Paying a Mortgage / 5 Ways

Our Next Life writer Tanja Hester’s blog post entitled “Of Boosts and Bootstraps: // One Story, Two Ways” is one of my favorites. In it she chronicles her accomplishments using 2 different narratives: 1) her bootstraps narrative in which she attributes her success to hard work and 2). her boosts narrative where she outlines how privilege has supported her in reaching her career goals.

I appreciate this post because she answers the question, “which version is true” with the answer, “both.” Both narratives are true. It’s all in how you look at it.

I am currently in the slog of paying down my mortgage and it can be tedious and frustrating. In fact, I could use a perspective reset.

In this thinking experiment I want to first look into what narratives I tell myself about my mortgage and finances. (Related posts about why I want to pay off my mortgage and my overall financial plan.)

Narrative 1: “Woe is me. I’ll never get this mortgage paid.” 

When my head is in the first narrative, I think mortgages are a racket. I was so proud to be able to put down 30K on my 133K home. I borrowed 103K on a 30 year loan and happily paid my mortgage each month. A few years later, I realized how slowly the principal was going down each month. Out of about a $500 payment (not including taxes and insurance), only about $150 went to the principal.

My response to seeing how much money was “lost” to principal each month? It’s absolutely bonkers that the bank can charge so much interest so early on in the mortgage cycle. Being just a few years into the mortgage, I didn’t want to pay any extra towards the principal because because I had just put down the 30K cash I had saved and wanted to start building some reserves again. I needed to be sure I have enough to live on.

I refinanced the original mortgage loan, which had a 6.55% interest rate, to a 5.125% interest rate. A few years later, I refinanced to a 20 year loan with a 3.525% interest rate. Over the first 6 years, I paid off about 10K in principal, so with the second refinance, I borrowed 93K. Even with the 3.525% interest rate, though, the monthly payment of 551.04 came to 273.19 in interest and 277.85 for the principal each month. That’s about half the payment going to interest. When in my “Woe is Me” mindset, I ruminate on the idea that it really sucks how after 6 years, the principal is still just creeping down.

Fast forward to today: it’s been 6 years since the last refinance and I’m finally just paying 185.04  in interest and 355.52 to the principal balance (for a total payment of 540.56). That’s with me paying extra payments including an extra 900 payment by mistake–oops. so I’m thinking to myself, “man, the bank is still taking about $200 of my money each month.”

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Narrative 2: “No more renting! I love home ownership.”

When I’m in my “I love home ownership” head space, I think about how I bought a single family home, just a little smaller than house I grew up in, for just me. (I had lived in 1 bedroom apartments ever since graduating from college.) My house is in an established neighborhood close to shopping, and relatively close to work. I have a bedroom, office and craft room to myself along with a full basement for storage. I have a washer and dryer in my home. This is the first time I had a dishwasher. The original owners added a second living room and a screened in porch–luxury! This was the first time I wasn’t sharing a washer and dryer with anyone. I had 2 bathrooms–one I never used. I had storage enough for a family. The house has just a 1 car garage, but I had 1 car and enough room for a lawn mower, bike, etc. Finally, I have a nice sized backyard– significantly larger than new construction. 

In this narrative, I focus on everything I love about my house to remind myself that I could have bought a smaller home, a town home or even a condo. If I had been willing to buy in a neighborhood I was less comfortable in, or an attached home, a 2 bedroom, instead of 3, etc., I could have spent about 70 to 80K, about 50 to 60K less than my current home. My down payment would have covered a larger percentage of the home price, and I would have had a much smaller monthly payment, not to mention fewer taxes and lower insurance bill. 

The word that comes to mind when I’m in this narrative is gratitude. I was able to purchase a home that met all of my needs, most of my wants and then some bonuses I didn’t realize I could afford.

Narrative 3: “How I was able to purchase a lovely home on my own // Checking My Privilege”

In this narrative, I acknowledge that I am a white woman raised in the Chicago suburbs. I went to a public high school that at the time was considered to be in one of the best districts in the country. I had my own room growing up. My parents encouraged me to get a job at age 15. They taught me how to save. The advantages I had are numerous.

My parents paid off their mortgage early. They also paid for 1/2 of my college. The other 1/2 I paid for from saving much of what I earned, not buying a car, and money my parents put aside for the allowance I received as a kid. I also had the desire and opportunity to go to grad school. I had friends who helped me revise my papers. After grad school, I had the support of my professors to get part time work to hold me over until I found a full time gig. One of my grad school friends helped me revise my intent letter that got me the interview for my current job. I had female role models in college. I knew I could do grad school because I saw a boyfriend go through it. I was able to work part time for my current employer and get advice on teaching from the full-timers. Though I had a bunch of challenges around this time (a devastating breakup and depression diagnosis), I had support every step of they way. I wouldn’t be a homeowner now without it.

Narrative 4: “I almost spent more.”

I looked at over 65 houses over about 6 months when house shopping. (My poor realtor, right?) I could not find a house I loved in my price range so I went back to the bank to see if they’d lend me more money. They agreed to lend me about another 20K. I was lucky that the couple who owned my house before me had won a home through a charity. I made an offer when it had been on the market just a few days. 

In this narrative, I remind myself that I could be in more debt. I could have another 20K to pay off and I’m grateful I don’t.

Narrative 5: “Wouldn’t it be nice if…”

The last story I tell myself about my home has more to do with the future than reality. In my daydreams, I don’t have to pay interest and I put everything I have to pay off the mortgage, or I’ve paid off the house entirely and I can start saving my money to update the kitchen, and bathroom, put new screens on the porch, get new siding… and on and on. This wistful narrative puts me in a similar place as the first one–feeling discouraged and frustrated.

There you have it: 5 narratives all about the same situation and all true. So which should I focus on? Which will support me in meeting my goal? Do I need a new narrative? 

My best answer at this point is to focus on the positive. Numbers 2, 3 and 4 keep me in a good place. I don’t have to obsess about what I can’t control. If I do end up feeling frustrated about the mortgage, I should feel my feelings and move on. Trying to stuff feelings won’t get me anywhere positive either.

I also believe that celebrating the smaller milestones will keep me on the right path. I plan on celebrating every 10K of the pay-down by announcing it on this blog. I will celebrate when I get to 51.5K, which is half of the original mortgage I took out (103K). I’ll likely celebrate when the interest is down to $100 a month. Celebrating will help me get through this slog of paying down the mortgage that is currently 60,859.  

I can also focus on the fact that I now have a partner, 2 step-kids and 2 pets that benefit from my good decisions (and my privilege) of buying this home.

What do you think? What are your money narratives? Which ones are productive for you? Which would you like to let go of?   

Peace Out (and In), y’all,

Jaye