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Why I’m Choosing To Keep My Mortgage!

Every month since the beginning of 2008 I have tracked my spending and debt balances. That’s nearly 6 years of tracking! 71 times I’ve sat in front of an excel spreadsheet and taken a snapshot of my debt balances. At the beginning of 2009 I also started tracking my savings balances.

My total debt in January of 2008 was $183,359.49. My total debt today is $187,017.81. My debt over the last 6 years has gone UP $3,658.32. Crazy right! What’s even crazier is that I’m not upset one bit.

Let me explain!

In January of 2008 I owed the following:

  • $145,220 on my home
  • $29,312 in car loans
  • $8,827 on credit cards

With total payments of about $2,900 per month.

Today my debt looks like this:

  • $121,584 on my home
  • $65,434 on a rental property

With total net payments of about $200 per month. I say “Net Payment” because the rental has positive cash flow, meaning I make money every month. If I apply that extra money to my mortgage payment on my home I only have to come up with $200 out of pocket. The rent my tenants pay covers all of the expenses on the rental house plus most of my mortgage.

So, do you see why I’m not upset? Sure I have more debt than I did 6 years ago despite my close watch and constant preaching about the virtues of being debt free. But I also have a pretty nice set up.

And then something amazing happened that put the whole thing into question.

On November first I was filling out my little debt spreadsheet like I always do on the first of the month. As I’m typing in my numbers I realized something. The equity in the rental could pay off the mortgage on our home. If I sold the rental I would have enough cash left over to pay off our house.

What?!

I could be totally and completely debt free! I figured that would happen eventually but I thought it was years away. But the recent upswing in real estate prices in Phoenix moved that process along much quicker than I anticipated. Amazing!

Despite my immediate joy I’ve decided to keep the rental and not become totally debt free at the moment. Why? Well, basically it would only improve our monthly cash flow by $200 per month. I would also be giving up all the potential upside of the market for the future. The reward for giving up all the future equity is only $200 per month.

I know there is risk involved in keeping it. But I think for now it’s the right choice. We have great tenants that seem very happy and plan on staying for the foreseeable future and if we had to we could cover both mortgages out of our monthly income. I wouldn’t want to cover both mortgages long term but we could do it while we sold or waited for new tenants.

So that’s an explanation of how and why I could be totally debt free… but choose not to be!

7 thoughts on “Why I’m Choosing To Keep My Mortgage!”

  1. Congrats friend! That’s a damn good position to be in! And here’s to 71 more times you’ll be in front of that computer filling out that spreadsheet, haha.. I think my number is somewhere in the upper 50s right now myself 🙂

  2. Hey there! Nice blog post. I am in the same situation. However, I don’t want either mortgages. If I pay off my mortgage on my rental home, my risk drops considerably, and my net return on my investment goes to 16% a year. I would agree with you though, I would not sell my investment property just to pay off my home to be debt free. That would be like uprooting all of your vegetables in a good growing garden. Just keep reaping the rewards of your financial garden and pay both your mortgages as you can.

    Warm regards,

    Martilyo
    The Angry Millionaire

  3. maria@moneyprinciple

    Wise decision, Ashley, and well done. We are keeping our mortgage as well (have other properties) – for at least five years by which time we would have made enough to payn it all off, keep rental properties and become digital nomads (I was partially raised by Roma people, you see).

  4. If you could pay two mortgages out of your income then why can’t you keep the rental AND overpay the mortgage on your primary residence by the sum of the two payments minus $200 a month?

    Then when it’s paid off, overpay the mortgage on the rental home by TWICE your primary mortgage PLUS the rental mortgage (presumably due to inflation you can raise the rent to cover the $200 a month ).

    If nothing major goes wrong, you could have both properties paid off in, what, dare I say 7 years? (!!!)

    1. We do pay extra on the rental property mortgage. I pay extra there rather than on our primary house because the mortgage is much less over there and it will be easier to get it paid off first. Also, the interest rate is a little higher and isn’t tax deductible. But mostly because it will get paid off quicker. But yes, I do plan to snowball it and get them both paid off asap. 7 years would be AMAZING!!!! I’m not on track for that at the moment but I also wouldn’t say that it’s impossible.

      When I say I could pay both mortgages, I could, but I would have to stop doing something else like saving up to pay cash for my next car, so I wouldn’t want to do it for very long.

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