Whether you saw my last post about working on paying down our mortgage before a technical issue caused it to disappear or not, I’ll continue with related thoughts as to what motivated me to make paying off the mortgage a goal.
I’ve always had a desire to be debt free, and other than our mortgage (and two car loans that each were two months long), we always have been. But the mortgage loan amount was so daunting that it was hard to believe that small extra amounts put onto the principal could make a difference.
A few things happened that caused me to reevaluate an early paydown, and resulted in me focusing efforts on aggressively making extra principal payments.
Five years ago, a medical product was being very strongly pushed to the people of the world, a push that was very, very strong in Israel. I was skeptical of a product that had intense marketing without demonstrated safety and efficacy studies being shared, and wasn’t interested in being a guinea pig.
Many people who shared my hesitations felt compelled to participate since their employment was at risk. During this period I had a lot of anxiety about what would we do if my husband had to face that choice. As a one income family, how would we manage without his salary if push came to shove?
Thankfully, though his company made recommendations to take it, he wasn’t faced with being fired.
- I hated having to consider compromising our bodily autonomy because we were dependent on his job, and it highlighted to me that we didn’t have the financial resilience I wished we had.
- From mid 2022 through 2023, due to rising interest rates and inflation, significant layoffs were made to the hi tech sector, which my husband’s job is associated with.
- Around that same time, Chat GPT was released. I didn’t immediately think about the significance of that, but it wasn’t long before I felt concerned about the impacy of artificial intelligence on employment. The people who were most knowledgeable about AI were predicting many jobs would be lost in the coming five years, and it would be the white collar workers who would be the first to be downsized.
Without being fearful or anxious, I considered what would help us weather potential job loss. Being free of a large monthly expense would make us more resilient in the event of a layoff.
- The next thing was thinking about retirement. We were late to the game for building retirement funds, and I saw that the anticipated monthly amount we would have from my husband’s retirement account wouldn’t be enough to pay our monthly mortgage payment (which were scheduled to continue a few years into retirement), let alone living expenses.
What if we didn’t have a mortgage? Would we still need such a large sum saved up? No. We could live on much less in retirement if we owned our home outright. The mortgage payment was a large monthly outlay we would no longer have, and we would need correspondingly less of retirement funds to cover our expenses.
These were some of the primary factors in the last few years that coalesced into a burning desire to pay off our mortgage as quickly as possible. I viewed being mortgage-free as building a financial shield of sorts for our family.
Is this the only way to be proactive financially? Obviously not. There are other ways to build resilience that may be better options for others. But this goal has been very motivating for me.
Avivah
2 Responses
Hi, it’s been awhile! I hope all is well. I’m curious how paying down a mortgage works – I had always been under the impression that there are so many fees/fines involved that it isn’t actually worth it. I’d love to pay ours ASAP as well.
I’m glad to see you here, Chana Batya, and hope you see my delayed response.
People say that there are so many fees and fines it’s not worth it, but that makes people not pay off their mortgage early, doesn’t it? I wonder who’s behind all of those claims? While the banks want to offset the loss of the interest they won’t be getting from you and there will be fees if you prepay, you’re saving many thousands of shekels on the interest you’re not going to be paying. I’d say we’re saving tens of thousands of shekels, if not more. It’s hard to calculate since Israeli banks don’t provide amortization tables (at least I’m not aware of being given this).
I was able to see after each prepayment how many months I cut off of the loan length, and a chunk of each payment is interest. Your savings are much, much more than the fees you’ll pay. The earlier payments of a mortgage have a super high percentage that is interest, and even one prepayment will save you a lot of money.
Good luck!