Yes, you read the title right. Instead of waiting the typical 30 years to pay off our house, my wife and I have decided to pay off our house in just 4 years! You might be asking yourself, “Why in the world would you pay off your house so fast when the interest rates are so low?” Well, even with our “small” loan of $70,875, we would have paid an extra $60,000 in interest over the course of 30 years, which means that we would have bought our house for about $140,000 (with the down-payment). We decided that we’d rather pay off the house ASAP and pay far less in interest.
With our frugal lifestyle and our side projects, we decided that we could pay an additional $1,200 on top of our regular payment each month. We bought our house in August, 2011, and if we started making these extra payments in January, 2012, we could pay off our house in exactly 4 years.
So How Are We Doing?
Well, as luck would have it, things didn’t start off well. My wife made a job transition, which forced us to buy a second vehicle, so we were not able to make an extra payment in January or February. The first additional payment did not happen until the beginning of March. We made our second additional payment in April, but then we ran into a snag again.
Since my wife was driving our Jeep an average of 75 miles per day, our gas expense was outrageous. We decided to pool up all of our money and buy a more fuel-efficient car and then put the Jeep up for sale. Needless to say, there wasn’t enough money in our account for the extra $1,200 payment in May.
Thankfully, we just sold the Jeep and we’re ready to make a double payment in June! Since we missed those first two months in the year though, we’re looking at a pay off time-frame of 4 years and 2 months rather than just the 4 years. We’ll have to see what we can do to get this back on track in the near future.
For you visual learners out there, here’s a graphical representation of our progress over the last 5 months and our future expectation for June.
Wow, based on this graph, it looks like we’re doing a pretty crappy job on paying off this house! Honestly though, I think we’re doing just fine. Sure, we missed the first couple of payments, but since then, we have been pretty solid (when you consider the double payment that’s coming in early June)! If we can keep this up through December, we’ll have our mortgage down to $53,000! Taking off almost $20,000 in the first year is a pretty impressive accomplishment! Let’s hope we can keep this up for 6 more months! 🙂
What you do you think about our plan to pay off our house in 4 years? Do you think we’re crazy? Or are you fighting this battle with us?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.