Sunday, August 17, 2008

How The Mortgage Payoff Plan Is Looking Today

For those of you who would like an update on my mortgage plan and current situation, here it is.

I have 4 acres outside of town with an old mobile home used for storage and an RV that I live in.

I have a house in town. I paid $131,000 for it in 2004. I bought it because I had a good paying job at the time and housing prices were still low. I was worried that if I waited prices would go up and I wouldn't be able to qualify for a mortgage. I knew I wasn't keeping my high-paying job forever because it was only contract work. So, I bought the house and visited it on the weekends(because my job was 3 hours away), decorating and landscaping to my hearts content. It was quite fun. Then I got laid off and I moved in to my house. The stress of not having a job and having a mortgage to pay was not fun. I was only out of work for 3 months but my current job pays much less.

I moved to my RV and tried to rent my home as a furnished short term rental. This was ok but required too much babysitting from me. I would stay in my house between guests and clean up after them. All the moving back and forth between my house and RV was exhausting.

Then I tried to sell the house with no luck. After my last short term renter left in February, I rented the house for longer periods of time. My current renters would like to stay for many years but I promised the last short term renter that they could come back next February. They pay me $4k for just one month so I'm not willing to tell them no. I'm not sure how that will work out. I would like my renters to leave for a month and then come back. I imagine that is a lot to ask. I might need to find another long term renter.

Last December I had $25,000 in the bank and I wasn't sure if I should invest it or pay down my mortgage. I finally decided that paying down the mortgage would be more motivating especially since interest rates were falling. The mortgage payoff plan had to be as fast as possible. My first plan had the mortgage paid in 5 years. That was too slow. Then I made a 4 year plan, 3 year, 2 year, and the super-duper fast 1 year 5 month plan if I sell my RV and most of my possessions.

The mortgage was $100,000 last December. I threw the first $25k at it to kick off my plan. Over the last 8 months I have paid at least $1200 extra a month and added any additional money I could find.

My current plan has the mortgage paid in 2 years from September. Here's what it looks like:
Extra Payments
Sept. $1300
Oct. $1300
Nov. $1300+$500 ebay stuff
Dec. $1300
Jan. $900 (This is when my tenants should move out)
Feb. $3800 (This is from my short term tourist season renters)
Mar. $1300 (I hope to have renters again but there's no guarantee)
Apr. through Jul. 2010 $1300 (If I have continuous renters)
Aug. 2010 $1300+$5000 (From stocks if they ever recover)
Sept. $1300+$7000 (Use $7k emergency fund)

I know using my emergency fund could be a bad idea but if I owe $7k on my mortgage and I have $7k in the bank I won't be able to stand not paying it off.

So that's my plan for paying off the mortgage in 2 years (and a few weeks). A lot could happen though, medical bills, car repair, house repair...not finding new tenants for a few months, that would delay my plan for a few months. That's why I say it's my 2-3 year plan. I like to think of it as a 2 year plan because it's more exciting, it keeps me motivated.


Anonymous said...

I am glad you took the 401K off the mortgage repayment table.

I have been meaning to ask you if you had read 'Your Money or Your Life" by Joe Dominguez and Vickie Robin, as your goals remind me of that.

Anonymous said...

Just for clarification - now the income from your home after paying off the mortgage is net of insurance/property taxes, etc, right?

Anonymous said...

What a great blog!! There was a TV program in the UK called 'pay off your mortgage in 2 years', hosted by the brilliant mentor Rene Carayol. It was great watching, seeing how he coached people in either increase outgoings by using their talents and focusing efforts, or reducing outgoings using strict budgeting and ingenuity.

Living mortgage free is a dream for many people and its inspiratinal to read about you going for it using pure sweat and guts rather than waiting for a lottery win!

Lizzie @ her homeworld said...

Thats excellent Daizy. I think summing up every now and then (and blogging about it)helps to keep motivated. I agree with you, all cash to the mortgage but no messing with the pension investment (I found out what a 401k is!!!)
Good luck!


Daizy said...

Yes, anonymous, the $600 from the rent is after ins/taxes. I did read 'Your Money or Your Life' thanks to my big sister when I got my first real job back in 1999. Back then I thought all I needed was $100,000. I'd save $10k a year and only work 10 years. Well, my 10 years are almost up. I do have $100k in property but I can't quit just yet. My goals have expanded a little.

Daizy said...

Thanks James! I got tired of waiting for the lottery. Plus who needs that much money anyway?

Daizy said...

Thank you Lizzie! My vocabulary is expanding from reading your blog too!