I Paid Off My House Today
We did it. We own our own home.
Before I tell that story, let me back up a bit to when I was 15 years old. My parents lost the house we lived in due to financial trouble, and we had to move on to a boat we half-owned. Living on that boat for two years shaped my life. If you think it was glamorous and fun, read that post for a glimpse of the difficulties we faced. Going through high school without a home to call my own or a place to invite friends over to hang out was really tough.
My parents were amazing, wonderful people. They are no longer with us, but I think of them often and am so very thankful for the love they showered on me and my brothers and sister. My dad, like me, was self-employed, but didn't always make the best financial decisions. Thankfully, I ended up marrying an amazing woman whose parents handled money a little differently. That, and working for Dave Ramsey for about 4 years, taught me a lot about how to handle money the right way. I had already seen first-hand the pain and stress of debt.
Years ago, when the interest rates went low, @corinnestokes and I decided to refinance to a 10-year mortgage. We figured, even if we didn't pay anything extra, we'd own the home just as my oldest became a teenager. We'd have no debt on the house before he turned the age I lost my house growing up. If you haven't yet done the math on the difference between a 30-year mortgage and 15 or 10 year one, please, do yourself a favor and look into it now. You can literally save hundreds of thousands of dollars.
In order to create some encouragement towards getting out of debt, in May of 2010, we printed out a piece of paper with a single square for every $1,000 in principle we still owed on the house. We hung it up on our fridge so we'd see it every day. With each monthly payment, Corinne would figure out how much went to principle and color in that amount. Once we moved to the 10-year mortgage, we got even more encouraged to see more squares colored in with each payment.
We worked hard, we saved, and we made the payments. We even paid a little extra whenever we could.
Fast forward to today, January 25th, 2017, and I've got some fantastic news:
We own our house!
Tonight, we colored in all the squares.
My 7-year-old son Devon helped a bit as well.
How did we do it?
At the end of 2013, I had bitcoin fever and wasn't willing to sell any of our bitcoin stash at its all-time-high price. I later regretted it, because I realized I could have paid off my house and then used that mortgage payment money to reinvest into bitcoin at much lower prices to rebuild my stake. Hindsight is always 20/20.
I didn't want to make the same mistake twice. Last year, as the price started rising, we sold some bitcoin and put it right towards the mortgage. Then we sold some more. As the price neared the all-time-high again, we started thinking, "We could pay off the house!" The price kept rising, and we finally decided to do it. Thankfully, we didn't have to sell all the bitcoin, but we sold enough. Today, Corinne got the final payment amount, went to the bank, and sent a wire transfer. Our house is now our house!
I'm so excited and so happy, it's hard to describe. I know peace and security are largely stories we tell ourselves, but this story sure sounds good right now. No matter what happens in the future, I know I've worked hard to position myself and my family on a solid financial foundation. I essentially worked two full-time jobs for four years as I turned my code into a company. I've now been full-time self-employed for over five years and our business is still going strong.
Starting now, each month, my family will have an entire mortgage payment worth of income to save for travel, to give to those in need, to invest in mutual funds beyond just retirement, and (or course) to put into some more cryptocurrencies. Tonight we celebrated with a nice sushi dinner!
Here's a quick video of our celebration dinner:
Financial freedom is something few people have the privilege to enjoy. I'm so very thankful for the experiences I've had which led up to this moment. I'm already thankful for the future.
Thank you for sharing this moment with me.
Previous #journal entries: 1, 2, 3, 4, 5, 6, 7, 8
Amazing read, thanks so much for sharing your journey. As a father to two young boys this really hit home. ✌️
I'm really glad you enjoyed it. :)
I just came across this very old story on your house when I was looking through your blogs to find a guide on Bitshares.
You took two jobs and paid off your mortgage early. You learned the damaging impact of compound interest, did the maths and formulated a plan to defeat it. Well done!
42 years ago I was working two jobs to finance my first one-bedroom flat. It cost GBP 13'000. My first salary, as a beginner banker in the City of London was £900 a year. My second salary, as a nightime bingo-caller was £1'250. The bank rules didn't permit me to have a second job, but there was no way they could have found out. Back then it was so hard to get on the housing ladder. You had to really struggle, make a lot of sacrifices and compromises. Two jobs and a lodger was a necessity.
Some people today say house prices are too expensive for the ordinary guy. This just makes me laugh. They feel they have a sense of entitlement, and won't make sacrifices. Smart-phone or house. Netflix or a second job. Lodger or space. They won't make the tough decision.
In 1975 the interest rate on my mortgage was 12%, so all of my second salary went in mortgage payments.
I had nothing left to live on. I spent nothing, not even a TV. I moved in a girlfriend and got her to pay some of the mortgage interest instead of rent. Having a girl in my bed was good, but apart from that it was annoying with two people living in such a small space, so I sold the flat two and a half years later as part of my strategy of separation from her.
I made a good profit. I sold the flat for £23'000 after owning it less than 3 years. Nearly doubled my purchase price and made tenfold my equity. I learned that borrowing money can leverage your profit.
From 1975 to 1985, inflation was very high and it seemed like house prices were guaranteed to rise forever.
Roll forward to 2015. My bank was closing so I had to re-mortgage. I thought of paying off the mortgage in full. I had the assets - in investments. With interest rates below 1%, I figured the 3 % dividend yield would more than cover the mortgage interest.
6 banks bid to lend me the money. Finally I took out a 100% mortgage, (yes, I know that's illegal for the bank - but they are salesmen, and they need to do the deal, so we bent the rules a bit here, and a bit there to get to the 100%). I split the loan into 6 tranches with fixed maturities of 0 years (Libor float) to 5 years, all slices at fixed rates below 1%. My average interest rate was 0.89%.
Since then, a couple of the slices have matured, and I have rolled the maturing slices for 5 years at a new fixed rate. The interest rate on most the recent slice rollover was fixed for five years at 0.99%, so my average rate stll remains below 1% per annum.
As far as I am concerned, this is free money. Anyone should be able to make long term returns well in excess of 1% a year. That's why I didn't pay off my mortgage like you. I have more exciting investments to make. Sure, the leverage could go the wrong way - house could prices fall, equities might fall, gold somtimes falls, bitcoin falls, and interest rates could rise. It's a risk I'm willing to take. I might not retire so early if it goes wrong. Meanwhile, I am gradually increasing my bitcoin exposure, aiming for the 5% to 10% range. Could get there faster than expected if the price continues to rise.
Advanced financial calculations should factor in risk (and systemic, devastating risk as well). There's more to my story you can read here: Living on a Boat for Two Years Shaped My Life. My parents didn't respect debt and it bit them hard.
Be careful. Playing with debt is playing with fire. You're banking on the idea that you're smarter than the banks who get bailed out by governments. IMO, you'd be better off with no debt and using your income to work for you all the way, without risk. Right now, you're taking on the risk, not the banks, because if we hit another 2008 crisis they will do bank bail-ins instead of bail outs. People will become part owners in worthless banks. They will have "shares" that are worthless. It's some scary stuff. We should plan accordingly and for me and my family, being out of debt is the best move.
You are indeed absolutely right. Playing with debt is a dangerous game. When the next crisis hits - maybe bank bail-in, nuclear war, plague, south american default, new digital US dollar, (defaulting on the old one), or housing decline, those with too much debt will get slaughtered. In the back of my mind, I've always thought I had a plan, A,B,C,D and E if an asset class collapses, but I will re-evaluate how it would work out in a range of scenarios - and how I would feel. On the latter point I have some experience. I got divorced in 2008 and had to sell every asset I owned at the bottom of the market. House, car, pension fund, shares, gold - basically everything. Financially it hurt like hell, but I was happy as a lark as I had my work and could use the leverage of future salary, (in part that explains the 100% mortgage I now have), to re-leverage and get back to where I was before I gave it all away.
Well now I am back to where I was, l agree, it's a good time to pay off some of that debt. I will work out a plan. Hate to sell my BTC though.
I will read your other articles - e.g about the boat. There's a lot of your blogs I plan to read. I can see it is very high quality. You write well.
I think Bloomberg has a stress test function. You put in your asset allocation, and it tells you what would have happenned in virtually every crisis since the South Sea Bubble. It's going to be interesting to play with, but the obvious flaw is that the next crisis is a black swan and they have no data on that. Also, it can't tell you what happens to crypto, or these new things that everyone calls alternative investments.
Thanks for the compliments, I do appreciate it. Sounds like you've got a good plan and you're thinking things through. Good luck!
That's an unreal story, it is one for the ages man.
As a Realtor now of almost 30 years, I can honestly say I am proud of you guys.
The lessons in this blog post you share + the ones your kids will learn from this being good stewards that you are - really you need to be commended on several levels here.
None of that is lof on me, not the bitcoin lesson in here too.
Thanks Barry. It's been an amazing ride.
Congratulations! It's like that you have passed through the eye of a needle! Good job :)
It's such an amazing thing to have no mortgage! To own my house! To know this thing is ours, no matter what we face in the future.
Congratulations!! What a huge step towards freedom.
Congrats brother! Upvoted. Really great news. Proud of you man.
My comments above are very true and sincere, you are right! Proud and good lessons!
Agreed.
Thank you!
Now my next mission is to figure out who this Blazin8888 character is who dropped $130k on STEEM. Hahahah. :)
Luke, congrats my man! It's such a great feeling not to owe on your home. I own my primary outright. Now, my rentals....those I'm loaned up on and joyfully so. ;-)
Hey. Yeah, funny story there... when we first moved here from Southern California, we were like, "What? Houses are how cheap? We'll take two." We literally bought a rental property about a year after buying our main property and after reading Rich Dad Poor Dad by Robert Kiyosaki. We thought debt could be used to our benefit (even after everything I went through). There were so many times looking back I wished we had never bothered with that. At one point, the house lost $40k in value (on paper) and looked like a mess. Thankfully the market here in Nashville is going crazy now, and we've got a great property manager and some consistent renters. We may toy around with paying it down some more, or we might just leave it alone. Either way, we actually have some equity in it now, so that's nice. Less of a liability and more of an income creating asset. :)
Nice, yeah I've been hearing about the booming Nashville market from people for a little while now. Alot of people relocating there rather than crowding my streets in sunny south FL. Friend of mine wants to go check it out for a possible re-location, may take the trip with him see if I like it.
Although, I really do not like country music....pretty big there I believe?
Nice! Let me know if you do make it out here, maybe we could get a Steemit meetup going. Nashville's housing market is insane right now, that's for sure. The weather isn't that nice and I have a friend who went the other direction and moved to Florida. @corinnestokes and I don't like country music either. In fact, we rarely go downtown. There's plenty of other great stuff to see and do though.
Oh, man! I'm so happy for you, Luke and family! :D Truly a blessing. This is a real victory for cryptocurrency, and concrete proof that hard work and dedication will always win at the end of the day. Man, I was teary-eyed while I was reading the post! I'm just so overjoyed for you guys!
:)
Thanks so much, Jed. It's amazing to think how much of my life and effort over the past... I dunno 10+ years or so are wrapped up in this post. It's an amazing feeling. Thanks for sharing in our joy. :)
Man, as someone who knows you on a personal level, at least to some extent, I know how dedicated you are to everything you do that's why I'm so glad that you're reaping the rewards from all of your effort :D
Thanks Jed. The things we earn through dedication and hard work always feel that much more special.
Congratulations! You will enjoy not having those house payments, for sure! My strategy was to negotiate the lowest possible payment and let everything else float (interest rate, length of loan). Then I paid extra every single month, every spare dollar - which all went to the principal. Within 2.5 years, I was done. It gave me so much independence, I've been able to call my own career shots since. Here's to your future of financial freedom!
Nice! Well done. That's real freedom. :)
You will enjoy your freedome, too! : )
Well done Luke! Look forward to chatting about this more over at SunshinePHP!
Pablo! Great to see you here. Yes, definitely looking forward to talking about it and hanging out. We're adding a couple extra days in Orlando for vacation also. :)