The full pre-payment on our 5 year term mortgage for the 2012-2013 year has been completed to the tune of $37,000 just this past week. I know if you were following our Net Worth updates this past year you were cringing because of all the money we kept in our high interest savings account at 2%.
I received emails and comments asking us why we did that and we did it for ease of liquidity and the ability to just pay off our mortgage. Some of you are seasoned professionals when it comes to investing but for a couple like us we are not. So when something looks easy to you it’s much more difficult to us. I appreciate all the help I get from my on-line friends who continue to motivate and educate me about investing along with my research.
Just like anyone else we need to learn about investing from the bottom up so it’s better to be informed than to jump in head first without any knowledge just because someone doesn’t agree with how we manage our money from an investment stand point. Maybe we did lose out on a bit had we had taken our money and invested it for that year, but we can live with that. It was a big decision for us to pay off the mortgage in full so we can move forward with investments for our retirement but we are happy with our decision.
What is a Mortgage Pre-Payment?
If you don’t know what a prepayment on a mortgage is or if your mortgage doesn’t allow this option, it’s simply the ability to put down a chunk of money when you have it towards the principle of your mortgage. Our prepayment privileges allow us to pay down our mortgage by 20 % during each anniversary period.
Some mortgage companies allow a pre-payment with no limits where our mortgage company only allows us to pre-pay up to 20% of the original mortgage of $185,000 each year. When we saved up for our down-payment on the house but didn’t use all the money we had as we weren’t sure at the time what we were going to do with it.
The house cost us $265,000 and we put down an $80,000 down-payment (roughly 30%) leaving us with a mortgage of $185,000 at 3.99% fixed 5 year term over 25 years. The price was cheap as we bought the property just after the financial collapse of 2008/2009 and scooped it up in less than a few days of being on the market and boy are we happy with our deal. We do love our house but like I mentioned before we don’t know if we will move or stay.
Initially we were looking at homes that were in the upper $400,000- $500,000 range because that was what the bank said we could have. In fact some mortgage companies offered to give us well over half a million dollars which was far too much for us. It may sound like a lot of money but living in the GTA that is like peanuts. Houses in our area are relatively pricey so we were super lucky when the owner selling this home needed to be gone fast so we picked it up for a great deal.
There were many things I needed to get done on the house and there still are ongoing renovations mainly to update but the home is still under the age of 20 years old and in great shape. It was worth it to us in the end as in just 4 short years we can put this house on the market as is for about $100,000 more than we paid for it.
Sometimes it makes more sense just to stay put because we won’t have a mortgage and just enjoy life. Other times we think it would be nice to have a bigger property with more privacy. There are lots or ideas for us to consider but I think we may stick around to finish up some renovations in hopes of making a bit more profit here if we make the decision to move. If not, we love our house and will certainly make sure to put the money into renovating it the way we would like to so we can live a comfortable life here together.
So, the mortgage will come due the end of April which will officially be 4 years into the mortgage. We will then pre-pay the full $37,000 allowable once again to drop our mortgage to around $81,000 just as an estimate as payments will happen in between now and then. We will then have to break the mortgage and pay a penalty for doing so. Currently our mortgage sits at $118,734.41 which at the current payment would take us 11 years and 9 months to pay off.
We hope to kill this mortgage off sometime around June of 2013.
Stay tuned for another mortgage update next month where I will give you the full run-down of what has happened since the writing of this post.
Do you make pre-payments on your mortgage?
What Does Individual Net Worth Mean?
Net Worth is a snap shot of your financial health sort of like a picture. It’s a total of the value of your assets minus your liabilities.
Determining Net Worth is fairly easy as long as you know your personal numbers. Net Worth is simply adding up all your assets (what you own) then taking away your liabilities (what you owe) which will give you a net worth number. It doesn’t get any easier than that.
Do you know how to calculate your own Net Worth? Why not go ahead and calculate your own using our Free Tool Net worth Calculator (Canadian Budget Binder 2012)
Our Short Term Finance/Life/Blog/ Goals
- To pay off our mortgage with-in the 5 yr term ending in April 2014
- Focus on TFSA and other investing
- To Save money for smaller renovations
- Continue to meal plan, create new homemade meals
- To sow and grow more vegetables/herbs in the garden to save money.
- To take vacation somewhere in Ontario this summer
- To take this blog to self-hosted and get a redesign (happening 2013!)
- Learn more about Passive Income
- To Read a new Personal Finance Book
- Learn more about SEO and Blogging
Our Long-Term Finance/Life/Blog/ Goals
- Continuing to educate ourselves on personal finance and investments
- Continue to Network with other like-minded individuals
- To finish renovating our home
- To continue with educational training to further careers.
- To save money for big renovations
- Start thinking about saving for a second-hand vehicle in the next 5-7 years
- Save up for a European Adventure in the next couple of years
- Potentially save for a second home to rent out or build/move to our dream home
Our Financial Numbers
When budgeting anything is possible, we are proof of that although we still have a long way to go in our journey. These are our numbers and our goals, not a means of comparison towards your own goals. We don’t care how much money others make or if their net worth is lower or higher as it’s not a competition. I hope our experiences perhaps will help guide you along your financial path towards debt freedom.
Canadian Budget Binders Financial Health
Net Worth For Preceding 12 Months
Net Worth Updates 2012-2013
- March 2012
- April 2012 (+0.94%)
- May 2012 (+1.19%)
- June 2012 (+1.17%)
- July 2012 (+1.51%)
- August 2012 (+1.67%)
- September 2012 (+1.61%)
- October 2012 (+1.91%)
- November 2012 (+0.96%)
- December 2012 (+1.76%)
- January 2013 (+1.39%)
- February 2013 (+0.75%)
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- Becoming a Single Homeowner – Part 1 “The Plan” (canadianbudgetbinder.com)
- Becoming A Single Homeowner – Part 3 “Mortgage Options” (canadianbudgetbinder.com)