Finance

Mortgage is Paid Off – Yay!

Happy Independence Day!  What better way to claim your independence than by freeing yourself from a mortgage lender?

December 2014 was a big month for me.  It was then that I paid off my mortgage once and for all.

I bought my house in May 2001.  After more than 13 years of principal, interest, and escrow I was ready to be done with it.

As many homeowners do, I refinanced my mortgage a few times. Each time for a various reason, but ultimately due to my own financial ignorance. The first time was to get rid of the PMI, since I didn’t put any money down at closing, but the value had gone up substantially thanks to the booming housing market.  Unfortunately, I refinanced into an ARM. So, the next refinance was to get into a fixed rate mortgage. Luckily that one occurred in late 2007, just before the crash, but early enough that the appraisal came back high enough that I didn’t need PMI. The final refinance happened in 2013, since rates had dropped significantly. The downside was that my house was worth less than what I wanted to borrow so I had to bring a couple thousand dollars to closing.

From 2008 to 2014, I was able to save a decent sum of money in my savings accounts.  This was held in various accounts: an emergency fund, an account that was fully funded for a brand new car, and a general house fund for any repairs that might be needed. In July of 2014 I started to aggressively pay down my mortgage by throwing every last cent I could towards the principal. In November, it was made known that the company I work for was having an exceptional year, so bonuses were accruing at well over 100%.

With the knowledge that I most likely wouldn’t get laid off in the spring, and instead get a significant bonus, I took a calculated risk and used almost all my savings to pay off my mortgage in early December. I had only $5000 left.  And it scared me to go from a huge cash cushion to almost nothing.

I wish I could say it was exciting and memorable, but it wasn’t.  I had to go to the bank for a cashier’s check, since the lender wouldn’t let me pay the remaining $1200 via a transfer from my bank account. The bank teller gave me an envelope so I stopped at the post office on my way home and sent it via certified mail. Weeks went by and then I finally received the notice from the bank, saying my mortgage was paid in full.

What I will remember is January 1st – the day a mortgage payment wasn’t due. The feeling of knowing that the money I earned was truly mine and not going towards a debt and interest is like no other.  It’s a true taste of what financial freedom feels like.

There’s an ongoing argument that, instead of paying off a mortgage, extra funds should be invested since the return in the stock market is likely going to be more than what the mortgage interest costs.  But, for me, it’s a huge relief to know that no matter what happens with the economy or stock market, I’ll have a place to live.  It’ll never be foreclosed and taken away from me. There’s great comfort in that.

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