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Goodbye Mortgage and Lender B.O.A. Hello Baby Step 7!

finished paying off the mortgage

My reaction to paying off the mortgage

Remember the feeling of those significant milestones in your life?

That time you moved away from home.

That day you said, “I do.”

That moment when your kids finally grew out of diapers.

That big job promotion or beginning a new career.

All of these and many more have occurred in my life and in our household. The one we experienced recently surely ranks in the top ten in matters of earthly importance.

We’ve Paid Off Our Mortgage!

Goodbye Bank of America. It’s been…uh, “nice” knowing ya. Hello Baby Step 7!

This event actually occurred in February. I walked into our local BOA and received the deer in the headlights look upon mentioning I wanted to pay off our mortgage. They appeared happy for me but I knew better. What was really running through their minds was “Rats…lost another one.”

They thought worse than that when learning I also wanted to close all my accounts. The only reason we opened a checking account there was because they purchased our mortgage from Countrywide years ago. It made it simpler to pay down our mortgage as we could transfer money to BOA from our main bank at PNC.

Uncharted Financial Waters

It’s taken me several months simply to wrap my arms around the concept that we are entirely debt free. No more loan payments…to anyone! It almost seems too good to be true. When you’ve accounted for something for 15+ years, it seems odd when you don’t have to anymore.

Maybe in a small way this is what it feels like to send a kid off to college. Or to retire. Is there such a thing as empty mortgage syndrome? Our monthly budget feels lost without it.

So what happens now that we’ve paid off our mortgage and that huge expense is gone from our budget? Where is all that extra money going?

The temptation is to hold the throttle wide open on the budget and rapidly increase spending. More clothes…more entertainment…more food options…more everything. After all, we’ve been so focused on freeing ourselves from this debt. Time to live a little, right?

Uh, yes…maybe just a little. Not the answer you were expecting? Well, we do have several things we’ve been considering with the extra room in the budget.

We are going to upgrade my cell phone to an unlimited data plan. No more counting the megabytes used each month.

We are getting cable TV again. (That “gasp” you heard was all the personal finance bloggers. 🙂 )

We might get a gym membership.

Those three things will account for less than $150/month in additional expenditures. That’s not nearly the amount we were spending on our mortgage. So we are not going crazy here. Our disciplined habits will not allow it.

So where is the rest going?

For now, we will be ramping up our savings efforts to purchase a new vehicle with cash. We’ve been setting money aside for several years already, as we saw our four kids would be quickly outgrowing our minivan. Hopefully, that purchase takes place within the year.

Beyond that, we are just excited about entering the most awesome stage of money management.

Baby Step 7

For those unfamiliar with the Baby Step 7 terminology, it’s the final stage of Dave Ramsey’s money management system. He teaches that individuals should progress through these seven steps on their way towards financial freedom:

Baby Step 1: $1,000 in an emergency fund

Baby Step 2: Pay off all debt (except the house)

Baby Step 3: Build a savings fund of 3-6 months of expenses

Baby Step 4: Invest 15% of yearly income into retirement accounts

Baby Step 5: Save for the kid’s college

Baby Step 6: Pay off the mortgage debt

Baby Step 7: Build wealth and give

Baby steps 1, 2 and 3 happen sequentially. A person should complete one before moving on to the next and before starting step #4.

Baby steps 4, 5, and 6 don’t work that way. Once a person can invest 15% of their income in step 4, they begin to save for the kid’s college with whatever else they can squeeze out of the budget. Then, if more money becomes available, they put that additional money towards the mortgage. So the idea is that eventually steps 4, 5 and 6 are all happening at the same time.

At some point, which is what we’ve reached, Baby Step 6 is completed. So all the money that was going towards the mortgage is now funneled elsewhere – into retirement, kid’s college and other investments – all with the expressed purpose to build as much wealth as possible and give a bunch away.

Should You Pay Off Your Mortgage Early?

You probably guessed by reading this that we paid off our mortgage ahead of schedule. That’s a hot topic in the personal finance world with solid arguments to be made on both sides.

As I’ve talked about recently, there is no absolute truth in this area. There is no consensus on right or wrong. It’s a highly personal decision based on how the individual assesses their circumstance.

We had our reasons and for that you’ll have to wait for my Wednesday post. Several of those reasons may surprise you.

How close are you to paying off your mortgage? Will you pay it off early? Do you even think in today’s transient culture a mortgage is worth paying off? When your budget experiences some breathing room due to a boost in income or the knocking out of a big debt, how do you handle it?

Image at FreeDigitalPhotos.net

Next Post: 4 Reasons Why We Paid Off Our Mortgage Early

Prior Post: Wrestling Against Something Twice Your Size

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Comments

  1. Yay! Thanks for the inspiration. We’re 4-5 more years out but paying consistently and considerably towards our mortgage. We’re hoping our bank account will be such that we can get it down to 20-30k and then just wipe it out. *Sigh* Congrats to you!! I’ll be traipsing around your blog to see how you funneled your former mortgage payment.
    Janeen recently posted…Raise Non-Materialistic ChildrenMy Profile

  2. FI Pilgrim says:

    This was good to read about Brian, congrats again. My plan is to pay off our mortgage later this year and then make a career change next year, which is already kind of in the works. Having the mortgage eliminated will mean less pressure on keeping full-time employment, and more time with my (rapidly) growing kids.

    • “…less pressure on keeping full-time employment…” I can completely relate to this and is one of the reasons we pushed so hard to get this done. Stay tuned…I have another big announcement coming. 🙂

  3. Wow – this is awesome! Congrats Brian! Is it true what Dave Ramsey says – your house feels different when it’s all yours?

  4. We paid ours off in 9 years, and it sure felt good. We then proceeded to aim the monthly accelerated mortgage payment at our brokerage account, which we continue to do. Out of sight, out of mind.

  5. Wow, Congrats! That is a huge accomplishment to be completely debt free. I’m almost 2 years into my mortgage. Right now I’m not focused on paying it off early as I have other debt to payoff first. I would pay off debt and save more money if my budget had a boost in income right now.

  6. Wow congrats Brian. That is a huge accomplishment. We have about 28 years left on our mortgage : ) I don’t think we will pay it off sooner as we will likely upgrade at some point in the future. I would love an extra 1k+ in my pocket every month though. That mortgage payoff must provide you with a lot more freedom!

    • Thanks Liz! If there is a housing upgrade coming in the future, I wouldn’t worry about paying off your present mortgage. Keeping current and building equity is the best thing you could do at this stage. Then put a plan in place to pay off the new house in less time. I’m of the opinion it’s definitely worth it.

  7. Yvette says:

    I also want to add my congratulations to you. I once had my mortgage paid off after 5 years. We bought our first place dirt cheap. But then I had to have the bigger house and thus the bigger mortgage. Looking back I would have made a different decision, but hindsight is 20/20. We have good memories in our home and we can still always sell it. Again, congratulations!

    • “We have good memories in our home…” That’s important Yvette and one of the reasons I love home ownership. Sure you can build memories as you move from rental to rental…I simply don’t think it’s the same as having one place to always come back to.

  8. This is awesome news Brian! Congratulations. I am in the process of getting a new mortgage. I have never been a pay off the mortgage early type of person, but I have changed over time. Once we solidify the numbers, I will be putting myself on the fast track to payoff. Nice work my friend!

  9. Bre @ The Weight of Debt says:

    YAY! I am so excited for you and your family! You guys had to work so hard for it! I’m so excited where this new debt free journey will take you in life and how it will rewrite your family tree’s future! Congrats again!

    • “… rewrite your family tree’s future!” I’m glad for what it’s teaching our kids. We’ve made a big deal about this so hopefully some of that rubs off in their adult life.

  10. WTG Brian and family …because I do believe it takes a family to pay off a mortgage! All of your years of discipline have been rewarded. Alas we have four kids, but let the fast paced life of raising them prevent us from keeping our eyes on the ball. With big regret we are still four years from paying off our refinanced mortgage. We are putting almost 50% of our net income towards it to reach that goal. It will make our mortgage last 26.5 years ‼ My hats off to you! Truly!

    • Sounds like you have your eyes on the target now in a really focused way. 50% of your net income towards debt payoff is huge! Nicely done…and four years won’t really be that long.

  11. Congratulations on being 100% debt free! I know that must feel good 😉 I laughed at adding the cable back! I’m also curious as to what led you to decide to pay it off early. I am a strong believer in doing what feels right for you/family. Kudos and enjoy the slight lifestyle inflation you’ve got planned!

    • “…doing what feels right for you/family.” That was a big part of it Kassandra. There are four big reasons that I’ll share on Wednesday…sorry to keep you hanging for an answer. 🙂

  12. Very exciting to pay off the mortgage, I think I would have asked for a frame or trophy of some sort to put on your Financial Wall of fame, i think that’s what I would ask for!

  13. Six Figures Under says:

    That’s so exciting! Way to go Brian and Kim! I’m so happy for you and I think it’s fin to add back in a few things that you had sacrificed. I can’t wait to read your personal reasons for paying off your mortgage early.

  14. Congratulations! How fantastic. Glad you got to say good bye to the mortgage and BOA all in one shot. Those all sound like nice treats, and for under $150, why not. As you said, you’re still saving much more now that the mortgage is gone. I can’t even imagine saving for a down payment right now, let alone paying off a mortgage! In a few years, maybe.

    • Saying goodbye to BOA was fun. Of course, there was even a loophole to jump through just to pay off the mortgage. They wouldn’t accept a personal check…had to get a cashier’s check or money order. That’s probably par for the course at banks, but was still an annoyance to have to leave BOA once I learned that, go to PNC to get the check and then back to BOA. Ugh…

  15. CONGRATULATIONS!! That is awesome, Brian! I can’t imagine how good it felt to walk into BOA and pay off your mortgage. And I can’t wait until the day I can do the same thing, although it will be awhile, which I am okay with. It sounds like you’re adding in some good things back into your budget. I did not *gasp* at the idea of getting cable again as I have cable too. 🙂 It made perfect sense why you got rid of it before and why you would consider getting it again. I think that is one of the best parts of getting rid of debt, being able to decide how you want to spend your money, guilt-free. Enjoy true financial freedom, my friend!

    • “…being able to decide how you want to spend your money, guilt-free.” Agree 100% Shannon! This is what we all work towards. There is freedom and options that come when there is no debt at all. It allows us to contemplate about doing things that before seemed impossible.

  16. Congrats Brian! That’s a huge accomplishment, something that I honestly can’t even fathom doing myself. I’m almost 2 years into our mortgage and we are far from paying it off. We also haven’t paid anything additional towards it, though, because we have student loan debt that is at a higher rate. I sometimes daydream about having all our student loans gone as we pay a *very* sizable amount each month towards them. Eliminating that cash outflow would take months to fully process but I know it will come sooner or later and I can’t wait.

    • Honestly DC, I wouldn’t worry about the mortgage at all until the student loans are gone. The school loans are by far the bigger issue. Just keep plunking away on the mortgage and throw any extra at those school loans.

  17. Natalie @ Financegirl says:

    Congratulations, Brian! You’re inspiring! I wonder if you will like cable as much as you did before getting rid of it. I know when I do get to watch TV it’s mostly garbage and I turn it off quickly! Either way, how nice is it to have it be your choice because you can afford it?! I don’t have a mortgage, but I liken this to how I’ll feel when I get to say goodbye to my dear friend and ruler, Sallie Mae. Soon enough! And again, congrats!!

    • Hmm…will I like cable as much? That’s a great question Natalie. A lot has changed in the last few years that makes me think I’ll be more disciplined in what I watch. I spend too much time writing now to be consumed by TV. I’m mostly interested in watching sports with my oldest two. They are getting into basketball and I want them watch the game more so they can learn it.

  18. Shannon says:

    Congrats Brian!! That is a HUGE accomplishment and I am sure that the BofA people were sad to see you go, but you are onto bigger and better things. I agree with you that paying off your mortgage early is definitely one of those debates in personal finance whose answer depends solely on each individual person’s view of it, but since it was important to you, I am happy that you were able to achieve it and can’t wait to read about all of your reasons on Wednesday.

    • It was really funny (kind of sad though) to see the expression of the customer service rep at BOA change. One minute she was all smiles, ready to help me…the next her face just sort of dropped. Upon hearing the news she replies, “Oh, I guess we can help you with that.”

  19. Congrats Brian!! That is huge! I laughed at the cable thing too. Hey man, if you have no debt and are saving for other things in life, go for it!

  20. John S @ Frugal Rules says:

    “We are getting cable TV again. (That “gasp” you heard was all the personal finance bloggers.” Lol, I loved this! Seriously though, huge congrats Brian! We had been prepaying on our mortgage fairly well prior to me taking the leap and have pulled back on it since. That was mainly going back to our wildly fluctuating income. However, as things start to stabilize and continue to increase this is one of the first areas we’re looking at tackling. It’s the only debt we have remaining and would love to get rid of it.

    • Thanks John! It’s well worth the effort to tackle the mortgage. I can’t really begin to describe the peace that comes knowing all the debt is behind you. Having that peace beats any mathematical equation showing there might be something wiser to do with your money, imo.

  21. Holly Johnson says:

    Congrats! That’s awesome!
    I think it’s totally reasonable to get cable TV and a gym membership now…you’ve literally earned it!
    We are prepaying our mortgage as well, but not with the vigor we had before. It still won’t take us long though!

    • We’ve sacrificed on those things for a long time. I have no problem with spending the money on them again. Those expenditures won’t impact our long range financial plans.

      • Yay, yay, yay, yay, YAY for YOU!!!!!!!!!!!!!!!!!!!!!!!!!! I just love reading these “I paid my mortgage” blogs. Congrats. I know that wasn’t easy – especially with 4 little ones. WOW – good for you and your family. Truly inspirational.

Trackbacks

  1. […] probability might have completed it in yr three. However, my spouse and I have been dedicated to paying off our mortgage early earlier than I give up my job. So for 2 extra years we held our month-to-month price range numbers […]

  2. […] Plunged in Debt talks about how she has paid off one of her student loans! Congrats Catherine! • Goodby Mortgage and Lender B.O.A Hellow Baby Step 7!- Brian at Luke1428 has officially paid of his Mortgage and gets to move on to Dave Ramsey’s […]

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