Mortgage Payoff – We Pulled the Trigger

February 11, 2009 by  
Filed under Debt and Credit

The mortgage is dead.  We killed it.

If you have been reading Mr. ToughMoneyLove for a while (thank-you BTW), you know that we have been planning on paying off one of our mortgages.  (We own two homes, one of which we use now as a vacation home and later, as a full or part-time retirement residence.)  My original target date for mortgage payoff was December 2008 but that date slipped a bit once we learned of the outcome of the election, plans for the economy were in flux, and things got busy around here.  We had been earnestly accumulating cash over the last 24 months to get this done.  

Yesterday it finally happened.  Last week I had moved money from our high yield savings accounts at GMAC and Capital One into accounts at our local bank in preparation.  I requested the payoff balance and payoff instructions from the bank which owned the mortgage (also our bank).  I saw in the instructions that payoff funds could be wired at no charge.  That sounded a lot easier, faster, and more reliable to me so that’s what I decided to do.

Yesterday morning, I called our bank relationship manager.  First, he had one of his assistants move all of the payoff funds into a single local account.   He then put me in contact with the bank wire department.  I gave them the mortgage account information and wire destination details.  I had to answer several secret questions to confirm my identity.  The wire person also called our banker to confirm that the instructions were from me.  Then someone pushed a button at a computer terminal and off went a big pile of our cash.

A few hours later I checked online to see what the mortgage balance was.  It had not changed.  Concerned, I called the mortgage servicing office.  The nice person told me that the funds had been received but that the computer records would not be updated until midnight.  When I got up this morning, the first thing I did was log-in to our online banking account and voila’, that mortgage had disappeared.  Gone from the list of accounts.  Forever.  Sweetness.

So now we own a home, free and clear.  (Well technically not free and clear until the satisfaction of mortgage is recorded at the County Register of Deed’s Office, which will happen in a couple of weeks.)  It feels good, real good.  We may have a mortgage document burning party at some point.  I’m not sure about that yet.  We may wait until we kill the other mortgage, the one on our mostly full time residence.  That plan is also in the works.  Hopefully, the college graduation of our third son will be jointly celebrated in two years with another mortgage murder.

So why did we choose to kill the vacation home mortgage first?  Several reasons.  First, that mortgage had a slightly higher interest rate.  Second, the mortgage was only six years old, meaning that a much larger percentage of our payment was interest compared to principal.  Third, that mortgage balance was larger.  Fourth, we had determined that if and when we downsize, it would be from our full time residence, which is twice the size of our vacation home.  Twice as much room as we need, actually.  In other words, our current thoughts are that our vacation home will be part of our lifestyle for a much longer period of time.  So we wanted to own it.  Completely.

You may be wondering why we decided to pay off the mortgage at all.  Some would argue that it would make more sense to invest that cash while stocks are on sale.  That argument would have a lot more appeal to me if we were younger.  As baby boomers, we have a different perspective on things.  Indeed, if the U.S. economy experiences a “lost decade” like Japan did in the ’90’s, paying off mortgage debt can make sense for younger folks as well.  For more of my thoughts on this, read “Your Home as an Investment?  Let’s Re-think this” and “Striving for a Mortgage Free Life.”

The real seeds of what happened yesterday were actually planted years ago, when Mrs. ToughMoneyLove and I were first married and sans kids.  I will save that story for another day.  For now, I will enjoy the afterglow of a mortgage death.  I encourage each of you to also strive for a mortgage-free life, as we continue to do.  One down, one to go.

Image credit:  Kristian Risager Larsen

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34 Responses to “Mortgage Payoff – We Pulled the Trigger”
  1. nickel says:

    Excellent job. My only real trepidation with paying off our mortgage is that a low interest, long term mortgage is a good inflation hedge. Raise your hand if you think we’re facing an inflation-free future (especially given the current economic crisis and our attempts to fix it).

    Side point: There’s also a tax difference in the treatment of interest payments on the two mortgages, isn’t there? That would be one more reason to pay off the second home first.

  2. Congrats TML!!! I can only long for that as we have SO FAR to go at this point. Luckily, we have a low interest rate. But in our 30s with two little ones and a dependent mother-in-law, we have to prioritize. One day I would love to do this. ENJOY!

  3. Nickel – Thanks. I agree with the inflation hedge argument but that assumes that your income also keeps pace with inflation. At my age, our income will enter a slow decline and then stabilize so the mortgage payment would represent an increasing percentage of our income, even with inflation. FYI – mortgage interest on a second home is also deductible but taking into account the standard deduction and the phase out of other deductions at our income level, it’s not worth keeping the interest.

    Beef: I hear you about priorities. Your time will come.

  4. cjbr549 says:

    Recently after looking at the savings rates that I could get in my money market accounts and the performance that I was making in my 401k, I decided to take my savings and a loan from the 401k and pay down the mortgage. With the pitiful interest rates available now on savings and a stock market that’s not likely to take off to the stratosphere anytime soon, it seemed the easiest way to make 5.5% (by saving it) with very little downside risk. I plan on paying the rest of the mortgage off by September by making large monthly payments and applying funds from a CD that will mature in September. Right now, if you owe money at anything more than about 3% or so, your probably better off paying off debt than you are saving the money.

  5. Congratulations!

    What a relief.

    I’d pay off the home instead of investing in stocks as well. It just feels better.

    When I get a home in the future, I’ll be on a 15-20 year mortgage, but that sounds like FOREVER to me. :)

  6. Andrea says:

    Congratulations. I don’t think you need to worry about the inflation hedge. It still would have been money down the drain and if you want to keep an eye on inflation there are other ways of doing it.

  7. My Journey says:

    Congrats. I have written about it in the past, but almost every extremely wealthy person I have worked with for estate planning, HAD THEIR MORTGAGE PAID OFF!

  8. tina says:

    Congratulations!! Our mortgage will be paid off in 4 yrs but we are hoping/planning to pay it off sooner.

    Its posts like these that keep the rest of us going!!


  9. Ahead of the curve? says:

    I paid ours off with an inheritance in 2004. I did get some flack from the very few people who knew (mostly the Merrill Lynch broker, who was unhappy to lose the money), but I have to say it is one of the best money decisions I have made. We’ve also resisted buying a ski condo in the ensuing years thankfully (although we were tempted, believe me, and had the $$). I feel freed. Even though I am still working in a fairly high paying occupation, I don’t want to do this forever (or even for much longer) and love the flexibility I feel like I have.

    So, good for you Mr. TML. And my respects for having earned it all yourself (I was lucky).

  10. Matt SF says:

    Congrats Mr. TML! Perfect example of sound financial planning.

  11. Revanche says:

    Congratulations on a job well done! I’m including this in my post of things to feel great about.

  12. Brian says:

    Congratulations. Articles like this really keep me going.

  13. No Debt Plan says:

    Congrats man, that’s awesome!

  14. Curt says:

    Congratulations. We have been planning to pay off our house in the near future also. This month we finally have more cash then our current mortgage balance. Now, we need a little more cash and to get a little more comfortable with the idea.

  15. Mr. TML Congratulations! I finished paying off a student loan. Not quite the same, but I can relate to the fulfillment of not having that burden.


  16. Thanks to everyone for the kind words. I feel blessed. I believe that you can do what we did, on your own schedule. Too many people resign themselves to a lifetime of payments of one kind or another. It doesn’t have to be that way. We are but one example of that.

  17. Travis @ CMM says:

    Congratulations, what a huge accomplishment. What do you plan on doing with the extra money you’ll be saving each month. I’m sure you’ll use it to pay off more debt, but do you plan on rewarding yourself with a nice vacation or something?

  18. Travis: Actually, every minute we spend in our vacation home is a vacation to us. Knowing that it is paid for just adds to the pleasure. So we will use that extra cash for paying off the remaining mortgage.

  19. richgirl says:


  20. Karen Datko says:

    Congrats, fellow older person. Also, your post convinced me that I’m on the right track with my own home. Thanks for that.

  21. Peter says:

    Congrats on murdering your mortgage! Wish I was able to do that.. Instead I’ll have to continue to resorting to slowly poisoning my mortgage with an extra dose of payment poison thrown in every now and again. I look forward to the day when my mortgage kicks the bucket and I can finally say it is dead and buried!

  22. K-money says:

    Wow, congratulations! I am in year two of a 30 year mortgage and I can only imagine how good it will feel to pay it off. I am on track to pay off my second mortgage in about 7 years but it will probably take at least 20 years to pay off the first. Looking forward…

  23. kitty says:

    I paid off mine some years ago with gains from the sale of a condo I was renting out. Occasionally, I wonder if I did the right thing, possible future inflation being the main concern. Sometimes I wonder if refinancing would’ve been a better option: I had a 30 year fixed at 7% and at the time I paid it off I could’ve refinanced at below 5%. But… Had I done that I would’ve probably invested it into the market and lost part of it. Or at least lost the gains – this was in 2003.

    Future inflation is why I sometimes wonder if I did the right thing. A couple of (rich) friends of mine just bought a vacation home and took a mortgage even though they had 3 times the amount in only one of their investment accounts. They said it’s because they expect high inflation some time in future. Sure, if we get late 70s-early 80s type of inflation and interest rates, anybody with 5% 30 year fixed would see their payments reduced to nothing. I remember opening my very first CD in 1983 and getting 13% (stupidly I only did it for 6 months…). But at the same time, not having these payments makes me feel a whole lot better in this economy.

  24. Kitty – Thanks.

    I think the argument about keeping long term, fixed rate debt as an inflation hedge is overused and often misapplied. If your income goes up with inflation, then your repayment of the fixed rate debt represents a decreasing percentage of your spending power, which is good. However, for people who are not “rich” but are approaching retirement or in retirement, it is not certain and perhaps unlikely that income will keep pace with inflation. That is particularly the case if you consider that tax rates are destined to go up, making those debt payments a larger percent of your spending power, even considering inflation.

  25. Congratulations! That is an awesome accomplishment. I would love to own a home free and clear.

  26. That is awesome, and very inspiring! I think your reasons for paying it off first were very good — it makes sense to own free-and-clear the home you plan to downsize into. Kudos!

  27. Single Guy: Thanks – you can get there as long as you don’t mentally accept a lifetime of making payments, as so many others seem to do.

    Maria: Thanks – I hope it makes sense – either way it feels good!

  28. AC says:

    Just came across this post and wondering why you suddenly decided to do this – if you were stashing money in high-yield accounts, was it earning more than the interest you were paying on the mortgage? Otherwise, it seems that you could have been paying bigger monthly payments instead of saving in the high-yield accounts and paid less interest.

    • AC – You make a good point. We chose to not make larger monthly payments because we were concerned enough about the economy that we wanted to have that cash available for possible emergency use until we made the final decision.

  29. AC says:

    Mr. TML – that’s a very fair answer. Thanks.

  30. Congrats on owning your home free and clear. Great accomplishment.

  31. jkg says:

    Congrats. This is awesome.

  32. ooga booga says:

    Congratulations Brother! When we were in our mid-30s, I decided it would be better to pay off the mortgage and we did in 4.5 years and our struggling new little family of four is better off because of it.

    The way I saw it was – I made an analogy of my ability to use my legs as my financial capability and asked myself one long question –

    Would I rather live the majority of my life with one leg to walk on (30yr mortgage would hamper my finances for a long time. I could get by but not have true mobility)


    Would I rather live with no legs for 4.5 years but knowing that I’ll be able to run afterwards for the rest of my remaining life (scrimp and save for 4.5 years then have much flexibility and freedom afterwards)?

  33. John says:

    I just came across this article and am thrilled that so many others are seeking the reward of paying off their home mortgages. My wife and I just paid off our farm and have no other debt. To do so, we made triple payments monthly for approximately 4 years. We paid off a 15 year loan in just under 5 years. We are both 47 and are definitely looking forward to building up our savings and enjoying the freedom of our efforts. Congrats to all that are on the same road!

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