Our Mortgage is Officially Half Empty

With this month’s mortgage payment Mrs. Pennypacker and I have officially met our goal of paying down half of the mortgage by June.  It’s been 8 years since we originally bought the house.  Back then, we weren’t even thinking about paying off the mortgage early.  We were just excited to have a house.

Our initial mortgage was a scary one.  We only had 5% for a down-payment, so we took out a first mortgage for the first 80% and a second mortgage for the remaining 15%.  The second mortgage had a high interest rate (9% I believe), but it was a fixed rate.  The first mortgage had a lower interest rate (6.5%), but it was an interest-only 5 year ARM.  This meant our payments would be low for the first five years because we were only paying interest.  Then after five years, our payment was would balloon to include principal.  Plus, the interest rate would adjust to the market rate.  It really wasn’t the smartest financial move on our part, but at the time, all we were worried about was getting into our first house.  Since then we’ve refinanced three times and we’re now sitting pretty comfortably in a 15 year fixed mortgage with an interest rate of 2.875%…ah, much better!

It was just a couple years ago that we started getting serious about paying down the mortgage early.  In the past two years we’ve gone from only having 25% of it paid off to 50% today.  And the rate keeps accelerating!  If we just kept going at the same pace, it will only take 3 and a half more years to be done.  But, there’s a bit of a snowball-affect.  As you get closer to that final payoff date, the amount of interest you’re paying decreases and a growing percentage of your payment goes to principal.  Also, your motivation tends to grow.  As you close in on that finish line, you’re excitement builds, and you start looking for spare change to throw at the house to get you there just a little bit faster.  We may end up getting it done in less than 3 years!

Paying off your mortgage early can seem like a daunting task at first, but if you break it up into shorter milestones, you start feeling little sparks of accomplishment along the way.  We also give ourselves little rewards at the end of each milestone.  For reaching the 50% mark, we bought ourselves a set of Adirondack chairs and a fire pit for our patio.

I think out next milestone will be 43% by the end of the year.  Not exactly a round number like 50% was, but it’s a makeable goal.

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