Almost six months ago, I purchased a house in one of the elegant suburbs of Baltimore, Maryland and elected to apply for a first and second mortgage instead of a larger first mortgage and PMI (Private Mortgage Insurance), I discussed the reasoning in an article explaining piggyback mortgages . Some lamented the fact that I opted for a higher interested rate (7.5% fixed on the 2nd mortgage compared to 5.75% on the 1st) but I felt that it was the best decision. Fast forward six months and with the 2nd mortgage paid off – it appears that, at least marginally, it was the better decision. At the very least, I avoided paying 6 months of PMI for no reason.
This achievement isn’t as monumental as it appears. I received generous financial help from my parents, a must for anyone under the age of 25 who wants to purchase a home in any of the hot real estate markets, but stuck almost every cent I could into the second mortgage because I felt it was my responsibility to do so. When we moved in, we didn’t spend much on new furniture or new fixtures. We didn’t do many of the typical new home things other than buy a few pictures and repaint a couple rooms. It did help that there were a few instances of unexpected windfall from my work that accelerated the payment schedule, but overall I think it helped that we didn’t spend a significant amount on furniture.
There will always be the eternal debate of whether I should have invested the money in the stock market instead of paying off a mortgage but at the end of the day, it feels good not to have that mortgage hanging over the house.
Happy Holidays everyone!