Thursday, February 11, 2010

Waging a war on debt...Dumping the mortgage

My husband and I have been waging this war for years. The credit card burden is nearly gone. The car payments are a thing of the past. Next?

The mortgage!

Now, some of you may feel that the tax credit of a mortgage is worth it. That may be true for some. For us? We've looked at the long-term payout and have decided it is just not worth it to pay double the house's purchase price in interest over 30 years.

According to a mortgage calculator, a $165,000 will accrue over $191,000 in interest alone in 30 years! That's paying out more in interest than the home was worth. Yes, I'm well aware that housing appreciates in value (the current housing bubble exempted), but expecting a more than 100% return on your money is a bit over the top. For some, the utility of the home is worth it. For others like my husband and I, we never really looked at the numbers that closely, and when we did, we decided to change our thinking.

The house is our biggest investment. We pay a lot to own it, and we pay to repair it, heat it, cool it, run it. We decided that investing in someone else co-owning the house we live in (the bank) is not something we were interested in doing.

So we've cooked up a plan. We sell our current home, buy another lesser valued home to live in and pay that off in 6 years. The particulars of our plan are these--we will be living outside of town so we won't be paying the "in town" housing premium; we will have less space initially; we will save and build our own home. We've done a lot of research and have found the place that will do all of this for us, two places actually so there is a back up.

It'll be ugly. It'll be humbling. But we believe it'll be worth it in the long run.

Right now, the bank is looking at our loan application, so we are in Stage One still: the praying stage. We'd appreciate your prayers, too.


  1. Prayers. We have recently written up a new budget and are paying an extra $400 a month off our mortgage. It is the only debt we have and because of the increase and paying fortnightly instead of monthly, we will have it paid off in 6 years too. This has cut 13 years off our mortgage and is going to save us thousands.

  2. I've gotten a lot of positive feedback from this post which makes me think we are on the right track. Strange how I expected to be told how dumb this idea was. Instead, I find out how smart my friends are! LOL!