Back to the
journey and our best investment decision ever. When we purchased our home all
those years ago, mindsets were different. Renting your home meant you were
pouring money out the window. Well, that was one side of the argument. The
other opinion was owning a home meant you would be responsible for maintenance
and repairs, and that was expensive. We believed in the first theory and were
anxious to put our money into something that we knew we could sell if we chose
and get our money back. So, we bought as soon as we were able. In today’s
world, you more often hear that buying a home is an investment. Property has
value. If the property is maintained and the housing market stays strong, your
house value, or your investment, will grow. Of course, over almost forty years,
our property value grew with inflation. What has happened since COVID, with the
explosion of the housing market, was an anomaly. Although our home value went
up during this period, this did not have an impact on our story, at least not
yet.
We were in
our very early twenties when we moved into our home and purchased it just a few
years later. We had accomplished our goal; we were no longer pouring money out
the window. It was some time after that when I came to understand and
appreciate the word equity. Essentially, I discovered that the more I paid on
my mortgage, the more of my house I owned! Because mortgages are front loaded,
the first few years we were paying primarily interest, so we could lay claim to
door handles, the kitchen sink, you get the picture. As our equity grew, so did
our credit and our ability to borrow from the bank. This is not always a good
thing because we, like many, probably borrowed more money than we should have. It
also gave us the ability to obtain the biggest evil of them all, credit cards.
When you are relatively young and have access to money by simply passing over
that dangerous piece of plastic, it makes you feel very powerful. Besides, all
you have to pay is that monthly minimum, right? The bottom line is we made all
those mistakes. We lived above our means.
When we
made the switch to TD Bank, we were able to consolidate all our short term and long-term
debt into the mortgage. Instead of having multiple monthly payments and varying
interest rates, we now had one payment at a very pleasant interest rate. Yes,
our mortgage principal amount had grown significantly but, because of the low
interest rate, we were paying more on the principal and less on interest every
month. I’ve always been a spreadsheet guy, so when I started plugging numbers
in to an Excel document and seeing how fast we could pay down our consolidated
mortgage compared to our former situation, I was amazed! This was a huge lesson
for a couple of inexperienced kids. I would like to say this put me on the
straight and narrow and that I was financially astute from that day forward,
but something else was going on in the background that I was not consciously
aware of. Life was in full swing and living costs money.
I’m off to
enjoy our last couple of days in the sun before heading back to reality. More
next week. I hope you can join me.
