Today is a landmark day for me – as someone who took on big leverage to buy a condo of my dream!
As shown in the above, my monthly mortgage expense finally dipped below $2,000! It is definitely a big milestone for me as it is a cumulation of relentless saving and debt-paydown that I have done since I took on this loan.
It started with $2,170 per month.
I kept paying down every month and in order to accelerate paydown, I paid extra down whenever I made conscious decision to save money by not doing something.
For example, on days I wanted to take a cab, I would leave home early and take subway and while I am in the subway station, I would be happily go on my bank’s app and make a paydown on principal. Obviously it does not stop there – rather than ordering, I would cook and use what I would have paid more for delivery to pay down my mortgage.
It is amazing that mortgage loans do NOT carry pre-payment penalty – unlike other loans.
IT FELT GREAT TO SEE THE PRINCIPAL GO DOWN EVERY TIME I PAID IT.
HOWEVER, THE MONTHLY INTEREST DID NOT CHANGE MUCH – AFTER ALL I WAS PAYING DOWN IN $10-$50 increments on a loan that had over $500K balance. And the their impact on monthly payment is EVEN DILUTED BY FACTOR OF 12.
However, I kept paying down in small increments. My monthly interest expenses came down in very small increments but I kept going.
And now, the monthly mortgage interest expense is $7 below $2,000.
what is my next milestone?
It is going to be hitting $1,500!
With increase in monthly rate, I plan to use excess cashflow from the property to accelerate debt paydown WHILE allocating more capital into cash.
Long-term inflation is what the governments and central banks want to encourage economic growth.
Liability/debt from pre-covid19 pandemic dollar is now much smaller than what it was on real dollar basis and I am paying it down with today’s dollar, which carries less value than a dollar from last year.
You must balance debt paydown and monetizing your debt – relying on central banks’ money printers.
Inflation is real (as noted below) – healthy amount of debt is very helpful for wealth creation.
BUT YOU MUST STRESS-TEST YOURSELF – even if you lose your job, do you have liquidity or source of liquidity that can keep you stay afloat for at least 6 months?
Anyway, it is a great day for you – hope all of you celebrate your financial milestones as well.
HAPPY INVESTING!
