This week, we celebrated a milestone: our mortgage came down to zero.
To be exact, our mortgage is $1,824 in credit.
Yep, we have money on there, but not for long. Like a plane coming down coming into land, the wheels first hit the tarmac before bouncing up again and then coming down for landing. We have some large, forecast and budgeted for expenses this month such as annual insurance premiums, rates and Christmas presents. Once I pay these bills and the credit card (always paid out in full), the mortgage will go back into the red before coming back to zero for good in January or earlier.
Setting the goal
This is a significant goal for us. I put it out there as my New Year’s resolution this year that I wanted zero on the mortgage by Christmas, and hubby was on board. It was a big ambition as I had just left my secure, full-time public service role and, while were (and are) in a good financial position, I knew that like most people going into business, it can take a while to build up. Still, we put it out there as a goal and like many goals, you never know exactly how you will achieve it, but one step at a time, with the right focus you will get there.
We will be celebrating on Christmas Day with a glass of bubbly and the secure feeling of knowing we are just that little bit more financially secure.
How we did it
I know so many people who think “I will never be able to pay off my mortgage”. A lot of people are buying homes for the first time at the moment, and the prospect of a large mortgage may seem daunting. But every little bit extra that you put into it really helps as over time, you are reducing the interest. And more interest saved means more money you have to repay.
There is no secret tip really other than focus. I would check my mortgage online almost daily. I’m a big believer that when you focus on the metrics and put attention into your goal that it helps to focus your energy. And we certainly made paying off the mortgage a goal this year.
That said, we didn’t live like hermits this year (other than when we were in lockdown). I travelled to Spain in January, via Abu Dhabi, to visit hubby when he was working there. We went skiing. We enjoyed dinner out including a memorable 16-course degustation. We managed a few road trips, including staying at an amazing Airbnb in Melbourne in February pre-lockdown. Hubby bought a new laptop and both my boys now have new gaming computers.
But overall, we stuck to our frugal ways: home cooking and baking, cycling where we can, only buying what we need and want and fixing rather than buying new. Funnily, our usual routine is now on-trend. Other people are discovering the joys of jigsaw puzzles, movies at home and even baking sourdough.
And I should add that we had a big realization through this, which is that when we aren’t paying big mortgages, we have more spending money. We’ve watched our monthly interest payments on my home mortgage drop from $80 down to $22 PER MONTH, and soon it will be zero. Hubby and his ex wife used to pay $1,700 a fortnight. As his contribution was $900, that’s an extra $900 a fortnight we have to invest – and spend.
Note: if you’re wondering about when I use we and when I use me, I bought the apartment around six months before I met my husband. We’ve decided, for various reasons, to keep it in my name but we have a joint goal of paying it off.
Hubby and I are by most standards conservative investors. In fact, he’d never really invested (other than superannuation) before he met me. A lot of things I wanted to do like ETF investments and leaving my job where predicated by “let’s pay off the mortgage first, then you can do that”. I’m sure there are many other investors out there who will tell me we could have gotten better returns with other strategies. I did research on investment into gold earlier this year, for example, but hubby wasn’t into it. And that’s okay because we had a clear and definite goal and we worked together as a team.
The big question is: what next? What is our next goal and how are we going to achieve it? We have a few strategies going forward:
- We are not going to discharge our mortgage. You would think we would be in a big hurry to get the bank off our mortgage title, but not so fast for us. There are a few reasons for this. I want access to the equity ‘just in case’ given that I am no longer in a secure full-time job. It’s my form of emergency savings. And crucially, my apartment is cross-collateralized with two other investment properties so it is hard to discharge. Doing this enabled me to get a lower interest rate on the other two properties, so I knowingly entered into this. I’m not usually a fan of cross-collateralizing my home with investment properties because if I default on an investment property, the financial institution could sell my home to recoup losses. But if things are that bad, I’d probably be refinancing my home anyway before it got to that stage. And in any case, the risk is low given the large amount of equity we have in our portfolio and the amount we both have in super.
- Snowballing investment property mortgages. Our/my investment properties are now positively geared, so we are going to pick one property and focus on paying that down, aiming to pay one mortgage down at a time. This is overwise known as ‘snowballing’. We are going to pick the smallest mortgage first, park all the investment income (minus expenses) on that mortgage. Then when that mortgage has been paid off, we will move to the next.
- We will be investing in more Exchange Traded Funds. Up until now, we’ve been almost solely focused on paying down the mortgage and building up superannuation. But now we’re going to also focus on building up ETFs I’m one of the initial investors in Pearler. We have a modest ETF investment with Pearler and plan to increase it. Hubby went from not knowing what ETFs/index funds were when I first met him to now being really keen to invest more in this. And that, I think, is a good reason for communicating with your partner and making joint investments when you are ready to handle the right risk profile. [To jump the queue to start using Pearler – which is still beta testing – use this code.]
- I’ll be investing in my businesses. In addition to The Joyful Frugalista, I’ve now got two more businesses. The first is The Joyful Business Club, which is about supporting women entrepreneurs to shine. Stop by the Facebook Group and check out the weekly Facebook Lives at 5.30pm. The aim is to create a platform for providing finance to women entrepreneurs and startups, and I want to invest in the technology to do this. I’m also currently working on a new initiative – The Joyful Fashionista – to encourage sustainable clothing. I’m currently looking for people to test the new platform so let me know if that’s you! Being mortgage-free gives me more confidence to invest in both of these ideas.
We’re pretty excited to have reached this milestone, even if we have reached it temporarily only to reach it for real in the new year. What’s your financial goal for 2021? Have you paid off your mortgage? Or is that your next aim?