It’s official — I own my house outright! Well… depending on how you look at it.
Technically it’s mine
By all government records, I own the house. Buuuuut I was only able to pay off the mortgage because my mom gave me the money as a 0% loan.
Her reasoning was that I’ll get the money at some point anyway. And since that won’t be for another 150 years,* she said I may as well benefit from some of it now by getting a no-interest loan from her.
Hard to argue with that. Or with saving the approximately $2,500 I would’ve paid in interest in the next few years.
So I accepted.
Of course, I first made sure she would have plenty left in savings if she gave me this loan. I didn’t want to strain her finances for my own benefits.
But as most of you know, she’s very frugal and has always made sure she has a healthy cushion. So she assured me that the loan wouldn’t imperil her finances.
So while she was here, we went to her bank, and she got a cashier’s check, which we took over to Bank of America and paid off the mortgage. A few days later, I got confirmation that my mortgage was paid in full.
But I do still owe someone money for the mortgage amount. It’s just not the type of owing where I could lose my house if I can’t repay it. So I guess my house, like Schroedinger’s cat, is in a quantum state of both being owned outright and having a loan on it.
*The time period she has agreed to stay alive, so I don’t have to deal with losing her. I should really get that agreement written up and notarized so it’s binding.
The nitty-gritty
We made sure to have a written agreement — both to protect her from a gift tax and to protect me in the extremely unlikely event that the IRS wants to know how I paid off $32,500 in one fell swoop. When Mom picked up the cashier’s check, we had the employee notarize the agreement, so it’s nice and official.
The terms are that I’ll start making payments of no less than $600 a month starting in December and that the full amount should be repaid within five years.
A surprising turn of events
Funnily enough, the loan terms technically raise my base housing cost a little.
My absurdly low mortgage was $612.57 a month, but now each month I’ll pay Mom $600 and will need to set aside $230ish each month in preparation for property tax and insurance premiums.
So my bare minimum housing costs will go from $612.57 to $830. But by the time I realized the calculation error, everything was notarized. And given that I was make payments to Bank of America that were at least twice the base amount, even $830 frees up at least $400 a month.
Which is good. Because the patio project proved a little more expensive than anticipated — and more notably, the house very much needs repainting and the bathroom will get tiled before too much longer. So my savings will take a $7,000 to $8,000 hit. So for the next several months, I’ll want to increase the amount I put into savings.
Still processing
Honestly, it hasn’t completely sunk in that I technically own my house free and clear now. Partially because, as mentioned, I still owe the money, but also because it’s such a huge shift in mindset.
Each month, I’d throw a bunch of extra money at the mortgage, knowing that I was one step closer to being done. Which I anticipated would be another three and a half years.
So to suddenly be done with trying to pad my mortgage payment is a bit strange. Good strange, but still strange.
So maybe I’ll just keep opening the email the bank sent me on Monday until it’s less of a foreign concept.
Anyone else have a story of a house payoff? Or near-future payoff?
Cool! Good for you
Thanks!
aww, this is such a nice thing!
I had a moment of joy of seeing my loan paid off, but it was just cause my note is changing hands due to my refinancing. Still, it’s something to look forward to!
(Technically I doubt your Mom or you would have to worry about gift tax issues, but a gift of that size would require filing form 709, if I understand correctly)
Yeah I think in most cases the gift tax only applies if you end up going over a very large amount in a lifetime. But still, we’re great at overthinking, so this was no exception.
And hey, it might’ve been brief, but you got a glimpse into the future. And with a refinance I’m guessing you’ll be making even faster progress if you pay any extra principal.
Love this!
As someone who owns outright, get ready for questions that will at first seem confusing, then silly, then rather maddening as you have to explain again and again that you OWN your house.
How did this come up? Friends were talking about property taxes going up. I mentioned that would be a big bill coming up for me. I got quizzical looks, then someone finally said, “so you bank screwed up the escrow?” I explained I owned it outright. They said, “Oh. I didn’t know you could do that.”
I wish I could say that happened only once. I can’t.
I… I… Woooow. It’s upsetting that people don’t realize that, yes, eventually you own your house outright. The whole thing about a mortgage is that it’s a term loan for goodness sake! But I guess between people often doing starter homes and then upsizing as the family grows and also just 30 years away seeming so far in the future, I guess it makes sense that it’s not people’s first thought. But it’d be nice if it was their second thought.
Funnily, enough, four days after getting Bank of America’s “Congrats you paid off your loan” email, I got a letter in the mail from the escrow department announcing they’d determined there would be a shortfall and asking me how I wanted to set up payment. I wonder who’s going to break it to them?
Yes, This.
Congratulations! That’s excellent.
I think we will try to do the same for our kids. I don’t want to spoil them by giving them everything, but access to 0% interest loan is a good help to them and we’ll be able to afford it. I think it’s better to keep interest working for our family than against it.
The only potentially weird thing would be that your mother could have invested the money and hoped to get a better long-term growth rate – 150 years would compound quite a bit ;-). I used to be more about the math of the stock market compound interest being better than paying off a mortgage, but the mental shift is nice when you can eliminate that big expense (we still have 5 years before we get there, so I’m just speculating).
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Good point — if she’s gonna live 150 years, she might need to concentrate on bulking up retirement more!
But seriously, I think it’s a great thing you can do for your kids. And if you’re concerned about spoiling them (and interest rates aren’t crazy) you can always let them get a regular mortgage and work on it for a few years to get a sense of the responsibility that comes with owing money/how much difference a little extra on payments can make and *then* offer them the arrangement. But even if you do it immediately, I think that would be fantastic. And I’m sure you’re raising them in a way that would mean they’re not spoiled, let alone spoiled enough to take the 0% loan for granted.
Congrats on owning your house! Seriously you didn’t have much left to pay off anyway but saving on interest is awesome. We have put extra funds toward principle and saved thousands in interest.
Thanks! And yeah, when Tim and I bought (I’m being generous here since nearly all the funds that went into our mortgage were mine, and the ones that weren’t were rent from my ex-in-laws) the housing market had barely started to recover and it was a foreclosure. So while I’ve put a lot of money into the house, I still got a great deal — and most homeowners have to cough up plenty of repairs/upgrades as time goes on anyway.
Congratulations! We recently paid off our home using a hefty chunk of savings. It is such an incredible feeling of relief but we started off Day One repaying ourselves as if we still had the mortgage. Every two weeks we deposit a half- payment back into savings, adding extra anytime we have the opportunity. Seeing the tax bill and insurance notice (both due at the same time) can really make your heart skip a beat. I’m so thankful we had the savings set aside to pay both without even so much as a hiccup in our budget. It really does help to set aside tiny amounts as often as you can because it adds up quicker than you think.
I’m always so impressed with people who a) get enough in savings to do this and b) are able to bring themselves to do it. I get so antsy when the savings account balance goes down! But it really is the smart thing to do, especially with bank account APY so low. And yes, I think it’s a great idea to make repaying yourselves a priority. It gives you a double sense of security — outright homeownership *and* a plumper savings account balance!
Congrats on your recent payoff!
Congratulations!
Thanks!
Frame that congratulatory note!
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Ooooh, I like that idea!
I’d love to do something like this for my boys down the track – but with the median price of houses in Melbourne, Australia being $1,022,927… I definitely couldn’t swing it.
Congratulations. You now have security. Worth more than gold.
Congratulations! In 2011 I paid off my old house. I purchased a new house in 2019 with a 48% down payment then recently I sold my old house and completely paid off the new house.
Wow nice! You’re kickin’ butt financially!
Congrats! You will feel such a lightness of being able to breathe freely.
Wonderful that your mom was able to lend you the money at such a great interest rate.
What a great thing for both of you!
Yeah, it’s very generous of her, but I know she also feels better providing me with some security. So I guess we both win.
My parents offered me a loan to buy a house. At first it was with low interest, but after a few payments my dad said he would skip the interest if I promised to stop sending calculation spreadsheets. It’s been really nice, and I hope to pay it off in the next five years. They have kindly offered months off of paying so that I could get work done. I think it drove them nuts to see things that needed to be done.
Haha yeah my mom suggested I keep my payments to a minimum so I could get some improvements done around here. Aren’t parents nice? But I love that you were sending your dad calculation spreadsheets!
Congratulations!! Paid mine off in 2017, and still have the letter from Wells Fargo hanging in my closet where I can see it every day !! Its a GREAT feeling!!
Yeah, it’s pretty amazing. I’m still waiting for the letter since I need to know when I can expect my escrow money.
It’s been such a week I missed this: congratulations!! I’ll witness that 150 year agreement if you get it drawn up 😉
Our payoff is so far away I’ll just have to bask in the joy for you and your paid off loan. Thanks for sharing that 😊
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Happy to share anything that lets people bask. And of course, even now our areas have very different housing prices, so in your place I’d be nowhere near done either. And prices were even lower when I bought. Way, way lower. So I guess I just got lucky. Now I just have to survive Phoenix summers as global warming speeds up.
Congratulations on paying off your mortgage! It’s important that your payoff document gets recorded with the county, so I would suggest that you check after a few weeks and make sure your lender has filed the document. In Arizona I believe the loan payoff document is called “Deed of Release and Reconveyance”. For Maricopa county it is easy to check because recorded documents can be viewed online. Just google Maricopa county recorded documents search.
You mom is the best 🙂
And nice of BofA to actually send you a congrats like that!
Mine literally just shrugged and sent me away lol… banks are the worst.
We paid off our house thanks to selling an overpriced primary residence in another state. We’ve invested money we would have spent on a mortgage for this house to buy rental properties to have good income in retirement. It’s been win win and it’s a great feeling not to have a mortgage hanging over our heads.
That is definitely a great situation, so good work on making all the best choices. I don’t know if I could deal with rental property anymore — just making sure everything in the guest house functions is plenty — but that can be such a great padding for income if you have the stomach (or property management firm) for it.