That’s no mortgage; it’s a savings plan

#356 in a series of true experiences in real estate
March 2001, Hills Newspapers

We’re each in a different world

Both Anet and I, like the majority of homeowners, have mortgages. Mine is large, Anet’s is smaller. Anet is intent on paying off her loan, while I have little hope of doing so.
Except for being thankful that I have the money to make the payment again each month, I send in my checks without much thought. I know that the balance is big and that most of my payment goes to interest. Once a year I get a statement that shows the balance, and I look at it, sigh, and file it away.

Anet, on the other hand, closely tracks her loan balance and whenever possible, she makes extra payments. At any given time, she knows precisely how much she owes, how much of each payment pays down her principal and in what amount.

She thinks of her loan payments as her savings plan. Instead of contributing to an IRA or other retirement investment, she puts money into her house. For years, even in thin times, she has made at least one extra yearly loan payment. If she does not have enough to make a whole additional payment, she pays whatever extra she can. In this way, she proudly points out to me, thousands of dollars in interest are saved and the length of the loan is shortened.

Recently Anet refinanced her home loan at a lower interest rate, paying points to make the rate even better, and she chose a 15 year term. She ran lots of numbers before choosing this particular loan, figuring how, by adding money to her scheduled payments, she could pay it off in 10 years rather than 15. She had a grand time doing this. She likes running numbers and she likes having a retirement plan.

Anet looks forward with glee to the time when she owes no money on her house. She hasn’t mentioned it but she might even have a mortgage-burning party. I’ll bet she will. I, on the other hand, simply assume that when I die, my children will go on making the loan payments or will sell my house and pay off the loan from the proceeds.

Occasionally Anet makes a gentle attempt to convert me to her way of thinking. “You can pay off your loan,” she’ll say quietly, positively.

“Huh,” I reply. “I borrowed so much during my divorce, there’s no way.” Then, my pitch rising, I’ll add, “I can’t ever retire. I’ll still be working when I’m 80.”

Usually she lets it go at that point but occasionally, she’ll go further. “I’m looking forward to your kids being on their own, to a time when we can travel. We wouldn’t have to stop working. We just wouldn’t work all of the time.”

Anet is obviously better at looking toward the future than I am. I tend to think only of today, this week, no further than a month from now. I can think farther if I have to. Uncomfortably, but I can.

Assuming the kids do grow up, do leave home to live their lives elsewhere, and assuming that I could stand to engage in some activity other than work (all of these are hard for me to imagine), there are paths I might take. I could sell my house and maybe, rent something. There’s an option. Would it cost me less to rent? I don’t know. Will I have to sell the house anyway to help finance my kids’ education? I don’t know.

Maybe they’ll go to trade school, become beach bums or, who knows, win a scholarship. I could stay where I am and find ways to continue to pay the mortgage — like working.

Or — here’s a possibility — my mother left my brother and me a small house in Napa. I don’t particularly want to live in Napa again, but the house is there, and if I sold my house in Oakland and bought my brother out, I could move in there.

Or my brother and I could sell the house. This would allow me to partially pay down the loan on my own house but would not get rid of it. It’s something to think about.

Except that thinking about it makes my head hurt. Years ago, I remember meeting a young man at a party who described to me, with animated intensity, his Five Year Plan. He had it all figured out, how his career would advance, what his investments would be, where he was going and how he would get there. I was in awe. Such thoughts had never crossed my mind. I found that I did not want them to.

I also have a friend who goes over her finances each morning right after she gets up. Honest to goodness, before she does anything else each day, she knows, to the penny, what she owes, what others owe her, how much money she will need (and when) to meet her obligations. She says she finds the knowledge soothing. It doesn’t sound soothing to me.

Call me shortsighted but I like living in the moment. Maybe I don’t have the capacity to do anything else. I don’t really care what my mortgage balance is because I’m too busy living my life today.

I’m hoping my kids are going to their classes and doing their homework today. I’m making notes about what our newspaper ads will say next week. I’m immensely curious to discover who will buy our new listing this month.

Anet’s thinking is better, I’m sure. She doesn’t ignore what is occurring right now — quite the opposite. But while fully engaged in current activities, she manages to think about and to plan for the future. She is optimistic. She looks forward to a variety of experiences in her life, expects them to occur.

That’s why Anet keeps her mortgage balance in mind and works to pay it off. She is a forward- looking kind of gal.

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