I’m starting off the new year with a new mortgage. With rates near record lows, like many people, I refinanced my home. Unlike many people, though, I didn’t do it to pull cash out, to make home improvements, to consolidate debts or to stretch my payments out. No, I refinanced for the same reason I want to completely eliminate my mortgage: security. I want to reduce my exposure to a bank having a claim on my shelter. Maslow, after all, wants us to be free and clear!
Following a brief pandemic-inspired pause on extra mortgage payments in early 2020, I came back with a vengeance. Thus, when I refinanced in December, my principal balance was significantly lower than it was at the start of 2020. This allowed me to refinance into a loan with a ridiculously low monthly payment. The monthly mortgage payment that I am required to make is less than the average car payment in the United States! I didn’t even need to extend the term of the loan–I refinanced into a twenty year loan, about the same amount of time I had left on the prior loan.
The rate, of course, is substantially lower than my previous loan. Also, this loan does not require me to make monthly escrow payments for home insurance and taxes, allowing for more flexibility. Finally, there were absolutely no fees or closing costs of any kind for this refinance. No costs, not having escrow payments, the lower rate, the same term, and a low required monthly payment are wonderful, but ultimately my plan remains the same: pay the damn thing off by Christmas 2024!
The bank still has a claim on my shelter, but the required monthly payment is so low that I am getting a sense of the peace to come. I know, now, that if I were to face serious financial headwinds, I could reduce my mortgage payments to the required minimum and likely be just fine. That’s comforting, almost as comforting as having no mortgage at all.
Our family budget has changed. My wife is changing careers and going back to school. I support her 110% in her her decision, but it does mean a decreased source of household income and increased expenditures (tuition), for now. Accordingly, while I am still paying substantially more than my required minimum mortgage payment, I have dialed it back a bit. I may have to dial it back further when my son starts high school, and his tuition jumps. Nevertheless, I am ahead of schedule and fully expect to celebrate a mortgage-free Christmas in 2024!
With Love,
P. Gustav Mueller, author of The Present