Saturday, March 17, 2018

A paid off home

Two weeks ago I did something a little scary ... something some might consider crazy even. I paid off my house. Yep, 12.5 years after buying my home it's truly mine and I'm debt free once again. Yay!

After a couple years of debating it, I finally stopped messing around and paid off the house mostly because I was pissed off. Pissed off that the newly passed tax bill once again favors the wealthy and big business over those who actually need assistance. Pissed off after hearing some politician's comment about how they were giving the poor more money to go spend. Money which they think will come back to the wealthy as profits. I vowed to save that extra money and put it to work for me instead. And it firmed my resolve to stop paying interest to a bank.

So I finally did it, went to the bank, wrote the biggest personal check I've ever written and the house was mine. It was kind of anti-climatic actually, but on the drive home I started feeling pretty good about the whole thing.

How is paying off a huge debt crazy? Well most conventional finance and investing advice says not to pay off a low interest loan like mortgages and instead invest it where you can make more. But investing isn't a sure thing and there's no way I would have ever put that same amount into the market. Definitely not now and probably not ever.

Don't get me wrong, I do invest. I regularly invest my retirement savings because it's the only way I'll ever be able to retire. In fact I significantly increased that savings rate last year and bumped it up a little more this year. But I like to spread out the risk and keep some in safer savings vehicles as well.

Also, at 5.7%, my mortgage rate wasn't as low as some. I probably should have refinanced at some point. I did look into it two years ago, but at that time the payoff was so long that it seemed better to just pay it off instead.

Even after paying off the mortgage, I still have an emergency fund that can cover 2+ years of expenses. I'd definitely recommend building an emergency fund and retirement savings first before tackling the mortgage.

I planned to pay off the mortgage all along because I didn't want to have to pay the bank all of that interest. So I started paying extra early. According to my records, my first extra payment was four years after purchasing the house. The first year I paid the equivalent of one extra payment, as I did the year after that. Then two extra payments. Then it varied. Last year I really started getting serious culminating with the final payoff.

So what's next? Well, I want to build up my savings a bit because my car is 18 years old and at some point I'm going to want a newer one. Then, with a paid off house and comfortable emergency fund, I can start funneling even more towards retirement savings.

Do you prefer to pay off debts or invest instead?


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