On our Mortgage Freedom series today we're going to interview someone who paid off their mortgage at 32 years old. And now he and his wife have a lot more money to enjoy.
David Venis and his wife Stephanie live in East Central, Illinois, with their awesome pup named Abby.
Andy Hill: Why you decided to pay off your mortgage?
David Venis: Well, the short story is that payment was just a burden. It just felt so uncomfortable.
I think the primary thing was the interest payment. The loan was $161,000 and the interest rate was 4.5%. And so while in comparison to a lot of things that's not that much, that's still $600 to $700 per month you're paying somebody to borrow money. That just wasn't for us.
Was it your idea to pay it off?
I think it was a little more Stephanie's at first. I always felt like I wanted to pay it off a little faster. But I was still in like the 5 to 7-year range.
Stephanie takes care of our day to day, monthly expenses. She handles that side of it. And I spend a lot more of my time looking at the 3 to 5 year and then the 30-year stuff. So it was really her idea.
She started playing with the numbers and built herself a little Excel spreadsheet and a graph. We started anticipating if we paid an extra $100 here, an extra $500 there, what it would do. The plan to pay it off in 5 years. And then the ball just kept rolling and rolling and we actually paid it off in just less than 12 months.
How did you pay off your mortgage in just 12 months?
We had saved quite a bit of money for this new farmhouse and we knew it was going to need some updates. It didn't have any heating or air conditioning, no air ducts. It needed new electrical and new water.
We lived in our old home and spent 6 months renovating the farmhouse, getting it to a liveable state. Then when we sold our other house in a month.
The plan was that we would take that cash and go ahead and invest it and not put it to the mortgage. But the way everything lined up, we got that big chunk of cash and we thought, we can take this money, put it on the mortgage and then we're only 5-6 months away from having this thing totally paid off.
Once we made the big payment with the proceeds of the other house, we drained all our sinking funds for cars, vacations and general emergency savings. We drained them all.
We knew we were so close that we just threw everything we had at it.
How much did you make from the proceeds of the previous house?
We made about $78,000 and made a $65,000 mortgage principal payment. Because at this point, we're still planning on like a 2 or 3 year pay off plan. But once we hit it that first time and the interest payments cut in half, it's like, “Oh man, we're that close? Okay, let's do it again.”
So it got to the point where a month later we're like, “Okay, now let's go ahead and drain that car fund.” Both cars are in decent shape. I like working on cars, so I'm not afraid to fix a wheel bearing or a set of tires or something like that.
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How much of the savings did you throw at the mortgage?
- We sold that other house on April 26th.
- May 20th, we made a $65,000 payment.
- May 31st, we made a $59,000 payment.
- June 20th, we made another $11,000 payment and that drained us of just about everything but our emergency savings.
We both have jobs. I had to wait for paychecks to come in.
I was going to get paid on a Friday and we actually went in on a Thursday and went ahead and paid the mortgage off. But I needed the money from the check that was coming the next day. We were banking that banks were still as slow as they always were. They were, so it worked out.
What do you do for a living?
Stephanie works in the billing department of an alarm and monitoring company.
I work for a large oil and gas company, a pipeline company.
How did you know to save all that money in sinking funds and emergency funds?
Steph is really the one that started that. She's always been a saver and a hard worker.
When I was growing up and I got my first job, I wanted to work on cars and be an auto mechanic. I don't know if you know this, but auto mechanics, their prized possession is their toolbox. There was a bunch of my money tied up on credit cards in toolboxes.
I couldn't seem to get it through my head that you need to pay that credit card off when you use it for breakfast, lunch and dinner. That stuff adds up.
She had tried to talk to me about it, but I don't know, I guess I didn't really get it. I worked for two years at that dealership and was really struggling to make ends meet. It just wasn't my style of work.
I got really fortunate to get the job with the oil and gas company. We moved from a Southern Indiana to Central Illinois, and Stephanie stayed over in Indiana. I'm by myself for 6 months and at that point, we're starting to transition bills to the new place. I open a credit card bill, and that's when it finally hit me. It's like, what in the world is this?
And of course, Stephanie says, “I've been trying to tell you for two years.” So, it really was her, I think.
We've both heard that women, they're nest makers, they're homemakers, they have that real strong security gene. Wanting to take care of her, that really affected me. Then by getting this new job, I wanted to work so hard. I wanted to prove to myself that I deserve this job. I've earned this job, I can do this job.
I think all of that kind of combined with, “Okay, I'm 21 years old, I'm still relatively young. I've got time to turn this around.” And that's exactly what we did!
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Were you worried about not having that savings cushion or not investing in the stock market during this time?
We told ourselves that if we had an emergency that was more than what we had left in our fund, we could dip into that Roth IRA. We actually still contributed to our Roths and our 401ks the entire time.
There was a little bit of argument, or conversation, between her and I about the 401k and the Roth savings, because we don't max out our 401ks, and I was having a little bit of a rough time at work. I guess the FIRE movement got to me a little bit, so I was struggling.
I was trying to talk her into, “Hey, why don't we start maxing out these 401ks instead of doing this?” She brought up the point of you've got to live life now too. She said, “Besides don't you spend a ton of your time planning and forecasting, and how are we going to make it?”
It's like well, she was right. I've built my own Excel spreadsheet with my own Monte Carlo simulation. It runs a thousand simulated tests and it takes about three minutes for it to actually compile everything. I've done it hundreds and hundreds of times. We're going to be fine if we never get raises, if inflation is 3.1% and if we use 2% less than what the S & P 500's return has been over the past 106 years.
I've run all the numbers and everything was good. We weren't too worried about being able to make the other end because we weren't changing the plan that was going to get us there. We were just working with what we had already carved out with the savings.
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What are you doing now with the extra money that you have?
The first thing is Stephanie's really been wanting to go to Hawaii, so we just booked a trip last week. We're going to Hawaii this December, getting out of the cold weather and spending 8 days out in Hawaii. We're both really looking forward to that.
As far as the extra money, we're building some savings back up. Stephanie's car and my truck are both at about 150,000 miles, they both have plenty of life left in them. But we're going to go ahead and get that car fund back up to where we want it. That way we've got the cash sitting there if and when she's ready for something new.
Then after that, we're going back to a few more home projects. I am still kind of a car nerd. I still like cars, so I'm looking forward to maybe getting a new truck and doing some performance stuff to it.
What advice would you have for someone who wants to pay off their mortgage?
It comes back to that 401k and the Roth. We automated that system for us 5 or 6 years ago andmade it where all that money is coming out before we even see it.
It was coordinated it with raises, with bonuses, with changes to the regular payment. We always budget for two paychecks a month, even though we're going to have a couple of months every year that has a third paycheck.
Setting everything on automatic, on autopilot, it really makes a difference. It sounds so simplistic and everybody says that, but it really is the case. If you set that stuff up before you see it, it makes all the difference in the world.
We used to set goals for ourselves: “We want to save this much money this year.” Then we would hit that goal in September.
We've learned now that whatever number we think we can hit, we go ahead and up it 15% or 20%. We go ahead and throw that goal out there because I promise you if you want it, you'll get it.
Something will happen that you never expected and you will get there. Don't doubt yourself. Go ahead and set that goal out there just a little bit farther.