by Vicky Monroe
Hello! My name is Vicky and I’m a new writer for Blogging Away Debt. To give you some background on my debt situation, my spouse and I currently owe $158,000 on our mortgage and are in the middle of paying it off. I personally strive not to have debt of any kind, although it’s definitely easier said than done!
Last year my spouse and I managed to knock about $16,000 off of our mortgage balance by making monthly overpayments. This year we haven’t been doing quite as well. We managed to start strong, making mortgage overpayments of $3,000 in both January and February. But in March, April, and May, we haven’t been able to make any mortgage overpayments at all, which is pretty disappointing.
Some large expenses including our wedding knocked us off course. My spouse and I got married in March. Although we had a small wedding in our backyard with only a few friends and family members present, the costs really added up.
Just getting my hair and makeup done was $300. Our wedding bands cost us $750 in total, not to mention food, flowers, and decorations. All in all, our wedding cost us a couple grand.
We also ended up going to Nashville for our honeymoon, which was a big budget buster. We had planned on staying close to home and going to Minneapolis to save money. But we’ve always wanted to visit Nashville, so we decided to take a longer road trip because you only go on a honeymoon once!
Although my parents used their Marriott points to pay for our hotel room as a wedding gift, we still had to cover parking and resort fees, which added up to $50 per night. Food and entertainment were much more expensive than we thought they would be.
We used to live in Massachusetts before we moved to rural Michigan about a year and a half ago. I was amazed to find out that food in Nashville was about the same price as in downtown Boston! Isn’t the South supposed to be cheap? Overall we went about $1,500 over budget on that vacation. But we’re not big travelers, so we probably won’t go on another big trip for at least a couple years.
Then when we got back home, my dad needed to borrow a couple thousand dollars from me because his commission checks have been low (he’s a salesman and so is my spouse). He couldn’t cover his bills on his own so I felt like I had no choice but to float him the money. I had to take the cash out of my emergency fund to help him out. So instead of making mortgage overpayments, I had to spend the next two months refilling our emergency fund.
Now here we are at the end of May and I haven’t been able to make any mortgage overpayments since the end of February. I hate owing so much money on our house, especially with rumors swirling about an upcoming recession. Although we have an emergency fund, I (somewhat irrationally) feel like we’re one job loss away from losing the house.
My parents came close to losing their house several times after the 2008 crash. I think growing up in that financially precarious environment has made me very conservative and debt averse. I didn’t even go to college because I was too afraid to take out student loans!
I’ve done some therapy in the past to try to overcome my financial fears and it helped a lot. But I think my parents being in a financially unstable situation again has brought some old childhood fears back to the surface. Not being able to make mortgage overpayments for a while has also made me feel a little nervous.
I scheduled an appointment with a therapist for this coming Thursday to work through some of these emotions, so I’ll let you know how that goes! Luckily I have good insurance and I’ll only owe a $20 copay for each session.
I think we should be able to make a $2,000 mortgage overpayment next month and start getting back on track. So hopefully seeing my mortgage balance go down a bit will also help with the anxiety I’m feeling.
Have big expenses and life events ever caused you to pause your debt payoff plan? Do any of you get a little anxious when you get off course? Let me know in the comments.
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Vicky Monroe is a freelance personal finance and lifestyle writer. When she’s not busy writing about her favorite money saving hacks or tinkering with her budget spreadsheets, she likes to travel, garden, and cook healthy vegetarian meals.
Hey Vicky, Congrats on the wedding!
You don’t mention how old you are but having $158.000 in securable debt doesn’t seem too awful particularly if you are debt free otherwise. I look forward to hearing your story more.
Thank you so much! My spouse and I are in our mid-twenties. That’s reassuring to hear! Luckily we are debt-free otherwise. Thanks, I’m looking forward to sharing more as well! I’ll be posting another blog the week after next.
Assuming you bought/refinanced when interest rates were low it’s not really worth it to prepay the mortgage because it doesn’t give you any flexibility in monthly payments until you are 100% done. With no information about interest rate, equity, years left, details about the house, it is very hard to put it in context.
We moved into our house in January of 2021, so it’s been almost a year and a half since we bought it. We have an FHA loan and our interest rate is 4% – that was high for the time because my spouse’s credit score wasn’t the best. We bought our home for $186,000 and it’s definitely appreciated since then, but we’re unsure how much. I’m not sure what you mean about no flexibility in payments until the mortgage is done. Refinancing into a new 30-year loan when the mortgage balance is lower is an option we could take to reduce monthly payments. I wouldn’t want to trade my 4% interest rate for the 6% interest rates that banks are giving out now. But if mortgage rates ever return to 4% or 5%, it could make sense to refinance once we hit around $100,000 or less left to lower our monthly payments, which are about $1380 (if this seems high we’re on ten acres so property taxes are included in this, plus mortgage insurance because we didn’t put a ton of money down to preserve our savings). I hope that provides some clarification and all makes sense!
Why are you paying down your mortgage if it is 4%? I’m almost willing to bet you will never see rates that low again in your lifetime (as you readily admit). Since you’re on an FHA loan, I don’t even think you can get your PMI removed without having to refinance (and thus lose the rate). You’d be better off adding to retirement or investing. The money will continue to grow and if you do have a loss of income, you could just pull the money from your savings to make your payments.
Personally I don’t think rates will stay this high for the rest of my lifetime. I’m only in my mid-twenties and there have been other times when mortgage rates were low, such as in the 2010s. That’s correct, the PMI will stay on the loan until we refinance, which we may or may not do. We haven’t decided yet – first we have to get the loan balance down more to make refinancing worth it. We are saving for retirement and increasing our 401k contributions as my partner’s income grows. We direct all raises to the 401k instead of allowing lifestyle creep to happen. We want to maintain a balance between investing in the stock market and investing in real estate. I’m not sure how climate change will impact either market, so I want to diversify our investments to decrease our risk. We can’t seriously invest in real estate until we get our mortgage balance down, so that’s one of our goals, as is increasing our retirement contributions. I hope that sheds some more light on our plans and makes sense!
I think your young age may be giving you rose colored glasses. Look up a mortgage rate chart that goes back to the 70’s. 4% interest rates have only been around the last decade or so, and never before that. They are also the cause of skyrocketing home prices so I’m not positive they could return anytime soon that you should rely on it for a refinance.
Paying down your mortgage isn’t diversifying or investing more in real estate. It’s tying up your money with a fixed interest benefit of 4%. It can have a high opportunity cost because you have to pay to access your money via HELOC or refinance. Ibonds right now are paying 9.62%. That’s an immediate 5% benefit versus paying down your mortgage. And you can pull the money if you need or want it, say to invest in rental real estate or payoff unexpected bills, whatever.
I’ve seen those charts before. I’m not relying on mortgage rates dipping back down by any means. We simply wouldn’t refinance if rates never came back down. Paying down the balance on the mortgage is still beneficial either way in my opinion.
That’s not quite what I meant by saying we wanted to invest in real estate. We wouldn’t be able to afford or get approved for a rental property with this much mortgage debt. I know some lenders use expected rental income to help qualify you for mortgages on rental properties. I think that’s a recipe for disaster based on what we just went through with COVID. I wouldn’t want to enter a situation where I couldn’t comfortably cover both the mortgage on my primary residence and the rental property if I had to due to an extended vacancy or eviction moratorium. Ideally we’d just have this house completely paid off before taking on another mortgage because I don’t want to be over-leveraged.
At the end of the day I just don’t feel comfortable having debt which is why I’ve become a writer here to document my journey. I’m a personal finance writer by trade so I’m aware of the opportunity costs and have decided this is the right pathway for me knowing how much money it will cost me in lost stock market returns. I give others the same advice you’re sharing here when I write for mortgage companies and such. I’m just super risk averse when making decisions in my own financial life, partly due to chronic illness. I’ve been so sick I’ve been unable to work for years at a time (couldn’t function from ages 16 to 20) and it would make me feel more secure to have my mortgage paid off. If I invested this money in the stock market instead, I could be forced to pull it out during a recession due to health circumstances and lose money anyway. I’d rather invest in reducing my fixed expenses in case my condition worsens, which is completely possible. That’s part of why I didn’t take out student loans – I wasn’t sure I’d be healthy enough to pay them back. Right now I’m able to work but who knows what will happen in the future. My condition has peaks and valleys.
You might have a hard time finding a lender who is willing to refinance a mortgage that is under $100k, so that is something to consider. A lot of big lenders don’t want to waste their time with what they consider small loans.
You mention an emergency fund—are your other savings and retirement on track? No mortgage is a great goal, but not at the expense of compounding interest. I WISH I’d saved more when I was in my 20s.
Hi! Yes, we are saving for retirement and have sinking funds for things like buying a used car whenever our current vehicle dies. My spouse gets a raise every August and we’ll be using the extra funds from that to increase our 401k contributions this year. I agree, investing while you’re young is really important so we’re always trying to find ways to save more for retirement!
I would not put extra toward the mortgage until you max your retirement and emergency fund.
Pay off that mortgage. We worked hard to pay off our mortgage a few years ago. We continued to put $ into our 401k at the same time (never want to lose that employer match – FREE $$$). Flash forward a few years and my husband lost his job. He was the major breadwinner. He wanted to go to school to learn a brand new trade. If we had a mortgage none of that would have been possible. We hate debt. It’s not always about the numbers. Peace of mind means a lot.