The Crazy (Not So Crazy?) Idea to Downsize to a One Story Home in an Effort to Pay Off Our Mortgage Quicker

When our family moved into our brand-new construction home back in January 2015, we had somewhat of an idea that we were potentially getting the last great deal in our bedroom community outside of Nashville.

But we didn’t realize that would mean the value of our home would increase more than $25,000 each year following.

In our neighborhood, houses are constantly for sale, and often are sold before a “sold” sign can even be posted in the yard.

My wife has been keeping up with the growing selling prices of our neighbors’ homes. It’s no exaggeration: We would easily make $80,000 if we sold our home today.

Contrast this to a decade ago when we bought a town home the year we got married, which happened to be right in middle of the The Great Recession. The value of that town home began dropping almost immediately. When we finally sold it in 2014, we barely made $1,000 off of it.

My wife and I are mutually obsessed with paying off our mortgage as soon as possible; as we have been debt free for 5 years now: No student loans, no car payments, no interest to be paid- other than our mortgage.

Last weekend was consumed by the quest to find out it would make more sense to actually downsize to a 3 bedroom, 2 bathroom, one story home in our area; compared to the 4 bedroom (plus a bonus room), 2 and a half bathroom, 2 story home we have now.

Even with the cost of other homes rising in our town, the $80,000 profit from selling our current home would greatly minimize our monthly payment; which we’re already paying several hundred dollars extra on each month.

We learned that ultimately, the amount of money we owe the bank would remain the same, but with the monthly payment being several hundred dollars lower, we could increase the amount we pay on the principle by that much more. And therefore, we could pay off our home years sooner.

However, it’s still a gamble…

Because at the rate our home is increasing in value each year, this means that two years from now by 2020, our home would be worth $100,000 more than what we bought it for in January 2015.

So while we are still open to the idea of downsizing in order to have a paid off mortgage that much sooner, it might be smarter to wait a few more years as our home continues to increase in value at the rate it is.

Therefore, it looks like our plan is to be working on simple upgrades for our home in the meanwhile, so that not only we will be able to enjoy our current home that much more while we are actually living it, but so that it will also be that much enticing for future buyers.

The problem is, I’m no Chip Gaines when it comes to my handyman skills. That will prove to be the biggest challenge for now…

Lottery Commercials Don’t Target People Who Are Good Money Managers

What’s the first thing I’d do if I somehow ran into a very large amount of money?

Lottery Commericals Don't Target People Who Are Good Money Managers

You guessed it. I would immediately pay off the mortgage on our brand-new house. It would be quite the celebration!

Because I know that I’m paying nearly 100% interest for the 1st half of the life of that loan.

I wouldn’t care about a new car, or a boat, or a big trip. All I would care about would be paying off the mortgage.

Then… placing the rest in savings and investments.

From there, I might consider a family vacation or newer cars; but that would be my last priority.

Yet I’ve never seen a lottery ticket commercial or an injury lawyer commercial showing a winner who joyfully exclaims, “With the money I won… first, I immediately paid off the mortgage on my house, then put the rest in savings and investments, so that I’ll actually be making money for the rest of my life instead of losing it quickly just because I have more!”

Granted, that’s what I’d say.

But apparently, that’s not what the targeted audience for lottery ticket winners or injury lawsuit winners would do, based on what is portrayed in these commercials:

When I see these kinds of commercials, I know that the marketing department for the lottery and injury lawyers are not baiting people like me, who have learned the hard way by living in debt for years, but who finally became debt free after following the teachings of Dave Ramsey, and who are now focused on paying off a mortage ASAP, to better save and invest all future income from there.

Of course, I’m not against the lottery or injury lawyers; I see good in what they do.

I’m just simply deconstructing some of the psychology involved in some of their marketing… the way I’ve pointed out in the past that fast food logos almost always include red and yellow as their main colors to try to make you slow down (like you do at a yellow light) and stop (like you do at a red light) for their restaurant.

Lottery Commericals Don't Target People Who Are Good Money Managers

It appears that lottery commercials are trying to make people think that if they regularly “invest” in lottery tickets, they will stand a decent chance of living the rock star (or rap star?) lifestyle, by blowing the money on depreciating liabilities, instead of assets that will hold their value; or in legitimate, profitable investments.

Perhaps this is what the advertisers want people to think when they their commercials:

“You deserve more money than you know how to manage, so once you win, spend your money on consumer items shown in this commercial, ones that immediately lose their value once you buy them, instead of ones that keep or gain value.”

Lottery Commericals Don't Target People Who Are Good Money Managers

Like I said, I’ve yet to see a lottery or lawsuit commercial that portrays the winner immediately paying off their mortgage with the money; then going on to save and invest the rest. I’ve never heard that even mentioned in one of these commercials, yet it’s the very first thing I would care about.

It really shouldn’t be that ironic.

So apparently, people who make lottery ticket commercials and injury lawyer commercials don’t have me in mind as a marketable demographic.

Maybe then it’s not that ironic that back in 1999 when I woke up in a hosptial after having been knocked unconscious after wrecking on a bike, and an injury lawyer was there as I opened my eyes, offering to help me “win the money I deserve,” I politely thanked him, but turned him down.

And for the record, I rarely buy a lottery ticket.

A True “Status Symbol” Is A Paid Off One, Including Our New House (Which Is Not)

4 years, 1 month.

A True “Status Symbol” Is A Paid-Off One, Including Our New House (Which Is Not)

Dear Jack,

As your Daddy, it is one of one my responsibilities to help teach you how to manage your money.

These days, it’s not as simple as saving more than you spend. It’s just as much about planning further ahead; decades ahead, as well as investing our money; as Robert Kiyosaki teaches in his book, Rich Dad Poor Dad.

In a modern culture where it’s “normal” to be in debt, Mommy and I are doing our best to lead you by example, in hopes you will likely grow up to have the same mindset.

We worked very hard to earn our “debt-free status” (other than the mortgage) back in July 2013; we lived without smart phones, cable or satellite TV, eating out, pets, or buying any new gadgets or appliances; nor can I deny that having you as our only child has had a lot to do with it.

Really, I’m just now becoming more open-minded to the idea of having another child; largely because we are much more secure in managing our money now, and also obviously because we are moving into a bigger house, which makes more sense as compared to our 2 bedroom townhouse we’ve lived in this whole time, up until recently.

And so with that being our norm and our lifestyle for the time leading up to going debt-free, it’s something we’ve naturally maintained since then.

Without our family being “weird” in regards to living without certain things, it’s an absolutely fact we wouldn’t be able to move into our new house.

For the record, we are not able to buy a new house because Mommy and I are suddenly began making a lot more money all of the sudden; in fact, I make less now that I stopped writing for last July.

As you get older, I want you to notice the definite irony in congratulating someone when they buy a new car. Because in almost every case, you’re in essence congratulating them on having to now make monthly payments; the majority of which, at first, goes straight to interest.

They have now inherited a new debt to have to worry about, as part of their family budget.

One of my coworkers, who was a banker for a couple of decades, likes to say this: “Those who understand how interest works, charge it. Those who don’t understand how it works, pay it.”

I recognize that, in reality, the commonly perceived glory of that new car will essentially be gone by the time it’s paid off; since it’s a depreciative asset, unlike a new house. The true glory is when the car is less shiny and impressive, but is paid off.

It used to mean something to see a person driving a nice new car. But these days, it typically just means they’re making payment.

Why should that impress anyone?

Nearly anyone these days can go into more debt by financing a new purchase; not everyone can buy something in cash.

Or if it’s not a car, we can use other examples of perceived status symbols: clothes, electronics, house furnishings, vacations…

However, a true status symbol is a paid off one. Like Dave Ramsey implies, being mortgage free is the new retirement.

I’ve been thinking about this stuff a lot here lately we are exactly 2 weeks away from closing on the new house we are building.

There for a while, it looked like there was a good possibility my paid off car was going to be totaled, when I was hit by an albino deer the night before Thanksgiving.

Thank God, I missed the “totaled” criteria by a couple hundred dollars. I am so grateful that I won’t have to worry about a new car payment, in addition to our mortgage payment on our new house.

A True “Status Symbol” Is A Paid-Off One, Including Our New House (Which Is Not)

I get to continue driving my 10 year-old 2004 Honda Element with 143,000 miles on it! I am so happy about that.

With that being said, our new house is not a true status symbol. Unless we strive to get ahead of the game, it would take 30 years to pay off our new house; I would be 63 years old.

That’s why it’s going to be one of our new challenges to figure out strategic ways to pay off our mortgage early. In a strange way, it’s something I look forward to.

I recognize that for the first 15 years of that 30 year mortgage, the overwhelming majority goes straight to interest, not to the principle. I’m very passionate about taking advantage of the situation by paying as much as we can on the principle whenever we can.

Until we pay off our new house, however many years it ends up taking, our new house is just like any other financed, perceived “status symbol” a person can have.



The 1st and 2nd Half Of My Marriage, So Far

I have now been married 6 years. That time frame can be easily and interestingly divided in half.

6 Year Wedding Anniversary Lake Tahoe

The first half of that dichotomy was where as a married couple, my wife and I had not yet learned the hard way regarding finances.

We kept digging ourselves deeper in debt, on top of school loans, cars, and our nice wedding. Those were also the days we still ate at restaurants, too; which sucked up around $80 each week.

Also during that 1st half of our marriage, our son was born, and we moved away from our big city full of good jobs (Nashville) to my small hometown, where it was difficult to find a job at all.

And now for the 2nd half:

Three years through our now 6 year marriage, we moved back to Nashville, got good jobs again, and a year later, were finally out of debt. We’ve been saving our money ever since.

And let me tell you, we are not the same people we were before. We were forced to learn to become tightwads.

So now here we are, married 6 years, and the 2nd half of our marriage, in hindsight, has by default, been better.

These past 3 years have gotten us to so much better of a place in life. Granted, it’s contrasted to the first 3 years in which we lived in ignorant bliss.

In theory, life is more fun when you’re unaware of your responsibilities and the consequences of poor decisions which you didn’t realize were poor decisions at the time.

It’s sobering to realize that life has to be so much more serious than I had planned for it to be. I used to be so carefree.

The important thing is, my wife and I had each other to depend on through all we’ve learned together so far.

When I think of the “for better or worse” part of the marriage vows, this is the kind of stuff I think about.

The challenges we’ve conquered together (like learning how to strictly manage our money) weren’t fun to live through, but they made us better people.

So really, it’s not “for better or worse.” It’s for better and worse.

And in the strangest way, I actually see the romance in that.

Dear Jack: New Infographic- Rent Vs. Own: Which Option Is Best For You?

3 years, 8 months.

Dear Jack,

I’ve been mentioning to you about our family’s plans to move out of our townhouse and into “a real house with a yard and one that’s in the right school discrict.” (That’s important here in Nashville.)

After having owned our townhouse for 6 years now, we are finally at the point at which we could sell it and actually make a profit.

For now it’s sort of a waiting game, as we continue to build our savings after having gone debt-free a year ago. Meanwhile, the prices in the neighborhoods we are considering moving to are now affordable… but how long?

The paradox: The longer we wait to move from our townhouse (as we continue to put more in savings for the down payment on our next house and watch the value of our townhouse continue to rise), the more likely the prices will also rise on the house we want to move into.

When should we move? We’ve got our sights on early next year.

This brand-new infographic below does a great job explaining which option is better, renting or owning. While it doesn’t relate to us in that we already own our townhouse instead of renting it, it does relate in helping me personally see that by owning it 7 years makes it more of an investment than selling it sooner.

Ten years would be ideal, but again, we have to keep watch on prices of the neighborhoods we’re interested in.

It’s hard to imagine what it will be like actually moving into the house that our family plans to live in for the rest of your childhood.

We’ve been working towards this goal for a while now.

I remember back in the days when it seemed the value of our townhome would stay in the negative forever.

But we’ve worked hard to pay off our debts, save our money, and keep a close eye on what’s going on out there.

Maybe by early next year…




Infographic courtesy of SpareFoot.

Courtesy of: SpareFoot