Mortgage Meltage

A time to build up, a time to break down

A time to dance, a time to mourn

A time to cast away stones, a time to gather stones together

--The Byrds

Heading into year end finds me collecting personal finance thoughts. The biggest move for me this year was, well, moving. I bought a fine little brick house built in 1925. After plopping down a decent sized downpayment, I financed the remainder as a 15 yr fixed mortgage at a respectable 4 5/8% interest rate.

Even with this low rate, however, the $194,100 principal would result in a $75,000 interest expense if I stuck w/ monthly coupon payments over the life of the loan. Given my growing desire to be totally debt free, I started out of the gate with 2x monthly payments. Before the end of the summer, I was at 3x. It was great seeing that principal and interest chunk lower.

In early fall, I began modeling payment strategies that could have this mortgage paid off by the end of 2010. Funded in large part by early IRA withdrawals, I made two large lump sum payments over the past two months. As the books close on 2009, my mortgage principal stands at about $108K--a 44% reduction from the original principal. By chunking things down at this rate, I've saved about $50K in interest expense.

I'm now setting my sights on finishing this off by August. I plan on funding one more large sum payment from my IRA early next yr--first want to make sure I have this year's tax consequences under my belt and understood.

Based on my current plan, and God willing, I have 8 more payments to make.