Give Me Back My Five Bucks

Why I don’t want to burn my mortgage

When I bought my first home in 2011, I had a very Independent Woman attitude about it all, and wanted to pay down my mortgage as fast as possible. Because I was self-reliant, and didn’t need a man to become debt-free and reach all my goals! Right? Well. 28-year-old-Krystal had a lot to learn about financial priorities. I eventually realized that putting every extra penny towards my mortgage wasn’t making me happy, and it wasn’t getting me any closer to my number one financial goal of early retirement. So by the time I sold that home in 2015, the only extras I was putting towards my mortgage was keeping to an accelerated bi-weekly schedule.

Related: Why I’m reducing my mortgage payments

Since RD and I are taking possession of our home in a few weeks, we’ve been discussing how we plan to pay down our mortgage. Based on our budget I showed you earlier this month, we’ll definitely be going with an accelerated bi-weekly payment plan, but aside from that? We have vague goals of putting down some sort of lump sum payment every year. Accelerated payments and small lump sums will be enough for us to reach our goal of eliminating our mortgage before we retire. But as a PF blogger, I just had to run the numbers to see how long it would take us to “burn” our mortgage, Sean Cooper style. :)

We’ve calculated that our joint expenses will be $3,600/month – which includes our base mortgage payment, strata, and property taxes, along with our fixed bills, groceries, household expenses, and a monthly buffer of $365 set aside for household repairs and emergencies. If we decided to trim down those expenses a little bit and put the rest of our income towards the mortgage (which means we’d live on a very strict budget), we could eliminate our mortgage in less than 5 years.

So yeah, it would be pretty damn cool to be mortgage-free before I’m 40 (especially in the Vancouver area!), but the lifestyle and sacrifice required to achieve that goal is not appealing. And at this point in our lives, it’s just not going to happen. 5 years is a really long time! Maybe our mindset will change in the future, but here’s why it’s not going to happen right now:

We have other (more important) financial goals

Yes, paying down the mortgage is a big financial priority, but early retirement and traveling every year is higher up on that list. It always has been.

Traveling multiple times a year is something we both agree is really important to us, and we want to do for as long as we are physically able to travel. It’s one thing to potentially lose our big trip each year (that seems manageable), but not be able to afford flights to visit our families, go to Tofino, or plan weekend getaways to the Sunshine Coast or Squamish? That sounds horrible. Living that kind of life for the next 5 years (which happen to be prime adventure travel/hiking years) to pay off our mortgage sooner? No thanks.

Related: When renting is better than home ownership

As for early retirement, saving for that goal has always been my top financial priority. And now that RD has figured out when he can retire from the government, it means my retirement age will be 54. :) Losing 5 key years of retirement savings stresses me out because if I keep saving at the rate that I’m saving right now, I will reach my goal easily.

No interest in working harder

Work more than my 9-5 job, and the small amount of freelance work I do on the side? Sorry, again, not interested. Maybe that’s a horrible attitude to have, but this is the reason why we chose to take on a small mortgage – so that we will never feel like we need to work harder than we already are, just to keep a roof over our heads.

Related: Why I don’t want to be self-employed

Don’t get me wrong, I think it’s really important to work hard to achieve your goals. I worked three jobs to pay down my debt, and continued to hustle in order to save for my first down payment – often working 70-75 hours/week. But that lifestyle isn’t sustainable, and I burned out after 18 months. I’m glad I worked hard to put myself in the financial situation I am now, but I made a promise to myself after I moved back from Germany that I was never going back to working crazy hours again – even if it meant taking a pay cut. Living a balanced lifestyle is just so much more important to me now.

I want a little YOLO attitude in my life

We love our lifestyle right now. We’re frugal and we often say no to things when they come up, but we also don’t want to miss out on what we feel is important. I love being able to say ‘yes’ to a girls weekend in Seattle or Vegas, treating my sister to a spa day for her birthday, and buying that sorta pricey climbing gym membership with zero regrets. I want to continue being able to do all of these things without stressing or feeling guilty that I should be putting those dollars towards the mortgage instead.

You really do only live once, and the whole point of buying the condo that we bought was because we could afford to continue living exactly how we’re living now. I’ve worked so hard for the past 10 years to become as financially stable as I am right now, and the idea of having to sacrifice for 5 more years sounds exhausting. And, honestly, it seems joyless.

Our mortgage will be paid off before we retire

We both agree that we don’t want a mortgage in retirement, and that goal is easily attainable by making accelerated bi-weekly mortgage payments, and small lump sum payments every year. Interest rates may change in the future, but for the next 5 years, we’re looking at a 2.59% rate. And I know we can get a better return for our money by investing it instead. Since we already have a sizeable down payment, the thought of putting more of our net worth into real estate isn’t something we are super comfortable with.

Related: My biggest home buying regret – not fully considering the future

As I said at the beginning of this post, this is our thinking right now, but it doesn’t mean we won’t change our minds in the future. Maybe we’ll come up with a happy middle ground where we are paying extra towards our mortgage to eliminate it in 10 or 12 years instead of aggressively going for 5 years. Or maybe we’ll just be happy with the 20 year plan that we have going for us.

Are you planning on aggressively paying down your mortgage?

Author: Krystal Yee

I’m a personal finance blogger and marketing professional based in Vancouver. I’m a former Toronto Star (Moneyville) columnist, author of The Beginner’s Guide to Saving and Investing, and co-founder of the Canadian Personal Finance Conference. When I’m not working, you can usually find me running, climbing, playing field hockey, or plotting my next adventure.


Comments

  1. Walnut says:

    With a 2.59% interest rate, I don’t think I would be putting in any additional lump sum payments either. I would instead drop the cash into a regular investment account and keep in the back of your mind that you could always use it to pay off the mortgage later.

    Our 15 year mortgage is locked in at 2.375% and I have zero interest in paying it off any sooner, whereas previously paying off my mortgage was super important to me. This is the first year we’ll max out our retirement accounts and any additional cash is just going to a slush bucket investment account.

    It’s a nice reward after so many years of hustling to pay off debt and build an emergency fund to just sort of settle and put things on autopilot for awhile.

    • Wow you got such a great interest rate. 15 years sounds amazing too! We have 30 years because we weren’t qualified for 15. But 15 years is our goal for the next house!

      • Krystal Yee says:

        I’ve always thought that it was super interesting that in the U.S. you guys have 15-30 year mortgage terms. Our standard amortization in Canada is 25 years, but we have to renew our mortgage rate/terms every 5 years. I’ve heard of some people with 10 year terms, but it’s really rare and the rates usually are pretty bad.

  2. Jordann says:

    I’m with you, 100%. My mortgage rate is 2.29%, and I have zero interest in paying it off early. I’d rather invest the money and accumulate a huge slush fund that I could, perhaps some day, use to pay off my mortgage. Right now I’m more interested in finding a sustainable life balance and accumulating a real cash cushion than being mortgage free.

  3. jill says:

    After buying out my dad’s share of the home post divorce, my mom was able to finish off her mortgage – around the same age you will be when you hit your early retirement goal. I think that sounds awesome!

  4. Money Beagle says:

    We actually just refinanced to a longer term mortgage for many of the exact reasons. Even with that our payoff date will be when I’m 57 which is long before retirement.

  5. Jessica says:

    Our mortgage interest rate is 2.35% and for the first 2 years, we were putting down lump sums left and right on top of our accelerated bi-weekly payments. While it was great to watch the total mortgage and interest amount go down, this is actually the first year where we won’t be doing lump sum payments. Instead, we’re putting down the money for traveling and to max out my TFSA. We have a couple out of town weddings to attend this year and we’re looking at the possibility of going to Italy for a few weeks. Maxing out my TFSA seems like a lofty goal, but I wasn’t happy with the amount I put in last year, so now I’m trying to kick it up a notch for 2017. :)

  6. Leigh says:

    My mortgage rate has been 2.5% since early 2013. There are a few months left on that rate and then it should reset to about 4%, give or a take 0.25 percentage points or so. I aggressively paid it off for the first 2.5 years and paid off half of it in in that timeframe! Then my now-husband moved in, I took a bit of a pay cut for a while, and went back to school, so I haven’t made extra payments for a while. It’s his responsibility now and I’m curious to see what he ends up deciding as the rate fluctuates in the next few years. The payment will reamortize back to 25 years remaining in February, which will reduce the required minimum payment by about 40% since I paid so much extra early on. My suggestion is that he keeps at least paying the original payment even when the required one goes down, but we’ll see how life plays out in the next few years!

  7. There is nothing wrong with not wanting to pay off the mortgage as fast as you can if you have other priorities. I’m glad you guys are closing on your new house soon. Must be an exciting time of the year! :)

  8. Ryan K says:

    I am in the same boat, but also a little conflicted.

    I am on my second 5 year term (mature in 2019) for my primary residence. I have been putting additional monthly lump sum. According to the mortgage website I am projected to have 2 or 3 years left after mature. I am planning to flip the remaining onto a HLOC to pay it off faster.

    I have a second property (former primary when I was a bachelor) that is being rented out. On its own HELOC. This one I am closer to pay it off.

    My conflict is should I be paying off my second property to gain more of a positive cash flow to go direlty into primary. I ran the numbers for different scenarios. Regardless of scenarios, I would end up paying off both mortgage is roughly the same time frame (2021/22ish).

    I am not sure if I should start travel (without breaking the pace) or wait until mortages are gone.

  9. Bria says:

    We bought our home last year and have a 25 year mortgage at 2.39%. We decided to put a 20% lump sum principal payment on it this year because our retirement goals are well in check, travel plans adequately funded, and our view was that a savings account is very unlikely to yield a 2.39% interest rate over the next 5 years. Our high interest savings accounts at two major Canadian banks currently offer less than two percent interest. We have investing accounts as well but factored in a 50% capital gains tax on any investment growth on the same money in non-registered accounts, and income tax of a similar percentage on those funds if we invested them in, and later withdrew from, our registered retirement accounts (RRSPs). We will max out our TFSAs this year, so no harm done there either.

    I think it definitely comes down to balance and how much you can afford to save on what you make. I’m not sure we will make big payments like this every year, depends on what is going on in life, but for us the freedom and security of not having a mortgage payment and being able to throw that money at life and retirement instead, is very appealing!!!

  10. A YOLO attitude is actually very healthy!

    In the end, working too hard to pay off mortgages and debt and then save aggressively for retirement only means you’ll have no fun while you still can and end up old and unable to do anything anymore!

    Okay, I exaggerate, but I have my own parents as examples. My dad used to be so excited about family camping trips and other similar activities! Now, he’s equally excited to travel but unable to enjoy it like old times. Health problems are in the way, old age changed his attitude (although no one likes to admit this), not to mention priorities change a lot with age.

    So, while we also can’t wait to become home owners, I’m sure we’ll find ways to prioritize for other fun ‘projects’ at the same time. While we still can :)

  11. Owen says:

    My wife and I paid off our mortgage early and it was one of the best things we ever did. Our original goal was 7 years and we ended up doing it in 5.

    It was an ambitious goal for my wife and I and we found it extremely motivating. We made all sorts of lifestyle changes to help us get there (like biking to work!) which are now simply habit. This has set us up very well for the future.

    Being debt free is a nice feeling and provides lots of flexibility.

  12. Ani says:

    How can I calculate how fast I can pay off my remainder mortgage? Is there an online calculator anywhere or is there a math formula? How do you calculate you are on track for retirement? Is there an online calculator or math formula/spreadsheet you use? Can you please share these calculator links? Thanks.

  13. Anna C says:

    I haven’t read your blog in a couple of years, but I used to follow it religiously. (This isn’t because of your content, by the way, it’s just because I’ve been sticking my head in the sand regarding my own personal finances.) It struck me reading this post how much you have matured. I was always impressed with your tenacity and relentlessness of paying down debts and working on your mortgage, but this balanced approach seems so much more sustainable, healthier, and more fun. I’m cheering for you!

    – Anna (aka Deena Dollars)

    • Krystal Yee says:

      Hey Anna – nice to hear from you after so long. :) Thanks for the comment, I’m really trying to live a more balanced life, so it’s much appreciated. Also as a side note, I hope that you come back to blogging at some point. I enjoyed reading your blog!

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