We paid a total of $3,572.87 in interest in 2016. I began thinking about it over the course of the last few weeks. I did not see much of a reason to keep paying interest to the bank when I have the funds to pay off the loan in full.
Between my interest earning accounts, I earned a total of $2,738.51. Therefore having the mortgage cost me $1,148.17, that's $3.17 per day. between Monday, February 1, 2016 and Saturday, January 28, 2017.
It got to the point where having the money in the bank isn't increasing my net worth.
|Interest paid in 2016|
There have been several good arguments made in favor of not paying extra towards the mortgage and investing the money in the stock market in mutual funds, like S&P 500.
However, I realized this particular argument does not fully apply to my situation. I have enough money to pay off the mortgage in my CD and Savings account. So my choice comes down to investing the money as a whole in the stock market or liquidating the CD, and combining it with funds in my savings account, to pay off the mortgage.
Now, there will be folks out there who believe that investing the money as a lump sum in the stock market in an S&P 500 fund is the way to go. They are not wrong. I want to make that very clear. I have a feeling that doing so will put me ahead in the long run.
I just don't have the courage to do so.
I would rather pay off the mortgage and invest what I would have paid towards it in the stock market every month.
With this strategy in mind, I called the bank on Monday, January 23, 2017, to close my 60 month CD and have them deposit close to $100,000 in my online savings account. They closed the CD without any issues, and the money was deposited in my savings account on the same day. I received an email confirmation from the bank about the account closure.
|CD account summary|
I had to pay $1081.77 in early withdrawal penalty, so my initial balance of $100.905.97 was reduced to $99,824.20, which was deposited into my savings account.
|Savings account summary|
I initiated a transfer of $126,000 from my savings account into my checking account at 7:34PM on the same day. The money was deposited into my checking account on Friday, January 27, 2017.
I called the mortgage company first thing in the morning, and got the necessary details about paying off the loan. I was told that I need to pay off the balance through a wire transfer. I was given all the necessary details needed to include on the form, such as the ABA number, destination account number etc.
I went to my local bank and initiated the wire transfer at 9:24 AM. They received a confirmation at 9:31 AM. The process was very simple, and it cost me $12.
|Checking account activity|
At 9:45 PM on the same day, my account status on mortgage account was updated.
|Mortgage paid off!|
I was told that I am going to receive my escrow balance check, and satisfaction of mortgage within 30 days. The mortgage company is going to contact the county clerk office to update them regarding this, so that I can receive my tax bill.
I will have to contact the homeowner's insurance company and have them remove the lender from my account and send me the bill for home insurance going forward.
My liquid net worth (including investments) has of course dropped significantly, but I am fine with that, considering I do not have mortgage payments anymore. I intend to put a savings plan in place, and hopefully save close 95% of my pay check, and I would imagine that it will grow over the course of the next few years.
|My current net worth after the pay off|