The Inevitability of Our Mortgage

Those who’ve read our spending projections post may have noticed that our housing costs are a bonkers $50,000 per year. This is only slightly less than the planned total annual spending (minus healthcare) that I use in our 4% calculations to plan for early retirement.

In some ways, I’ve been a realist about our housing.  I accepted when we bought our house that it was a decision based on emotions and not rationality.  Living in one of the richest counties in the US meant taking on a half-million-dollar mortgage for a house that seemed run-down compared to the newer, nicer houses bought for half the price by family members in lower cost of living areas.  But we wanted the space and the yard, so we bought a house.

I also have to acknowledge the enormous privilege of being able to buy a house at all, and to have the incomes to afford a half-million-dollar mortgage (while eating avocado toast, even).

And of course, the payments are so high because we already have a 15-year mortgage.  At an amazing rate (3.125%).

Traditional financial wisdom says we should take our time paying the mortgage down.  The rate is ridiculously low, and I think I just read that the stock market is up 18% this year.  We actually have a CD at the moment with a rate of 3.1%  (though rates are about a percentage point lower now).  That’s why prepayments were pretty low on my list of savings priorities for the year.

And yet, I want that mortgage gone.

I’ve been spending time with a spreadsheet, trying to figure out how to shorten the timeline OR lower the payments enough so they feel more manageable.

The problem then becomes this: to cut the mortgage timeline down requires massive amounts of money.  To pay it off in 5 more years, we’d need to send $50,000 extra PER YEAR.  Realistically, we just don’t have that much extra money without sacrificing tax advantages, college savings, and cash cushions. (I know enormous cash cushions are a bad idea.  You can bite me – I will have an extra-large emergency fund until I die.)

I should note here that I don’t do well with goals that have long timelines.  Even 5 more years is stretching the boundaries of my imagination.

Knocking down the payments via a lump sum + recast is an option, but it’s about a 1% return.  That is, a $5000 lump sum payment will decrease monthly payments by $50.  This doesn’t move the needle for us on an annual basis, and it doesn’t make a huge difference in, say, dropping down to one income.

I still don’t know if or when we’d retire early (I just want to know we can), but it seems pretty clear that we can’t with our current mortgage.  Even accepting the risk and saving “only” the $420,000 balance represents many extra years of savings… and remember, I really do best with a 1 to 2-year timelines.

Like Revanche, I’m accepting that there are other, higher priorities for our money.  But still, the inevitability of keeping the mortgage is eating away at me.

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This is what my mortgage is saying to me every time I try to think of a way to pay it down.

4 Responses

  1. Sigh. I am right there with you. I’m trying to figure out a refinance option that doesn’t include $5000+ in closing costs because our rate is still just under 4% and I think there are savings to be had, even if the total mortgage is so much that we’re not likely to eliminate it fast no matter what we do (barring a massive windfall of some sort).

    • I was surprised that refinance costs were higher than when I’d looked in the past, even though the rates are slightly lower… If we wanted to lower our rate at all, it would be several thousand dollars! But when we refinanced in 2017, it was $0 (and we even got out of the appraisal).

      At this point, I feel like emotionally I can’t NOT throw extra money at it. I tell myself it would have to happen before we retired anyway, so it might as well happen now.

  2. Ouch I can see why that amount would raise anxiety, even if you didn’t want to retire early. I feel ya on not being great with long timelines. I’m looking at a 5-6 year timeline on paying down my mortgage and that feels like forever even as years seem to whiz past me these days.

    I say keep your cash reserves no matter what others say (and it sounds like you are). You can’t put a price on peace of mind!

  3. […] prepayments, and the seeming inevitability of our mortgage brought that goal to a higher importance than contributing to a taxable investment account.  I […]

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