Imagine right outside of your window is a huge tree obstructing a beautiful horizon and the only way for you to see that view is to cut the tree down. You spend years saving up for an ax until one day, you’re ready to pick it up and start chopping. Day and night, rain or shine, hot or cold, through good times and bad. With every ounce of energy you have, you chop.
On some days, the size of the tree makes you want to give up and accept that you will never see the view you’ve dreamed of. Settling becomes comforting. After all, most people would be elated to see what you already have.
But one day, after chopping and chopping and chopping you see the tree tilt. Months later, it leans some more until finally, one last swing of the ax sends the tree tumbling down. The sound it makes is like the largest cash register you’ve ever heard and BOOM…a million dollar view is born.
Seven years ago, if someone asked me if I ever thought I would be mortgage free at 37, I would’ve said…”it’s possible“. I would’ve then asked, “what amazing six figure job opportunity did I land”? I would not have believed it was possible working a regular job and steady, persistent, unrelenting grinding.
A few days after we got engaged, sitting in a Lima, Peru hotel, we devised a financial plan for our life over meats, cheese, aguaymantos and pisco sours. Paying off the mortgage was a milestone that we knew was in the realm of possibility just not in the immediate future. At home, we would listen to Dave Ramsey podcasts and hear how much his guests were enjoying life now that the burden of debt was lifted. Given our income, we would also think that we could experience that joy in a much shorter timeframe. When we weren’t binge listening to Dave’s rants, we would explore blogs like Afford Anything, Go curry cracker, Millennial Revolution and several others featured on Rockstar Finance. From time to time, we would flip each other articles from people who had done it and think…
“one day that’ll be us”.
The primary reason we decided to payoff the mortgage was to create a level of freedom and flexibility that no job could ever provide. It was a critical part of the plan because it drastically minimizes our cost of living, allows us to invest at an even higher rate and gives us the ultimate layer of security. I also believe tackling an obstacle was good for us as a married couple because it taught us lifelong lessons in teamwork and sacrifice.
Given our plan to gain financial independence [the point where our cost of living is covered by passive income], it simply made sense to eliminate our largest bill. As an added bonus, our [now] primary residence could easily be rented for $1000+ a month once we move out. That income, combined with our other rental property, covers a substantial amount of what we need on a monthly basis and gets us much closer to financial independence. However, there are downsides to paying off a mortgage such as
- The mortgage payoff increases our tax exposure because we don’t have mortgage interest to deduct every year
- The opportunity cost of the money going towards the payoff, could’ve gone into the market earning us a higher rate of return than our mortgage cost us
Ultimately we chose to pay it off because the good far outweighed the bad in the long run. Secondly, given the cyclical nature of our economy, it made little sense to assume that the gravy train we’re riding would continue into perpetuity. On a regular basis, we witness layoffs, people battling burnout or suffering from a slew of physical and emotional ailments that are directly linked to unhealthy work habits. More common than all of those cases are people who simply aren’t happy.
We don’t want to be like them. So we swung the ax.
We swung it about 30+ times over a 2 1/2 year period putting every single dollar to work. Some payments were as small as a couple hundred dollars, some upwards of $8,000 until the final swing for $10,800.57 + $30 for the wire transfer fee on Kiersten’s birthday. Over that period of time, we agreed to send every extra dollar to go against the principal as soon as our direct deposits hit because we knew that the longer it stayed in the checking account, the easier it was to spend it. According to the US Census Bureau; as of 2015, approximately 30 million Americans own their homes free and clear. Of those, 2.5 million are Black compared to 25.8 million Whites [the leading group]. Among Blacks, only 14% are between 30 and 40 years of age (approx. 327K). So compared to the US population, that means we’re in the top 9%. As, Black Americans we’re in the top .008%. But as Black Americans in our age group, we’re in the top .001%. So essentially, we’re black unicorns.
Bottom line We didn’t just payoff a mortgage; we bought time. Specifically, we bought about 45 months of our lifestyle, in today’s dollars, for future use and put ourselves one huge step closer to an early retirement. So in a way, I suppose you can put a price on freedom.