Mustache vs. Mortgage

[MoonPilgrim]

I found MMM this past summer, and decided my first project would be doing whatever it took to stop paying 6.875% on the mortgage for my former-residence-now-rental-property.  Refinancing was not an option, because the house was valued at less than $50K, and I was not able to find a bank who wanted to profit from the interest I would have happily paid in exchange for a more reasonable rate.  So the goal became:  PAY THAT BI-ATCH OFF.

I started with a loan balance of $41K in July. 

1.  Cash in those savings bonds ($15K) and put them to work.  Not everyone has a fairy godfather who had savings bonds taken out of his paycheck every quarter, but I lucked out in that lottery.  I hadn't touched them because of silly emotional attachment (they'd been my safety net since I've been on my own).

2.  Take advantage of a couple 0% transfer deals.  A bit higher risk, and a non-traditional way of managing debt.  Okay, maybe just a dumb idea.  But it took another $15K off the balance.

3.  Panic and think about switching course.  Maybe I shouldn't tie up all that money in the house.  Maybe I should pay down the cards.  Ahhhhhhhhhhhhh.  What if there is an emergency?

4.  Well, I'm so close, might as well keep going.  I will take my chances and assume that I can go at least 6 months without a catastrophe.  Save, save, save, thrift, thrift, thrift.  Put an extra few thousand each month towards the principle, and...

5.  Make the last payment November 30, 2012.

6.  Open HELOC as an emergency fund. 

7.  Now start putting money towards those 0% cards.  True freedom from that house-related debt will probably happen in June.  I could get there sooner, but I want to start maxing out my retirement savings plans now that I've killed that stupid interest rate.


Thank you, everyone, for the advice and inspiration you provide!  I would never have gotten here on my own.  After one year of mustachian living, my net worth will have more than doubled.  As in: I invested more in myself in one year than in the last 10 year of my working life combined.  Better late than never!  :)

[Another Reader]

Now, that's determination!!! 

[DoubleDown]

That is awesome, good for you!

[Matt K]

This 0% thing you transfered debt to, it's a credit card I assume?

Around here we have several 0% transfer options (all credit card based that I know of). I thought the only balance you could transfer was from another CC. Once the initial 0% period is over (3 - 9 months?), the rates skyrocket back to normal CC rates (18%).

If you've got it planned so that you pay it off before that rate hits all is good. But even if you miss, you have the back-up of transfering the balance to your HELOC for a much lower rate.

Initially the thought of taking on $15k cc debt (even at 0%) make me squirm. When I write it out, it sounds like a solid plan. I'd guess there are a lot of people who (like my initial reaction) wouldn't do what you did over irrational fears ("I god, I'll owe the CC $15k at 18%!). Oh who am I kidding, these days no one bats an eye lash at owing $15k to Visa.

Good on you.

[PJ]

Using the 0% balance transfers is risky but doable, as long as you know exactly what you need to do not to end up paying the 18% interest, and take care of things in time.  Those who are disciplined and organized can definitely benefit from them (that's not so much me, but I've thought about it!) 
 
Congrats, MoonPilgrim, on an awesome year of investing in yourself!