Monthly Updates

August Numbers

This is our first monthly update where I plan to share our numbers at the end of every month so our progress is visible and we can be held accountable. As you can see we’ve already paid down the linear mortgage by €38.652,51 since our move. €38.050 are the extra payments, the remainder are regular principal payments. The large payment we made yesterday is not yet reflected in our numbers because it isn’t cleared yet, so this will be included in the numbers for September.

August Mortgage Numbers

Interest Only Mortgage €98.788 no change
Savings Mortgage* €80.000 no change
Annuity Mortgage €109.442,44 – €188,41 change from last month, just the regular payment
Linear Mortgage €53.059,49 – €157,17 change from last month, just the regular payment
Total Mortgage €341.289,93
Savings Balance attached to Savings Mortgage*  €13.629,65  + €38,50 change from last month
Total Mortgage including Savings in Savings Mortgage €327.660,28

The mortgage is 26,41% paid off, 73,59% is still outstanding.

* The €80.000 mortgage remains outstanding until the end of the 30-year loan. Attached to this mortgage is a blocked savings account where you save for 30 years and receive the same interest as the interest rate that you’re paying on the mortgage. After 30 years there is €80.000 in the account and you pay the mortgage off.

Savings Rate*

August Savings Rate: 47,58%
Savings Rate 2017 Year to Date: 18,16%

Our savings rate in 2017 is not that impressive, because we had a lot of expenses in the middle of the year because of our move. However I’m really pleased with our savings rate for August.

* To calculate our savings rate I deduct everything we’ve spent in a month from our income. Divide that number by our income, and that gives us our savings rate. Not included in the savings rate are pension contributions because those happen before taxes and are mandatory.

Progress towards FI

In addition the mortgage numbers I also look at how far along we are on the path to be financially independent. Since we’re not investing that much just yet this is not a very impressive number. Using the 4% rule we are currently at 1,44% of the amount that we need in order to declare ourselves financially independent. That’s an 0,02% increase from last month…

Looking Forward to September

We emptied our savings in order to make some large extra payments on the mortgage, and in the next few months we will focus on refilling some of our savings goals that we took the money from.

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Mortgage

Extra Payment on the Mortgage!

As I mentioned in earlier posts we received €47.635,85 in equity from our previous house sale. This was not real profit since we paid an extra €70.000 off on this mortgage ourselves over the last five years. Regardless, it was still nice when that amount showed up in our bank accounts mid May.

Our new mortgage provider lets us pay off 10% of the original mortgage without penalties and we can also pay off the equity from our house sale without prepayment penalties. We paid off the 10% out of our savings in the last two months. We get paid around the 19th and the 24th every month, so yesterday we transferred the equity of €47.635,85 to the linear mortgage.

This will lower our monthly payment by about €250 per month, so that is a substantial savings! Our mortgage provider also informed us that since we paid off so much with this overpayment, that our mortgage is now in a different risk class and our interest rate is reduced by 0,35% and for the savings mortgage by 0,3%. According to their own terms and conditions, we should’ve been the ones to bring that up and back it up with an appraisal, but apparently that wasn’t necessary. It’s not all rainbows and sunshine, because the decrease in mortgage interest for the savings mortgage means that we have to up the savings portion of that mortgage. That payment will increase by €12 per month, but the total savings per month are around €60 as far as I can calculate so it’s a net positive. I’ll share the exact numbers when I get the new statement later next month.

We’re now done overpaying on the mortgage for this year and we’ll focus on replenishing some other savings goals that we took some money out of in order to make these extra payments so quickly.

Up next tomorrow is an overview of our August numbers!

 

Mortgage

Paying Off the Mortgage and Financial Independence

The question whether to pay off the mortgage or to invest is one of the most highly debated issues in personal finance. I can see how just looking at it financially, investing might make more sense, but personal finance is also personal. Personally we prefer to focus on paying down the mortgage first. I just really like the idea of owning our house free and clear. I also like the fact that if we don’t have a mortgage payment we need a lot less income, giving us more options. Also the interest only mortgage will have to be paid off after the 30-year term, and the ultimate nightmare would be that the stock market tanks at that time and we wouldn’t qualify for a new mortgage and we would be forced to sell our house.

The plan is to pay off the mortgage in the next 7-10 years and then start investing more aggressively. Right now we do some investing: we invest €100 a month in a stock index fund through Meesman and I also invest 5% of my take home pay. I’m aiming for a 75% stock and 25% bond fund mix. Of course, by only investing this much we’re not making a lot of progress towards financial independence. Using the 4% rule we currently are only 1,42% of the way there to be able to live of our investments. As I said, we will focus more on this once the mortgage is paid off and then without a house payment, we should be able to invest about 10 times what we do currently and our progress will be a lot quicker.

So what do you think? Pay off the mortgage early or invest?

Uncategorized

Week in Review

Lunch
Lunch at the park on Wednesday

As I mentioned in my introduction post, I would like to share not just numbers but also some more things about my life in the meantime.

This week I received some good news on a work project that I’m working on. My work needed to be assessed by some independent body and my project got the highest possible score. They advised to continue without making any changes, so that was really nice. A lot of people congratulated me on it, also the top boss of my department, so that was some nice exposure. I do feel somewhat weird about it because sometimes you can get a bad review even if it’s not because of something you did wrong. Anyways, I’ll take the win for this time!

On Wednesday I took a day off from work because the weather forecast was really nice and I still have a lot of vacation days left over. I really enjoyed the day by going for a long walk in nearby park. I also had lunch there, which was not the most frugal choice, but I had heard lots of good stories about it so wanted to go check it out. To be honest, I ordered a salad and it was okay, but nothing I couldn’t have made myself. Still I really enjoyed the beautiful day and just felt very grateful that I could take a day off with such short notice.

A notable expense this week was a new screen for my iPhone SE. I accidentally dropped my phone two weeks ago and the screened was all cracked. My phone is only a year old so I preferred to fix it rather than buy a new one. That turned out to be quite expensive, €189 in total, blegh! A colleague had her phone fixed at a random corner shop but her screen wouldn’t lock when she was on a call anymore after that, resulting in dropping calls. So I went to an official Apple retailer, but I was less than happy with the price and the duration that I had to go without my phone. I got my phone back on Saturday. From here on out I’ll be even more careful with my phone, what a waste of money!

Saturday night we had a BBQ with some friends and it was really nice. These last summer days feel like a gift! On Saturday afternoon the weather was still nice and we went for a run in the morning (separately). In the afternoon we did a bike ride of around 30km. We brought our own coffee with us, and treated ourselves with an ice cream at the end of our tour.

 

 

 

 

 

How It All Started

How It All Started Part IV: Paying Down the New Mortgage

Our New Mortgage

We bought our new house for €382.000 and took out a mortgage for €380.500. We could transfer our old mortgage over to our new mortgage provider and take out another mortgage for the difference.

We started out with the following mortgage:

Interest Only Mortgage €98.788 From previous house, paid down from €170.500 in 2008
Savings Mortgage* €80.000 From previous house, no extra payments yet
Annuity Mortgage €110.000 New
Linear Mortgage €91.712 New
Total Mortgage €380.500
Savings Balance attached to Savings Mortgage* €13.076,38 This amount was also transferred from old mortgage provider to our new one
Total Mortgage including Savings in Savings Mortgage €367.423,62

* The €80.000 mortgage remains outstanding until the end of the 30-year loan. Attached to this mortgage is a blocked savings account where you save for 30 years and receive the same interest as the interest rate that you’re paying on the mortgage. After 30 years there is €80.000 in the account and you pay the mortgage off.

Our new mortgage provider also gives us the possibility to pay off 10% of the original loan balance per year without a prepayment penalty. Also, in addition to the 10% they also allow us to pay the amount in equity from our previous house as long as we pay the 10% first and then the equity. Paying down €38.050 (10%) per year on this new mortgage is quite a stretch for us, but this year it will be doable because we already had some savings left over from last year.

The Plan

Our plan is to pay off the linear mortgage first because that will help us the most in cash flow making it easier to get to the 10% in the next years. After that we would like to pay down the interest only mortgage because that loan will not pay itself off automatically like the others.

In our next post I will discuss how this plan to pay off the mortgage is linked with our goal to be financially independent.

How It All Started

How It All Started – Part III: Above Water and Finding a New House

In June of 2015 we were finally above water on the mortgage according to conservative estimates of our house value (€195.000). At that time I was just in the middle of a very demanding traineeship and I felt like it wasn’t the best time to move just yet. However, by April 2016 we were so done with our neighbors and wanting to move to the city, that we met with a mortgage adviser and started looking at houses. Unfortunately the market was up again and houses were selling really fast. We’ve put offers in for several houses above asking price, and also had a hard time even getting a showing for houses before they were sold. It was very stressful and discouraging and I felt like we chose the wrong time to buy a house again. Finally, by December 2016 we were lucky that a house went up for sale in a neighborhood we checked out earlier for a previous house sale that fell through. This time we knew that we really wanted to live there, so we could move fast. We were the first to see the house and put an offer in the same day. After two days we knew that the house was ours!

Because the house buying process was taking so long and the housing market was so booming, we had not listed our own house yet. I will admit that I was extremely worried that something would go wrong and our house wouldn’t sell. Our house was sold within a week, but the buyer had some trouble getting his mortgage approved at first, so that was a stressful period. In the end everything worked out and we got the keys to our new house on May 2nd and we transferred ownership of our own house on May 15th.

In 2017 we did not make any extra payments on the mortgage of the old house because we wanted to just pile up savings in case anything would come up during the move. After settling in though we starting looking into paying extra on this mortgage as well. We also received €47.635 from the sale of our previous house in equity. This is not really a profit considering we paid off an extra €71.500, but still we were quite happy that the house sold for €230.500 in the end. In Holland we are required to put down the equity from a house sale in the last three years towards the new house in order to keep the tax deduction for interest paid. So regardless of our plans it would be necessary to use the €47.635 to pay down the mortgage on our new house.

In the next post I will share the details of our new mortgage and our plan of attack going forward.

 

How It All Started

How It All Started Part II: Paying off €71.500 in Five Years

Once we started we were hooked…

After that first overpayment we were hooked and were motivated to pay off the mortgage as soon as possible. Our overpayments are limited to 10% of the original mortgage balance. The original mortgage balance was €170.500, so we could pay €17.050 per year in extra payments without incurring prepayment penalties. This amount became our goal to pay off per year. At first this was very hard to do, but with every overpayment on the mortgage, our monthly payment for the mortgage also went down, so we profited from the snowball effect. In 2013, 2014, 2015 and 2016 we paid off €17.000 each year, totaling €71.500 in five years.  

Savings

There are a couple of things we did to lower our expenses in order to be able to make the extra payments:

  • Budget: we started using a zero-based budget and we keep this up to this day. At first we started a budget in Excel, but we’ve been using YNAB for a couple of years now and love it! Budgeting sounds boring, but I started to love it because it helps us reach our goals but also gives us permission to spend.
  • Insurance and other monthly payments: we started looking critically at our insurances and switched to cheaper companies when we could and made sure we were not double insured for stuff. We also cut cable because we weren’t watching that much tv anyways and switched to Netflix.
  • Grocery shopping: trying to shop vegetables that are in season and on sale and buying buy-one-get-one free deals when it is stuff that we actually used. Also meal planning really helps. We moved to a new city in May and since then we can easily shop at Lidl and Albert Heijn. Lidl is cheaper for most, but not everything. If in doubt we can easily check the price of an item in the Albert Heijn app while we are standing in Lidl. However, we don’t go for the cheapest on everything. For things like meat and eggs we prefer to buy organic.
  • Travel: we love to travel as much as anyone else. We love Scandinavian countries the most, but they are amongst the most expensive countries to go to. So in the past couple of years we’ve stayed home one year, went on two bike trips, camped in Italy, visited Stockholm for a city trip and last year we traveled around Norway for three weeks. Some trips were more expensive than others, but by limiting the number of times we go and balancing between cheaper vacations (bike trip/staycation) or more expensive ones (Stockholm, Norway).
  • Car: we have one car and it is mainly used by J. who needs to car to get to work and public transport is not an option to get there unfortunately. J. is very good at driving his car as economically as possible and he actually gets the gas mileage for his car that the car brochure claims it does. Also we try to avoid using the car for personal trips as much as possible, also for environmental reasons, and use bike and public transport.
  • Curb lifestyle inflation: our income went up by 27,46% between 2012 and 2016. Partly because I graduated, but I struggled to find a full time job in my field for a good while, but since 2015 our income was up. We tried to keep our expenses the same as much as possible. We are both college educated working professional jobs so most of our peers drive expensive cars, have cleaners for their house, go on exotic vacations multiple times a year, use pricey meal services, and buy lunch at work every day. Sometimes it’s hard to be always be the frugal person, but it’s worth it to us.
  • Just don’t buy it: I found minimalism before personal finance and this also helped with curbing our wants. Stuff does not make you happy even if it’s a good deal, and the most frugal thing is just not to buy it.

In the next post I will share how we finally were above water on the mortgage and found our new house in the city.

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