First Person: I’m Paying Down My Mortgage Despite a Rock Bottom Rate

Yahoo Contributor Network

When people go to refinance their homes, they typically have a specific motivation. Some people want a lower payment so they have more cash flow each month. Other people want to take advantage of historically low interest rates so they can put their money to better use with investments that offer a higher return. In my case, the reason I refinanced was so that I could shave a year off my already aggressive plan to pay off my house early.

Resisting the temptation to save

Although it may sound counterintuitive, I want to resist the temptation to pay the minimum on my mortgage and save the extra money. The reason is because I am fairly confident that one of two things will happen with the money we have "saved." One possibility is that we will end up spending the money we have put in savings. The other option is that we invest the money in stocks or exchange traded funds (ETFS) that may go down in value. I based these fears on past experiences.

Ignoring the low interest rate

My goal is to own my home free and clear as quickly as possible. Refinancing from a 4.65 percent to a 2.75 percent interest rate saved us thousands of dollars in interest. However, I can't get caught up in the fact that I won't have to pay a lot of interest over the remainder of the mortgage loan. By paying the same $1,500 we have been paying for the last several years, we can have our new mortgage paid off in 7 years.

Paying on my house until death

When translated from French, the word "mortgage," means an agreement until death. I don't want to be paying on my mortgage until I die. I want to be free of the monthly payment, even if it's as low as our new payment of $900 a month. At the same time, if we ever experienced a financial emergency or job loss, I feel more peace knowing we could pay the mortgage on less income.

Ultimately, when I look at my new mortgage statement every month, I will ignore the payment amount. By paying our mortgage off in the next 7 years, we will have achieved my personal timeline. My goal was to only pay on our current house for a total of 15 years. On the path to get there, we refinanced two times. One time, we took advantage of a free government refinance program. The second time we refinanced on our own because of the rock bottom rate of 2.75 percent. The reason I set the goal is because I want to be free of a mortgage before I turn 50.

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