Slowly but surely breaking down mortgage debt

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Patti Vier had always dreamed of living in the country. “I wanted gardening and making my own jam and seeing animals every day,” she says. So shortly after her wedding, in the early 1980s, the then-21-year-old bought a three-acre plot of land in Michigan with her husband. The small home was rustic and lacked certain conveniences, such as a refrigerator—they nestled their milk into a snow bank during those early days, before finally investing in the much-needed appliance.

The country felt idyllic at first, but “then reality hit,” says Patti. “I was a hairdresser, he was a cook, and we weren’t making much money.” Rather than a traditional mortgage, the young couple had taken out a land contract with an 11 percent interest rate and a balloon payment due at the 7-year mark. “I started doing the what-if thing: What if the roof falls in? What if something major breaks? What if the old oil furnace stops working next winter?”

Talking through stress…

Patti’s financial anxiety mounted slowly, until she finally voiced her fears to her husband. She was relieved when he agreed: The bottom line was they couldn’t get by with merely paying their bills each month. “We had to do whatever we could to have backup money and get prepared, in case something happened,” she says. The couple created a budget, and rather than rolling whatever was left over into savings at the end, they focused on paying into their savings first and then figured out how to stretch the rest to cover expenses. “It was hard to figure out, because I mostly made tips,” she says, “so we had to assume a base pay that we could definitely count on, just in case.”

To prep for the eventual 7-year balloon period, Patti and her husband decided to pay a little extra toward the principal each month, even if that meant just $60 or $100 on top of the required payment. Whittling down the loan’s principal gave their finances a two-part boost: They would owe less when the balloon payment came due at the end of the contract, and they’d pay less in interest during those seven years as well.

“I’m the one who started the conversation, but he’s the one who created a table that showed where we’d be after seven years if we paid a little extra,” says Patti. Seeing the cumulative impact of a spare $20 here or $50 there was hugely motivating, and from then on whenever Patti had a great month in tips, she’d put that extra cash toward loan repayment.

…and then beating it

Over the next few years, they watched the loan amount steadily dip down. Additionally, they had savings on hand to make repairs to the property and to start a family. When the couple was expecting their second child, they decided to sell the land and move closer to family. And because of their aggressive repayment, they had enough equity in the property for a sizable down payment on their new home in town.

“Because we put more down, we had a lower monthly payment with the second house, and that meant less stress,” she says. On sounder financial footing, the couple eventually bought a restaurant to run, and “slowly but surely, life became way better than we ever expected financially,” she says. “It really started with nervously asking, ‘what if?’”

Fast-forward 30 years, and Patti’s circumstances are worlds away from that first country home: She remarried and relocated to Florida. One thing that hasn’t changed: Patti still prioritizes financial confidence and carefully tracks her spending each month (though she’s swapped her pen-and-paper system for a computer spreadsheet). The next big goal she’s working and saving toward: retirement.

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