Free and clear

Yesterday during my lunch break, Elise and I drove over to the bank and wired a large sum of money to Colonial Savings to pay off our home mortgage in full!

We bought our house in 2004 and made our payments at whatever interest rate we’d gotten locked into at the time. We refinanced for another 30 years in 2012 at a 4% rate, and we’ve continued to make our payments on time, and I’d throw a little bit at the principal each month. We were considering refinancing again at ~2.5% and doing the math to see if wanted to entertain a 15-year mortgage but, for some reason, we just couldn’t bring ourselves to pull the trigger.

I’d recently had a conversation with my good friend Eric. I told him I was a bit concerned with the current positive state of the stock market, specifically technology stocks. I asked if I should pull some out before a downturn. He said, “Yes, you should. Pull out enough to fund your next venture!”

“I don’t have a ‘next venture’ right now.”

“You don’t have a sell strategy either. Figure out what your sell strategy is and what your next venture is going to be.”

So I sat on that for a while. And I went to a lake house with my family and my sister’s family for a week. I’d work downstairs during the day and we’d take the girls on the boat in the evening. And I’d think about my sell strategy and next venture.

It was on the morning of Friday, August 21st that I came up with my sell strategy. It was one of those moments when I really wished my dad was still alive so I could ask him what he thought I should do. And then I remembered what a counselor told me 11 years ago. She said, “Josh, your dad had done everything that God needed for him to do here. He’s given you everything that you need. Now God needs him.”

Confident that Dad would agree, I went with my gut and decided my sell strategy was to sell enough shares to pay off our mortgage in full and be able to cover our capital gains tax.

Our investment portfolio over the course of a year

Over the next few days, I carefully analyzed our entire portfolio and picked the number of shares in each company that I would sell. On the morning of Tuesday, August 25th, I executed my sell strategy.

Worth noting here that I’m working with individual investments that I’ve managed in our brokerage account. Elise and I have no other debt beyond the mortgage. I feel that we make smart decisions with our money. We have retirement savings in the form of IRAs and a current 401(k) through my employer. We have a funded savings account. We have an emergency fund. I’ve always looked at our brokerage account as “play money.” I’ve maintained a philosophy that if I were to lose everything in our brokerage account, I must be okay with that. Three investment tenets that I’ve maintained are 1) invest in what you know and love 2) buy and hold and 3) reinvest dividends.

Ordinarily I would only look at my monthly statement so I could update my investment spreadsheet that shows our account value over time. It wasn’t until tech stocks, specifically Apple and Tesla started really increasing in value that I realized my play money was turning into real money. And while I must be okay with losing any of it, to wait for that to perhaps happen would be dumb.

I thought about a myriad of things we could do if I sold. We could reinvest in something more conservative, like ETFs. We thought about buying real estate. We thought about moving. I thought about land and boats and RVs.

I pitched the idea of owning our home, free and clear to Elise. I was a little nervous, only because I’d put so much thought and planning into it. There was part of me that was afraid she wouldn’t buy in. So I wrote down all my reasons why we should pay off our mortgage. What it really came down to was peace of mind. The #1 thing that stresses me out financially is our home.  I worry about losing my job because I worry about how we’d pay the mortgage.  Our mortgage is our largest monthly bill and our only debt.

If something were to happen to me, I worry about Elise and the girls and if they would be able to keep the house.  I worry that Elise would have to sell it, uproot the family and endure the stress of having to find a new home, or move into an apartment, or burden family/friends.

I read and read and read and got all kinds of pros & cons and mixed messages about paying off your mortgage early or investing more to build wealth. I had to make it a simple decision, and again, that came down to peace of mind.

Elise agreed, and our “next venture” became being 100% debt free and owning our house. I requested a payoff statement from our mortgage lender and it was in my inbox the next day. It gave me the exact dollar amount to pay off our mortgage in full.

When you sell investments, there’s a thing called T+2. That’s how long the transaction takes to settle. T is for “transaction date” plus two (2) days. Immediately after I sold my shares, that cash was available in my brokerage account to reinvest if I wanted to. I didn’t want to reinvest. I wanted to cash out. The money became available for withdrawal first thing Thursday morning. I transferred the money to our credit union and it was there, waiting for us on Friday. I called our bank and our lender to have them help me fill out the wire transfer authorization form.

And so yesterday, Elise, Mara and I drove to the bank and shot our wire transfer request through the vacuum tube at our credit union. We were told to pull around to the front of the bank and our banker came out to have us review the document and provide final signature on the funds that would pay off our loan.

This morning I kept hitting refresh on our mortgage account, anxiously awaiting to see that $0 balance. It started to stress me out, so I decided to take a break and go for a run. When I came back, I hit refresh again to find those six beautiful words.

Your loan is Paid in Full.

“When you pay off your house and burn the mortgage, take off your shoes and walk through the backyard. The grass feels different under your feet. The borrower is slave to the lender is deeper than just a mathematical discussion. It frees you up in places you don’t even know you’re stressed in until you don’t have the stress anymore.”

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