A New Goal

I’m tired of having the balance in our HELOC remain pretty much unchanged.   We’ve had our house for five and a half years.   When we bought it, we only had 5% for a down payment, so in order to avoid PMI, we got a first mortgage – fixed at 6% interest for 30 years – for 80% of the price, and then a HELOC for 15%, with our down payment making up the rest.   The HELOC has a variable interest rate, so the payments have fluctuated a bit over the years.   Right now, they’re only about $115/month, but they’ve been as high as $200/month in the last couple years when interest rates were higher.   We’ve paid off nearly $20,000 on our mortgage principal over the last five years, but it’s all been on our first mortgage.   The HELOC is tied to our checking account, so we stash all of our money there and just transfer it back to the checking account when we need to write a check.   That way we keep our monthly balance as low as possible, but we’ve never focused on paying off the balance in the HELOC.   We paid off $40,000 in other debt since we’ve had our house, and we’ve contributed to our HSA and our IRAs and paid extra principal on our main mortgage, but the HELOC has just been sitting there.   We’ve decided to tackle it.

It’s a little overwhelming – the principal balance is $26k right now.   We’ve paid down about $2500 since we decided to make the HELOC a focus this spring.   But $26,000 is still a lot of money.   Then I remind myself that we’ve done this before – we buckled down and lived on almost nothing while we paid off the debt we had accumulated during the years we were starting our business.   So I know we can do it again.   When we were paying off debt before, we were only putting a total of $200/month into retirement accounts, and we’ve increased that to the point where we should both max out our IRAs this year.   Our income is higher now, but we have a child and I’m probably not going to go back to my job at the library, so our income will likely drop for the second half of this year.   So with all of those factors, I’m not sure if we’ll be able to match our earlier rate of debt repayment.   But we’re going to give it a shot.   Funding the IRAs and the HSA are still a priority for us – I don’t want to put paying off a mortgage ahead of those.   But we’re going to make the HELOC a close third and dedicate ourselves to it with the same intensity that we attacked our other debts a few years ago.   Our goal is June 2010.     Hopefully interest rates will stay low for a good chunk of that time – the lower the interest rate on the HELOC the more money we can put towards principal.   Two years to pay off $26k.   Can we do it?   I’ll update our progress regularly on here, so check back to see how we’re doing!