Two years without a mortgage

It’s hard to say what has changed because so many other money things have changed as well.  DC2 is no longer in preschool so we’re not paying for that, and DH and I are both getting full-time salaries (and we’ve both gotten raises).

Our non-mortgage/non-daycare spending has definitely gone up.  We were in the city the other day without the kids and didn’t even blink at spending $30 at a cafe for two meals (duck confit and bean ragout for DH and blood orange beet salad for me).  We’ve been flying to DH’s family for Christmas instead of driving.  Whenever I’ve been feeling stressed, I hit up donorschoose and drop $25.  And there’s been all that political spending.  And summer camps aren’t cheap.  But, with the exception of DH’s new car (can we really make that an exception?), I don’t think this additional spending has completely caught up to the $750/month we were spending on daycare plus the $1,214.40/month that was going directly to payoff our mortgage.  (Not including property taxes and insurance, which we still have to pay and both of which have gone up quite a bit in the past two years.)

So I guess bottom line– Not having a mortgage has increased our spending, but it hasn’t been a 100% offset.  Not having a mortgage has also increased our monthly cashflow cushion.  There’s just more left over at the end of most months.  The first mortgage-free year (when DC2 was still in preschool much of the year) I was still having to dip into savings on occasion to pay the big bills like income tax or property taxes, but this year I was able to cash-flow property tax from DH’s salary (DH’s salary direct deposits into checking and mine into savings).  We’re not really living on just DH’s salary because almost all of our retirement savings and benefits spending comes out of my paycheck, but for the past year (minus the car purchase) it sure has been feeling like we don’t touch my income.

We’re also now almost getting to a point in which we have to decide what to do with the extra build-up of money since we’re maxing out our tax-advantaged retirement savings (including backdoor roths!) and have paid off all our debt.  We do have a list of important big expenses that we’ve been going through, which is why we’re now at the Kitchen Renovation bullet.  If we still had a mortgage, I don’t think we’d be there.

Has your life changed after finishing a big regular expense like daycare, a mortgage, or a car payment?

(Mis-)Adventures in trying to get a whole house water filter.

I’m allergic to the water in our area.  If I take a bath or the shower filter wears out, I end up with super-flakey skin and sometimes it itches.  Generally we handle this with a shower filter in the master shower and a sink filter for drinking water in the kitchen.  But then I started getting an itchy spot on my back where one of my bra straps hits (sort of on the right side), and we thought maybe instead of a blemish (there’s no bumps) or some kind of neurological problem it might be me becoming allergic to cloth, specifically the water it’s washed in (we’ve already narrowed down laundry soaps I can use).  I’m not convinced that the itchy spot is from the water, but we figured this was something to try.  Add to that that DC2 seems to have inherited a lot of my skin allergies, and the praise one of my colleagues who is allergic to chlorine gives his whole house water filter, we decided this was worth trying.

In fact, we decided it was worth trying back this summer when DH started getting paid again.  (This was our celebratory purchase.)  We decided it so much that I ended up buying a whole house water filter on “60%” sale from aquasana off amazon (quotes because it’s always on at least a “40%” sale).  From online searching, we determined it would probably cost another $700 -$1K to get the thing installed, and we were fine with that.

We still don’t have whole house filtered water.

My colleague had told us it was so easy.  They just hook up to the waterline and put it in your garage, he said.

My colleague does not have a corner lot where the garage is on the other side of the house (with the pipes imbedded in the concrete slab under the house).  There is no real feasible way to put the filter in the garage.  It has to be attached where the waterline comes into the house.

So we had the plumbers out and they said first we’d have to find the water line, which they could do but they didn’t have the specialized equipment so that would mean digging up a good portion of the lawn searching for it.  So they recommended a service who doesn’t do plumbing but just finds leaks.  That guy found our water line… and a leak (a real leak– that part of the lawn was definitely much greener than the rest of the lawn, we just hadn’t noticed).

So we had the plumbers out again to fix the leak.  Our home water pressure improved noticeably.  They still needed to get back to us on the cost of installation of the water filter.

Then weather happened and the plumbers couldn’t do non-emergency stuff for a while.

Then school happened and we didn’t have time to contact the plumber.

Then our sprinkler system started leaking, so we had to have a new sprinkler repair person out.

Then some hose connections started leaking (at which point we began to suspect that the increased pressure was busting out wherever it could bust) and we had the plumbers out again and they were able to get us an estimate on the whole house filter while they were out.

Then we accepted the estimate and made an appointment.

Then the two plumbers who were supposed to come out couldn’t because one had a wife in the hospital and one had a baby in the hospital (both emergencies, though with the baby it was a preemie so not entirely unexpected and the prognosis and eventual outcome was good).

Then they rescheduled for the next week when I was out of town for a conference.  They came out and fixed another hose connection thingy.

Upon further inspection, they realized that the hot water closet didn’t have enough room for both the water heater already housed there and the whole house water filter and told DH to get a shed.  DH took the day off work and went out and purchased a $300 ugly grey plastic shed and spent $30 on truck rental to get it home.  Then he put it together.  Then he realized he’d need a concrete floor or something to use it for the filter.  Then he realized the plumbers wouldn’t be coming back that day.  Then he realized the shed violated our HOA agreement.  [Update:  he has since resold the shed on Cragislist and so is only out $130, not $330, and we no longer have the ugly thing in our backyard waiting for the HOA to notice it.]

After much discussion, we decided to contact the HOA architectural committee for advice.  They didn’t give advice (the helpful lady had stepped down and was replaced by a guy who spent a long time explaining to DH why rules are important) but they gave us a horrifically lengthy and detailed document we would have to fill out if we wanted to get a shed (only wood are allowed, and boy are they pricey and difficult to find as small as we would want).

Then Thanksgiving happened.  Then Christmas happened.  And today is New Year’s.

So now we have three options which may or may not work.

1.  (The one we’re leaning towards):  Install the filter without the pro kit (looks something like this but is 10-year, not 6-year).  This cuts the width from ~44 in to ~22 in and might allow it to share the outdoor closet with our water heater.  We don’t know yet and would have to have the plumbers out again.
2. Remove our tanked water heater (which is going to have to be replaced in a year or two anyway) and replace it with a tankless water heater.  Then install the entire filter.  This should be possible, but it may cost another $2K, one K for the tankless water heater, another $1K for installation.  We have to do more research on this.  If money were no option, we’d be in the ideal situation for tankless as this water heater services two bathrooms and nothing else (meaning if we all took showers and baths at the same time we’d only be using 8 gallons max) and we’re in a warm climate.   Apparently the installation of tankless water heaters could be difficult or could be easy depending on where the hookups are and how big the tubes are.  Some newer tankless heaters have more standard hookups than did older models.  But we have to figure out which is which.  (Our garage water heater replacement will be another tank because we like running the dishwasher and clothes washer at the same time.)
3. We could keep trying to get a shed just for the water filter.

Am I wishing that I’d held off buying this filter?  YES.  Especially since my back hasn’t had that itchy spot for a while (it went away whenever I traveled, so right now my primary suspect is a different environmental allergen).  And the plumbers aren’t returning our calls.

We could cut our losses at this point and either try to return the filter at a loss or sell it on Craigslist at a loss.  But it would also be nice to take a bath from time to time without having to shower afterward (or regretting it later).

So I had hoped to have a happy post about how great whole house water filters are and how it’s changed my life etc…. but… instead I have this warning post about how corner lots and HOA suck and man, home improvement sure can suck away a lot of time and energy.

Have you ever gotten a whole house water filter?  How about a tankless water heater?  Any advice on getting a small (under 6 feet) wooden shed (and does it need a concrete bottom)?

We’re trying the “bunch your property taxes” thing

[HEY– TUESDAY IS VOTE DAY IN THE US!  MAKE SURE YOU VOTE!!!!  LOCAL ELECTIONS ARE IMPORTANT!   Also:

If Ed Gillespie wins then every single Republican in 2018 will replicate his racist, hate-filled playbook. We can't let that happen.

— Leah Greenberg (@Leahgreenb) November 4, 2017

Ditto all the racist xenophobic mailers that have been going out.  We cannot let hate win just because we weren’t paying attention to state and local elections!

This is just a sampling of the racist mailers Republicans are sending to voters across the country. Not a single Republican has repudiated. pic.twitter.com/w2q7m2WH7P

— Matt McDermott (@mattmfm) November 4, 2017

… END SOAPBOX.  VOTE.  ]

This is our first tax year without Wells Fargo paying our mortgage taxes out of escrow.

Our property taxes are 8K/year.  We have a choice of paying half before November and half in June, or paying in full in November.  That means it is possible for us to pay half in one year and 1.5 times the next, followed by half the next year and so on.  Alternatively we could pay 1x each year.

Given our regular charitable giving and other taxes, we’re right up against the standard deduction if we pay 1x each year.  So it makes more sense for us to try to bunch it into every other year.

So, this year I wrote out a check for half the property taxes and we’ll be taking the standard deduction.  We’ll put off our holiday charitable giving to January rather than December.  Next year we’ll itemize.

We’ll see how this ends up working out this year, and next year too.  Hopefully we didn’t make a mistake (especially given upcoming changes to the tax code)!  If a tax plan that limits the property tax deduction to 10K really does pass, then I will send out the second property tax check before December 31st and our annual charitable giving then too.  I put a note in our google calendar to double check on things sometime in December.

Do you itemize your taxes?  Do you play any fun games with timing for tax purposes?

The Last Mortgage Payment

Last month (January):
Balance:$1,510.75
Years left: 0.166666667
P =$1,214.40, I =$10.74, Escrow =$812.79

This month (February):
Balance:$0
Years left: 0
P =$1,214.40, I =$5.98, Escrow=$0, Recording fee: $30
Amount of interest saved in this month’s prepayment: $1.20

So, I know that this is ending a month early.  But what happened is my regular mortgage payment is $2027.19, and there was only $1510.75 left on the mortgage (technically $1510.79 because Wells Fargo steals micropennies from us), so it seemed silly to write a bigger check this month and then another check for ~$1100 in March, only to have them send back ~$1600 from the escrow for those two months (along with the ~$500 that’s still in there after they paid our property taxes).  Cashflow and interest argue that in this specific instance, it is better to pay off the loan than to let them have two months of escrow.

[Update:  After we paid off the mortgage in full, we got the bill for the next month’s mortgage.  Then a few days later we got a note saying that we were not allowed to pay the bill (that we had just gotten), instead we would have to pay the mortgage in full because the mortgage balance was less than a payment.  And the in-full payment was due three weeks before the regular mortgage bill!  For a mortgage that had already been paid. Wells Fargo’s departments really need to talk to each other.]

So we got a final payment slip and sent off a final payment check.  Now we wait for our final paperwork to return to us.

So what does this all mean?

Well, the house cost $265,000.  We have paid down that $265,000 including the $53K downpayment in principal in ~10.5 years.  In total, we have paid $364,161.71 on the house, or about 100K in interest more than the house cost initially (but only $20,761 of that since we refinanced 76 months ago– those big interest costs really do come at the beginning of the loan). We paid $114,873.36 extra in pre-payments since our last refinance.  We’ve saved $18,783.83 in interest (not accounting for inflation at all) by prepaying since we refinanced, but I don’t know how much we’ve saved overall since I wasn’t tracking before the refinance.

As we’ve said many times, we will not ever really own the house free and clear.  This year we’re paying about $8K/year in property tax and $2K/year in insurance.  Those numbers will only go up.  We could rent a 2br apartment in town for about that amount and not have to worry about repair bills.  But we won’t.

How does this change our lives?  Well, we now have about $14,573 extra cash flow each year that we had been sending to our mortgage as principal or interest payments.   And I no longer have to write out a mortgage check every month which should save ~12 checks a year meaning we should have to buy new checks less frequently (daycare still takes checks out of the credit union account– I have lessons and incidentals coming out of the Wells Fargo account right now).

It also means that we will need to keep a high enough balance in both Wells Fargo savings and checking to not get charged monthly fees on those two accounts.  Right now we are already doing that because that’s where we’ve been depositing DH’s reimbursement checks and any side payments or gifts that we get.  But I’ll have to be careful going forward.

Also… I guess I won’t be writing these monthly posts anymore, because I have nothing left to track!  It’s the end of an era!  For nostalgia’s sake, here’s the first one from November 2010.  (And here’s an earlier post about refinancing before I started tracking monthly.  And here’s a popular post on why we did some prepayment of the mortgage but didn’t focus everything on prepaying.)  Here’s the mortgage tab if you want to read them all.

Given that I don’t think #2 wants to be pressured into saving up for a down-payment, any thoughts on what should go in this space?  Anything?  Nothing?

January Mortgage Update and Wells Fargo thinks we’re ready to buy a new home

Last month (December)
Balance:$2,714.41
Years left: 0.25
P =$1,198.91, I =$15.49, Escrow =$812.79

This month (January)
Balance:$1,510.75
Years left: 0.166666667
P =$1,214.40, I =$10.74, Escrow =$812.79

For the past few months our mortgage statement has come with a sheet not about the usual refinancing or home equity line of credit options, but about getting a new mortgage on a new home.  We must have clicked into the “almost done with the mortgage” advertising.

This thought of being ready for a new loan once you’ve finished the old mortgage must be appealing.  With increased incomes over time folks can afford a larger monthly housing payment.  Why go from a small payment to no payment when you could just pay a little more and get a bigger house to go with it?  Many of my colleagues bought much larger homes when they got tenured or promoted, effectively doubling the cost of their housing.

That same thought process can go along with car loans.  Buy a new car after 5 years when your loan is done.  You’re used to the payment, why not get something nicer for about the same cost or only a little more?

We’re a bit odd– most tenured faculty in my department started out with houses under 3K sq feet and now have houses more than 4K sq feet… we have 3K sq ft exactly.  No starter home, no McMansion, just a big house.  While we occasionally think about down-sizing because it means paying less for all the services and upkeep that come with a house, we never think about up-sizing.  Given that we have no need/desire for a larger house than the one we’ve got, it really doesn’t make sense to get a new mortgage.  Maybe there was a benefit to not getting a starter home, even if we ended up paying more for utilities and property tax and so on, because it means we didn’t go crazy with custom-building something even bigger.

We’ve also never gotten used to having a car loan.  Our first car that we owned jointly and paid the insurance on was a graduation/wedding gift/hand-me-down.  We paid for our next car with cash.  We’ve only had a short car loan for the third car that was paid off in well under a year.  So the thought of starting another required monthly payment for a car seems odd.  Going from not paying anything to a regular monthly payment seems painful to us.  But if we’d had a long-term loan, maybe it would seem like business as usual.  Why not get a nicer car for a monthly payment we can afford?

I wonder how much of this buying bigger and better is partly habitual.  You get into the habit of monthly payments, so you don’t think about what you were paying before as a loss, even if you wouldn’t have to pay it anymore if you didn’t buy the shiny new thing.  You compare the additional monthly payment to the niceness of having something new, rather than comparing the full cost of all payments to the increase in niceness over what you already have.

In other words, it feels like the original payment is a sunk cost even if it isn’t because you’re already used to paying it.  We fell prey to this miscalculation ourselves when we bought our house– part of why we didn’t get a starter home was because the mortgage payment for our big house was about the same size as what we had been used to paying in rent for our grad school apartment!

One problem with not having the habit of regular payments is that we’re also in the situation where if we want to buy a new car, we have to come up with 20-30K in a relatively short time-frame to keep up with our usual not having a car payment.  That’s a bit of a spending shock.  Still, it’s one that can be put to rest with a large enough emergency fund and/or a willingness to take on a short temporary loan if it takes time to move around/accumulate assets.  Even if the larger emergency fund isn’t the best use of money, it’s still more efficient in terms of savings than buying a new car every few years would be.

Fortunately one generally doesn’t have to replace a house like one replaces a car (and we’re keeping our home insurance in case of a catastrophic event).  We won’t be buying a new house any time soon.  Even if Wells Fargo wants us to.

How do you think about revolving debt and new purchases?  When do you/have you decide(d) to buy a new house or car?

November mortgage update and dealing with escrow after the mortgage is gone

Last month (October)
Balance:$5,107.51
Years left: 0.416666667
P =$1,189.48, I =$24.93, Escrow =$812.79

This month (November)
Balance:$3,913.33
Years left: 0.333333333
P =$1,194.19, I =$20.22, Escrow =$812.79

Right now we spend $812.79 each month in escrow.  After the mortgage is gone we will be paying property taxes and insurance directly.

There are a number of different options for how to pay for these.  I could continue saving $812.79 each month.  I could pay the insurance monthly via credit card (for a small “processing” fee), and the property taxes in two lump sums.  Or I could save up an additional 10k in our all-purpose emergency fund and pay each of the bills once a year when they’re due.

The last option seems the least hassle, mental and otherwise for me.  Starting in March I will aim to keep our savings account at 31k (though it may take a few months to get there).  In July we pay insurance and in December we pay property tax.  Then we’ll refill as we get paid.  We’ll lose some in say, stock market gains, but it’ll be safer in case DH loses his job.  (Dear Hillary Clinton, please get congress to fund research.)

It is possible that if we both continue to have high incomes that I’ll start playing the pay property taxes twice in one year (and itemizing) and zero times the next (and taking the standard deduction) game and time donations to match, but we don’t have to worry about that this year given my leave last year.

Do any of you pay house insurance and property taxes directly?  How do you save for them?  How do you time payments?

October Mortgage update and totally wasn’t paying attention

Last month (September)
Balance:$6,296.99
Years left: 0.5
P =$1,184.79, I =$29.62, Escrow =$812.79

This month (October)
Balance:$5,107.51
Years left: 0.416666667
P =$1,189.48, I =$24.93, Escrow =$812.79

Turns out these mortgage updates have been a lie since March 2015.  We accidentally double paid our mortgage in March 2015 because our check got delayed in the mail somehow an then we did a last minute online transfer so there was a double payment.  We vaguely remember when this happened, even though we clearly didn’t put it into medium-term memory long enough to wait to send a mortgage check.

I noticed that this happened last month when we got the Sept bill a little early and I was like… wait… why is this not due until October?  Some sleuthing reminded us of the previous mix-up and I decided to just not pay the October bill until this month.  So now the numbers above aren’t a lie except for the few pennies that Wells Fargo steals from us with rounding errors every few months.  I get the numbers directly from our mortgage spreadsheet and apparently haven’t tried to reconcile them since March 2015 or earlier.  I mean, I look at the check and make sure our previous month’s payment went through but I’ve never paid that much attention to the balance– by the time we get the new bill I’m already thinking about the next month’s balance, so the number never threw me off since it looked familiar.  Maybe if I’d gotten two months off…

I’ve definitely had a lot more inattention to our finances than we used to.  That’s mostly because the penalty for getting things wrong isn’t a big deal right now.  Being able to be relaxed about finances is pretty amazing.  We are lucky and I’m glad we made earlier sacrifices to be able to capitalize on that luck.

I thought about just paying off the mortgage again this month, but then I was like… ungh, I’d still have to figure out how we’re going to be saving for escrow and that sounds like a pain.  Plus all the paperwork with actually closing out the mortgage and making sure all the escrow they’re keeping gets back to us and so on and so forth.  We have enough money in our Wells Fargo accounts from reimbursements right now that we wouldn’t have to worry about paying a $15/mo checking fee, but keeping track of that also sounds like a pain.  I am so hassle-averse.

If we have time over the holidays maybe I’ll deal with all of that then.  Otherwise I’ll just keep writing a check each month until March.  Except, you know, last month, when I let things catch up.