I have started to read the jlcollinsnh-blog from the first blog post onwards. This guy will go to South America together with Mr. Money Mustache and J.D. Roth (Get Rich Slowly) for their Chautauqua. I love his writing style and take his recommendations very seriously. Plus, I want me some F-you money! This blog (and I Will Teach You To Be Rich, which I haven’t finished yet) has renewed my motivation for investing. Index investing that is, duh.
See, we won’t be able to pay off our whole mortgage within ten years. Why not? Well, we have two different parts of mortgage. The first part is a savings type of mortgage. One keeps the entire amount of money owed and doesn’t pay that off, because one gets huge tax breaks this way. On the other hand one saves in this special savings account with a fixed interest rate (same rate as the mortgage part) which is capital gains tax-free. The downside is you’ll have to pay a fine if you pay things off too fast under 20 years.
The other part of our mortgage is an interest-only mortgage. We can pay off as much as we want here. We still have a significant amount to go. If we were to pay off the remaining part of this mortgage today 30% of our home would be ours. From then on we wouldn’t be able to get a lot of extra mortgage payments into our savings mortgage account, unless the rules of the game change. I read somewhere that this might happen. See, there is a certain bandwidth you must abide by. One can’t put in more than 10 times the minimum inlay per year into that account. We’ll lose the entire tax break.
This means that by the end of this year we could still own more than 30% of our home (one of my goals for this year), but after this year things will slow down in that department.
What are we to do?
We will invest even more in index funds. Right now we are investing €500 a month and I would like to increase this amount after having paid off the interest-only mortgage. Every personal finance blogger/author that promotes early retirement stresses the importance of investing and make time and money work for you. It’s the best bet to reach financial independence, which is what we’re after.
How do you like our game plan?