Our single biggest financial focus is to pay off the house before we retire. We have a lofty goal of reducing our 30 year mortgage to just under 9 years. We bought the Casual Shack in the summer of 2009 taking advantage of a short sale. To date we have made 41 monthly payments and have reduced our mortgage term by 71 months. That means if we only make minimum mortgage payments from here on out we will pay it off almost 6 years early and have already saved close to $58,000 in future interest payments. $58,000!!
The purchase price of our house was $200,000. If we didn’t pay extra over the life of the loan our house would have cost $405,000. At this point, with no further additional principal payments the Casual Shack will cost $347,000. That’s still too much. If we reach our 9 year payoff goal our house will cost us $261,000 which is close to market value for this area, saving us $144,000 in interest payments. We can live with that.
In order to do this we have sent an additional payment every month since the first payment. Sometimes a lot, sometimes a little, dependent upon our extra income and unexpected expenditures.
You don’t need to add thousands of dollars to your monthly payment to make a difference. Had we only added $100 per month, every month consistently we would still have saved $42,000 over the life of the loan and reduced the payment term by 64 payments. That’s $42,000 that can stay in your pocket and over 5 years early! These figures are based on our loan and its interest rate so the numbers will vary. Here's a link to an Amortization calculator to see how much you can save by adding that little bit extra.
I don’t know if we’ll reach our goal of owning our house by May 2018. I do know that we have already deprived the big bank of $58,000 of our hard earned money.
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