As I’ve mentioned previously, we just went through a process of refinancing our home. Now, to a normal person this is a rather joyless occasion because it doesn’t really change anything. But to a financial nerd like me, this is just another excuse to crunch the numbers and play with scenarios.
Think about these scenarios as traveling through time. What will our lives be like when we’re completely debt-free?
Great news about paying off mortgage!
… is the fact that we’re finally making a dent in this mortgage of ours. Yes, I know mortgage in French means “thing you have till you die” or may be “herpes”, but after 5 years of making payments we’re seeing the difference and perhaps a glimpse of light at the end of the tunnel. Now we just have to make sure that the light isn’t an oncoming train.
When we first got our mortgage, it came with a bi-weekly payment of $495. Every year or so, we’d increase the payment by 10% till the payment increased to $658. The extra payments would go towards the principal and slightly speed up the process of paying off mortgage. Extra payments coupled with a healthy downpayment made a nice dent in the mortgage by the time we had to refinance 5 years later. The amount of money we still owe is $195,000 (price of our home - $285,000)
Another great news is seeing how much of our new payment will be going towards the principal. On original payment of $450, huge chunk of it was interest. By the time the payment grew to $658, it was a bit less than a half. New payments consist of roughly 30% interest and 70% principal repayment. And that means more and more of our money going towards principal and less towards banks’ profit margins and their nice furniture. Take that, banks!
Paying off mortgage is hard. We’re still not even half way towards repaying it. We’ve paid $285,000 for our home, and the mortgage is barely under $200,000 right now. It’s a bit depressing to think how much we still have to pay towards it. I want us to be debt free yesterday! I want us to keep the money we’re throwing at the mortgage in our bank account to enjoy it, not hand it over to some big corporate bank! Trust me, the quality of life for me and my wife comes first before that of banks and banks’ shareholders (sorry, dividend investing bloggers).
So, I’ve said to my wife: “- I hate our mortgage!”
And she said”: “- Hey, so do I!”
And then I said: “- Hey, I’m glad we finally have something in common!”
Then she gave me THAT look, and I’ve decided to proceed with our options: