Friday, 9 May 2014

Mortgage Update

I thought that it was about time that I give an update on the progress on my mortgage. If you've had the chance to mosey on over to my goals page or have followed my blog for a prolonged period of time then you'll know that it is my goal to have my mortgage paid off 5 years from when I got it. That would be the 8th of November 2017. This is when my term is up and by having the house paid off will mean that I don't have to worry about an increase in interest rates and that my money can start heading towards some other really big goals.

There are two portions to my being able to pay off my mortgage in 5 years. The first is making a 10% payment against my mortgage every year and the second is a combination of increasing my payments by 10% each year and doubling up my payment every month.


Since my mortgage started at $152,000 each year I can make a lump sum payment of $15,200. I have successfully made the 10% payments for the first and second year. I have the payment for the third year sitting in the bank and part of the fourth year as well. The final year I'll only need $1,900 since paying more then that will have me paid off ahead of time and I'll incur penalties.

Year 1
Year 2
Year 3
Year 4
Year 5

Total Needed
Total Saved


Since I have $20,699.47 sitting in the bank for my 10% payments I only have a short fall of $11,600.53. Since I should have a double pay check coming at the end of the month (my disability insurance is on a different schedule than my work and I just started working again) it should get knocked down to about $9,000. I can come up with that $9,000 by raiding my car savings fund should worse come to worse, however, I am pretty confident that I can come up with that amount over the next three years with tax returns, bonuses, and extra money off my pay checks. 


The monthly portion has been a bit more difficult, especially since I took a pay cut to go back to Graduate school, and since that pay has been irregular and of uncertain amounts. Each month I have to pay $646.62 towards my mortgage. I have increased that each year by 10% and I double it up each month so each month I pay $1,564.82. All of this comes off my monthly pay check and the plan is to continue that. A bit challenging after my pay cut but it mostly came down to picking priorities. I don't currently have transportation costs since I commute on my student bus pass and savings is currently at $0. Dropping retirement savings was a bit of a struggle at first. However, I decided that it would make sense to wait until the 2015 fiscal year to make RRSP contributions since I'll be in such a low tax bracket this year. I also figure that being a student again I'm ahead of the game seeing as my net worth is still increasing as opposed to decreasing. By the end of the mortgage term I'll be paying close to $2,000 a month towards my mortgage. So for the next three and a half years I'll need to concentrate on keeping my income high and my expenses low. But all in all it seems doable. 


I have to admit when I first signed my mortgage papers a year and a half ago I wasn't sure if I would be able to hit my goal. But I told people about it. I told my family, my financial adviser, the people who were handing me the mortgage papers, and all my lovely blog followers. As of today I own 47% of my home (see the goals page for more details). From where I'm sitting now the goal of paying my mortgage  off in 5 years suddenly seems very possible, almost matter of fact.

So the next time someone asks - I'm not planning to pay off my mortgage in 5 years, I AM going to pay off my mortgage in 5 years. 

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