Exactly two months ago, Vanessa and I were taking possession of our dream house, an 874 square foot bungalow located in a nice mature neighborhood in a small town in Alberta that shall remain nameless. NICE TRY YOU SICK FREAKS.
We should probably dream bigger.
Two months in and we don’t regret a thing. You might think 874 square feet is small, but it’s plenty for the two of us. Hell, the basement barely gets used. If anything, we could easily squeeze into a smaller place. Anyone who lives in a place much bigger is just throwing money away, provided they don’t have any kids.
With our new house came the responsibility of a mortgage. We took advantage of the generosity of a family member to secure an open loan at 2.7% with a minimum payment of $700 per month. This is a slightly higher interest rate than we would have been charged at a bank, but I thought it was very worth it. Flexibility is something I’ll gladly pay a little extra for.
Usually I would be in no hurry to pay down a debt with an interest rate of 2.7%. I try to grow my net worth by 10% annually, so I would definitely end up richer in the long run if I just kept the mortgage and funneled all my available cash into investments. Even if I can’t get a 10% return, it’s not hard to build a dividend paying portfolio that yields more than 2.7%.
But, alas, it was not to be, for a number of reasons. I have a wife who hates being in debt. The idea of working towards paying off a debt is more motivating than working to hit some net worth milestone. And perhaps most importantly, I just can’t find many compelling investment opportunities close to home. It’s why I keep writing about stuff like investing in Turkey.
So we’re paying down a mortgage now.
Vanessa has a very ambitious goal of paying down our debt in 30 months. Because I subscribe to the motto of “happy wife, happy life”, I have joined her in this goal. Will we get our mortgage paid off by the time the calendar hits 2019? Damned if I know, but hey, let’s give it a shot.
Okay, enough teasing. Here’s what we’ve paid back so far:
- Purchase price: $195,000
- Down payment: $5,000
- July payment: $11,000
- August payment: $26,000
- September payment: $3,000
Okay, Nelson, where did you come up with $40,000 in just a few months?
Glad you asked. Wait, that’s a lie. I’m actually not glad you asked. I don’t even know your name, creepy blog stalker/reader.
So the first $16,000 came from cash I had sitting around as sort of an emergency fund. I don’t really believe in the concept of emergency funds, so just consider it cash on hand.
The cash for August’s payment came primarily from a private mortgage borrower making a big lump sum payment on their debt. I didn’t have anyplace to put the money to work, so I threw it on the mortgage.
September’s payment was far more boring. It just came from normal earnings we had made in August.
And now, what you’ve all been waiting for…
After a whole two months of having a mortgage, we are down to $151,324.51 owing on our loan. That means we’ve paid off $43,675.49, or 22.4% of our original purchase price. Based on opinions from two different Realtors, we reckon our house is worth $225,000, giving us a loan to value ratio of 67.3%. Does that mean I qualify for a HELOC? CAUSE I’VE BEEN JONESING FOR ONE OF THOSE SO BAD.
If we can maintain our pace, we’re easily on track to get our mortgage paid off in less than three years. I doubt we can though, since we’ve already picked all the low-hanging fruit. It’s going to get a little more challenging going forward.