I was obsessed with being debt-free by 40, but I took on another $100,000 mortgage to buy a house anyway - and I know it was the right decision
Courtesy of Katie Oelker
- Inspired by the FIRE movement, which helps people plan to retire early, my husband and I decided we wanted to pay off our mortgage early and be debt-free by 40.
- However, now that we're in our early 30s, we decided it was worth pushing our goal back by about 5 years in order to buy a bigger home for our growing family.
- I was sad to let go of the dream of being debt-free by 40, but I had to strike a balance between our plans for the future and our family's needs today.
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Some people say that buying a home is not a good investment and should not be viewed as one. While I can't necessarily disagree, I think a lot of that depends on where you buy a home and the state of the housing market at the time.You can go back and forth on the math all day long, but to us, homeownership was a solid financial decision and one we are glad we made when we did.Advertisement
In 2014, when my husband and I were nearing the end of our rental lease, we realized that we could likely buy a home and have around the same monthly payment as it would cost us to rent a larger apartment.
We started looking around and found our first home: a great little split level in a lake town just outside of Minneapolis. We put an offer on the house the day after it went on the market for $210,000, and when it was accepted, we were able to put $20,000 down.
We had to balance our needs today with our plans for tomorrowWe could have stayed in that house - but we decided not to.
Although I'm a big fan of the FIRE (Financial Independence Retire Early) movement and loved the idea of paying off our mortgage by the time I turn 40, the idea of more space for our growing family was enticing, so we remained open to buying another home. We knew we wouldn't take on more debt if it wasn't the perfect fit, but after looking for a year and a half the home came along. It was exactly what we had been looking for and most importantly, was still within our budget!We knew in order for our offer to have a fighting chance we had to put it in as non-contingent (meaning we didn't have to sell our first home to buy the next one). To make that possible we really had to buckle down to increase our savings so we could put 5% down. Luckily ours was the first offer to come in, and it was accepted. The new home cost us $369,000.In the five years since we bought our first home, it had appreciated significantly. We ended up selling for $270,000 and netted roughly $82,000 after paying all fees and closing costs.Advertisement
With that $82,000, we used $4,000 to pay off the remainder of my student loan debt and will send the rest to the new mortgage. That will leave our mortgage balance right around $263,000. Although this is roughly $100,000 more than our last mortgage balance, my goal is to pay it off within 12 years.
Our only other remaining debt is our car loan (which has about $4,000 left) and we are planning on paying it off within the next few months. Once that loan is paid off we will roll the $675 (the old student loan payment plus the old car loan payment) into the new mortgage payment.
I still plan to be debt-free - it will just take longer than plannedIn order to pay off our mortgage within 12 years (moving my debt-free age closer to 45), we would still need to put an additional $1,000 towards the principal each month. How are we going to do this? Our plan is to push the extra money we were saving for the house down payment into our new mortgage and continue to stick to our budget to free up extra money.Advertisement
Being the money nerd (and financial coach!) that I am, I keep meticulous tabs on our money. I have a spreadsheet that lists all income and fixed expenses, and track all our spending through the Mint app. I've created budget categories for most of our discretionary spending, and each week check in to see how we are doing. It takes time and effort, but it's these habits that have allowed us to save more money to put towards a new home and our dream of being debt-free as quickly as possible.
It's definitely a stretch, but we are up for the challenge. I am also well aware that life happens and our plans to become debt-free so quickly may change.I definitely have mixed feelings about taking on more debt as we try to pursue FIRE. On one hand, we are finally able to host get-togethers, parties, and have a pool for lots of summer fun, all high on our list of things we value and that we couldn't do before. On the other hand, I was sad to let go of the dream of having our smaller mortgage paid off much quicker than we will be able to do now.Advertisement
Despite the new house, my plan is still to be debt-free by the time I am 45. Whether or not that goal happens, I know the trade off will be worth it. The memories we create with our family in the new home will be priceless.
Katie Oelker is a financial coach, personal finance writer, and podcaster. When not working, she enjoys spending time with her family, practicing yoga, and planning her family's next adventure.You can find her at KatieOelker.com and on Instagram at @katieoelker.
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