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August 15, 2017

Paying Down the Mortgage: Meet Stephen, Brad and Patty

Homeownership

Homeownership means different things to different people, but most often it's tied to a sense of pride and future financial stability.

Over time, homeowners build equity in their home through their monthly mortgage payments and changes in their home value.  Remember, early in the mortgage lifecycle as detailed in your amortization schedule more of your monthly payment goes toward interest. Later in the mortgage lifecycle, more of your monthly payment goes toward principal.

We reached out to three homeowners — all at various stages of the mortgage lifecycle– and asked them how it felt to be paying off one of their biggest life debts.  Here's what they had to say.

Meet Stephen: 4–Year Homeowner

Location: Tampa, Florida
Date of home purchase: 2013
Change in home value since purchase: Increase
Mortgage history: Refinanced once to take advantage of lower mortgage rates
Years remaining on current mortgage: 27
Monthly Principal/Interest Payment Breakdown*: About 70% of monthly payment goes toward interest; 30% toward principal
Do you pay more principal each month to help pay off your mortgage faster: Yes
How long do you plan on staying in your home? It depends on how many kids we have

How does it feel knowing you are paying off one of the biggest debts of your life?
"It feels great to know that every month we are gaining more and more equity in our home. While it doesn't fall under materialism, it gives us a sense of pride to own a home and have the stability of knowing we can provide for our family."

Meet Patty: 11–Year Homeowner

Location: Bozeman, Montana
Date of home purchase:  2006
Change in home value since purchase: Increase
Mortgage history: Thirty–year fixed–rate mortgage with no refinances
Years remaining on current mortgage: 19 years
Monthly Principal/Interest Payment Breakdown*: About 58% of payment goes toward interest; 42% toward principal
Do you pay more principal each month to help pay off your mortgage faster: No
How long do you plan on staying in your home: 10 more years

How does it feel knowing you are paying off one of the biggest debts of your life?
"It is a great feeling and gives us a nice sense of security."

Meet Brad: Recently Paid off Mortgage

Location: Bethesda, Maryland
Date of home purchase: 1994
Change in home value since purchase: Increase
Mortgage history: Refinanced in 2002 from a 30–year fixed–rate mortgage into a 15–year fixed–rate mortgage. Interest rates were low enough to take out enough money to upgrade the kitchen and still reduce the monthly payment.
Years remaining on current mortgage: 0
Monthly Principal/Interest Payment Breakdown: Paid in full
Did you pay more principal each month to help pay off your mortgage faster: Yes. Once we had paid off our car, we applied what had been our car payment to our mortgage principal. 
How long do you plan on staying in your home: As long as possible

How does it feel to have paid off your loan and how has it impacted your life?
"Having paid off our loan is a relief and made it much easier to retire with some sort of a financial cushion against life surprises. If my kids need a place, we have a place. It also means I can direct the extra principal payments I was making to my retirement account and general savings."

While these three homeowners reaped the many benefits of homeownership, it's important to know that owning a home doesn't always come with guarantees and requires financial commitment, responsibility and hard work.

* Based on principal and interest payments only on a 30–year fully amortizing fixed–rate mortgage at 4.25%.

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