Flashback to 2009: the purchase of the big house.
At the time, 2009 was a great time to buy a home: the housing market was down/sadly collapsing into ruins, interest rates for mortgages were low, down payments were also as low as 3% and the government handed out $8,000 incentives for signing that inch-thick, legal size bundle of papers.
For those who haven’t had the privilege, the signing of the mortgage’s documents takes forever, and so does the 30-year “payoff.”
At this point, we are six years into the mortgage with $90,000 worth of payments (including escrow) and about $30,000 worth of “improvements.” (These so-called improvements will be discussed in an upcoming post.) Where does that leave us?
A reduction of the mortgage’s principle by only $30,000. That’s right.
$90,000 in but only $30,000 actually “paid off.”
How could this have happened? We didn’t miss any payments along the way, because we always check to see our payment was auto-debited from our checking account.
Could it have been some kind of supernatural force secretly working against us all these years? Did we sign for three mortgages at the same time? (Who knows really, I mean, who reads all of those documents at signing?)
No, it was the interest. Interest!
Related Post: Why Mortgage Debt is Worse Than Credit Card Debt
The word “interest” is actually rather amusing when you consider its many forms. When used in terms of the many interests we have, particularly hiking and running, the word “interest” has a positive connotation. I find people to be interesting, which usually has a positive connotation as well. One can also have a vested interest in something. In terms of a mortgage, though, the word “interest” is one that chills me straight to my core.
Because I opted for a 30-year mortgage, my payments continue to be dominated by interest as they had from the beginning. In fact, my first payment was more than 67% interest.
If I wouldn’t sign up for a credit card with 67% interest, why get a mortgage at 67%?
Well, times they are a-changin’ and our goal is to build a tiny home with cash left from the sale of the big house this year! The goal? No more mortgage!
SmartAsset Calculator (affiliate program)