Paid Off The Home Mortgage…..Now What?

This is a guest post from Joe at SmartMoneyFocus.com. Joe is on his way to be an asset millionaire by age 41.

I remember the day that we paid off the mortgage like it was yesterday. My wife and I sat down and wrote the check to the mortgage company. It was the biggest check that either of us had ever written by far. It was for $167K. We had been saving and investing for this day for about 7 years and it was sweet. This was the end of our debt free journey. We had saved and worked hard to pay off, not only the mortgage, but also student loans, cars and credit card debt. We got there faster than I thought we would, but I did not know where our journey would take us.

After our little triumph, I knew we needed another focus to keep us headed in the right direction. We decided to focus on our three boys and their college education. They are young and we had 10 years before the oldest would hit college age. We now had the “mortgage” money to put towards college, as well as our accelerated “house payoff” fund. Again, we focused and put our efforts into this quest. I am proud to say that we have enough to send all three boys to school for their bachelors degrees. We had done this with good investments, saving and other activities that brought in extra money.

We were not done, no, we had to focus on something else. It was time for us to focus on building wealth, real wealth. This is our latest quest. We are in the process of building up a nice portfolio of assets. We are diversifying our money generating activities by saving, of course, but also by investing and creating multiple streams of income. We are not there yet, but we are on our way. We have a goal to hit the $1 million asset mark by the time I turn 41. That’s a little over a year from now. Our goal, is to have $3 million in assets by my 50th birthday and to be able to not work at a JOB. I would like to be in a position to have my own company by then and create a great place to work and help others achieve wealth.

All this has been possible because we have focused. It has taken us about 10 years to get to this point. I know that some say that we have achieved a lot in these past 10 years and others have said that 10 years is a long time to achieve where we are at. The truth is that it has been right for us. We have done it at a metered pace. We still take vacations to nice places and go out but we live within our means. I am blessed with a good job and have made great investment decisions. We are living proof that most people can achieve what they want with their money if they keep focusing on their goals. Keep at it and you can get where you want to be in shorter time than you think.

Joe Edward is in pursuit of creating wealth for financial independence. Joe believes the right focus on five key areas are a way to financial independence:
-Maximize Career
-Save, Save, Save
-Debt Free Living
-Invest, Invest, Invest
-Create Multiple Streams of Income
Joe is well on his way to be an asset millionaire by the time he turns 41. He started SmartMoneyFocus.com to help others achieve their own paths to financial independence. Follow him on Twitter: @smartmoneyjoe

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Pay Off the Mortgage Early

Last year I shared how I can’t bring myself to pay extra on the mortgage. Fortunately, since then I’ve been able to bring myself to make a few additional principal payments on our mortgage, and I love seeing them applied directly to principal.  It’s a great feeling.  However, we have many more years to go and many more mortgage payments to make.  So far we’ve eliminated at least one mortgage payment off the life of our loan, and it feels awesome.

When we refinanced our mortgage a couple years ago, instead of going with a 28 year mortgage (the amount of time that we had left on our original mortgage), we stretched it out to a 30 year mortgage to get a lower payment.  One of our goals is for me to be a stay at home mom whenever we do have kids, so that was a huge factor to us.  We figured we can always pay extra on the mortgage if we choose, but we can’t pay less.  It’s worked out well for us so far, and that’s really all that matters.

But since we’re completely debt free now except for the mortgage, I’m thinking about stepping it up a bit and making even more extra payments and hopefully for even more money.  I’ve shared my reservations about paying extra on the mortgage before, but they mainly are these: I don’t know how long we’ll actually own this house, and what if we need the money?

I calculate the amounts for us to pay off the mortgage in so many years versus refinancing.  I don’t want to refinance our mortgage right now because we’d have to pay closing costs, we’ve already got a pretty good rate, and I don’t know how long we’ll be in the house.

-To pay off our house in 26 years (the original amount of time we’d have left if we had kept our original mortgage), we have to pay $22 extra a month.
-To pay off the house in 20 years, we’d have to pay an additional $135 per month.
-To pay off the house in 15 years, we’d have to pay an additional $308 per month.

Since one of our goals for this year is to live on one of our salaries, I’m thinking about taking a portion of my salary and applying it directly to the principal of our mortgage.  I’m thinking that $200 a month is an amount that won’t break the bank if we really needed it, and it will make a nice dent in the mortgage.  If I can continue that amount, we’ll have the mortgage paid off in 18 years.  Wow.  Of course, if I’m unemployed or Mr. Money is, we’ll have to change our plans and probably stop the extra payments.  For now though, I think it will definitely work for us, and I am happy that finally I’ve come up with a plan.

I’m going to keep plugging away at the mortgage and watching the balance go down. I can’t stand to see the thousands of dollars each year we spend in interest for the mortgage.

Do you think it’s a good idea to pay off a mortgage early?

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Should I Refinance my Mortgage?

Last June we refinanced our first and second mortgage (I didn’t follow my own tips for a first time home buyer) and secured a lower mortgage rate.  We signed for a 30 year mortgage in order to keep the payments low.  We wanted to know we can afford the payments so I have flexibility in my career.  You never know, I may want to be a housewife one day and I want to know I have that option!  When we refinanced our mortgage, we went with a loan that didn’t provide an escrow service for us, so we had to do that ourselves.  Not a problem; we actually enjoy saving money ourselves for homeowners insurance and property taxes.

Thankfully, the closing costs of refinancing only were $150.  The only drawback?  There is a prepayment penalty on the loan, and the only way I can avoid a prepayment penalty is if we make a large payment on the loan and then wait a day and pay the rest.  I don’t know about you, but I don’t have over $100,000 just sitting in our bank account, so we’ll eventually have to pay a prepayment penalty that will likely be over $1,000.  I was aware of this prepayment penalty when we refinanced, and we had no closing costs, so I’m not going to complain too much.  Had we gone with a conventional mortgage refinance, the costs would have been a lot greater.

Anyway, my point here in all this is that I’ve been considering refinancing again.  Mortgage rates are at a historic low, and I’d love to get a mortgage in the 3-4% range.  That would be awesome! I checked today, and we could refinance for as low as 4.32% and our payment would be about $150 less than they currently are if we went with another 30 year mortgage.  Of course, I know we’ll pay closing costs with this mortgage so I’d have to factor in about $1500(?) for closing costs, plus the prepayment penalty from our current mortgage (at least $1300).  With that alone, I’m looking at $2800 just to get a lower rate!  I’d make that up in 18 months, and we plan on staying in this house for at least that long.  However, I don’t know if it is worth it.  I’ve thought about trying to refinance into a 15 year mortgage, but I don’t know if I’d want the higher mortgage payments each month.

I think I’m just going to keep our current mortgage and maybe start paying a little extra on the principal each month as I see fit.  At least then I’d be saving myself money that wouldn’t be going towards interest.  Plus, I feel like I’m “making” 5.59% on my money then, and we know there aren’t any savings accounts or certificates of deposit that are paying that right now!

I’ll be honest: the 3-4% mortgage interest rates are really tempting, and I almost wish they weren’t that low so I wouldn’t be tempted!  It’s so hard to decide how to handle money sometimes. I think as long as we live below our means, we’ll end up fine and I shouldn’t worry about it so darn much.

Do you think I should refinance my mortgage?

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