently disciplined but I believe you two will go through with it.
    I am looking forward to your updates to see how everything goes with your plan.

    • Omar says

      January 5, 2019 at 12:36 pm

      Thanks Kris!

  6. GYM says

    January 18, 2019 at 2:22 am

    Thanks for sharing your post, looking forward to read your ‘burn mortgage papers’ post!! 🙂

    • Kim says

      January 19, 2019 at 4:32 pm

      “Burn Mortgage Papers”… I like the sound of that. Haha. Thanks GYM!

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See what’s happening on Instagram

thinkingofsomeday

#tbt To last Thursday (1/7/2021) when we became mo #tbt To last Thursday (1/7/2021) when we became mortgage free!! Yes, you read that correctly! We are 100% debt free! Like debt free, debt free. 🤣
⠀⠀⠀⠀⠀⠀⠀⠀⠀
To be honest, it’s been a week and it still doesn’t feel real to us yet. But it was real watching that money disappear from our account and no longer seeing our mortgage balance when we signed into our credit union account. We must say, our credit union works pretty fast! Lol.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
We didn’t even get around to sharing our mortgage payoff goal for the year with one of the little cute pictures explaining how we were going to do it. But here’s a quick recap of the numbers that we were working with...
⠀⠀⠀⠀⠀⠀⠀⠀⠀
• mortgage principal: $54,507.37
• mortgage interest: $35.84
• reconveyance fee: $69.00
• paying off our mortgage... definitely not priceless, but oh so worth it!! 😂🙌🏽
⠀⠀⠀⠀⠀⠀⠀⠀⠀
We’ll share more in depth details soon because you’re probably wondering how we came up with that amount of money 7 days into January. It definitely wasn’t from hitting the lottery! Lol. But until then, just know that...
⠀⠀⠀⠀⠀⠀⠀⠀⠀
WE’RE MORTGAGE FREE!!! #piecesofsomeday
So we took some Christmas / family pictures back i So we took some Christmas / family pictures back in 2020 (as if that was so long ago), but I never got to share them. 😩 So here’s one. I actually like the fact that it’s in front of our house. #piecesofsomeday
⠀⠀⠀⠀⠀⠀⠀⠀⠀
And I also wanted to add that we finally did another blog post after quite some time. Maybe we’re the world’s worst bloggers. 🤷🏽‍♀️🤷🏽‍♂️ But if you’re interested, we’re sharing a recap of quarter 3 and quarter 4 from our mortgage payoff journey. We’re also sharing what our mortgage payoff goal is for 2021. We’re a bit excited about it! You can check it out at the link in our bio.
2020. This has been a year that I’m sure none of 2020. This has been a year that I’m sure none of us will ever forget. While this year has been ok for us for the most part, there are many people that it’s been a really really tough year for. Whether it’s been financially, emotionally, health wise, etc. etc. etc. So here’s to hoping that next year will be much much better, for everyone, but especially for those who had a tough time this year. ✨♥️
We started 2020 off with owning 43% of our house a We started 2020 off with owning 43% of our house and we now own 69% of it. We had paid off 39% of the mortgage loan and we’re finishing the year out at having 66% of it paid off. (These 2 numbers are not the same for us because of our 5% down payment as well as when we refinanced to a 15-year mortgage.) It’s been really exciting to see these numbers increase this year.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
(Annnnnd this concludes our December numbers. I can’t believe I managed to share them all before the end of the year!! 😂)
Q4 was our best quarter by far, mostly due to the Q4 was our best quarter by far, mostly due to the RSUs that we were able to use. However, even if we hadn’t been able to use them, Q4 would have still wrapped up nicely thanks to us still being able to stick to our 70/30 plan.
For December we were able to color in 4 rectangles For December we were able to color in 4 rectangles. This puts our mortgage balance for the end of 2020 at $54,507.37.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
• 132 rectangles total
• 88 rectangles colored in
• 44 rectangles to go!!
The total of our mortgage principal payments for D The total of our mortgage principal payments for December was $3514.74.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
$995.13 came from our regular payment and $2519.61 came from our budget.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
This put us at meeting our second stretch goal of putting a total of $45,000 towards our mortgage principal for the year! Yes, we did a little magic with our budget in order to get it at exactly $45k, but I’m sure that’s what we all do in when we’re trying to hit a certain number!! Haha.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
We’re soooo happy that we were able to meet this goal because we really weren’t sure if it was going to be possible or not!
Am I right? Or am I right? Throughout parts of thi Am I right? Or am I right? Throughout parts of this year it seemed like the days, weeks, months were going soooo slow. And then all of a sudden summer was over and school was starting. Then it went drastically slower again, but yet here we are with only a couple of days left in this year.
⠀⠀⠀⠀⠀⠀⠀⠀⠀
And as usual, time has gotten away from me when it comes to sharing our mortgage payoff numbers. So starting later today and over the next couple of days, I’ll be sharing our December numbers in the hopes of getting them all in before January 1st! 😆 We’ve enjoyed seeing everyone else’s numbers though!
Merry Christmas!! #christmas2020 #piecesofsomeday Merry Christmas!! #christmas2020 #piecesofsomeday
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