Focused on Debt Reduction

Things are pretty boring financially speaking for us these days. We are plugging along with our plans to pay down an additional portion of our debt load to offset our increased living expenses and decreased income from my wife staying home. This has been part of the plan since we bought our new home that substantially increased the amount of total debt on our balance sheet.

Last year we identified our Rental #2 property with a 30yr fixed mortgage @ 6.5% as the first target of our debt reduction. We refinanced that into variable rate equity lines significantly reducing our current carrying costs and have been focused on paying it down with all free cash (while making no changes to our retirement savings, investments routines).

We currently have about $14,000 left @ 4.25% on our IELOC and $25,000 @ 3.25% on an HELOC. I hope to have the the $14,000 paid off this year and want to continue paying down the $25,000 once that's complete. Once we pay down the $25,000 HELOC to about $15,000 or so we'll begin to look into our next steps. At the rate we are progressing that's likely 24 months or more out.

Of Course if the stock market suddenly becomes much more attractive or we identify a more compelling investment we may shift gears to utilize our monthly free cash for other purposes. For now its focused on debt reduction.

Related in Real Estate:

No Closing Cost Loan Example (Nov 29, 2012) I've gotten multiple requests to clarify the recent no closing cost refinance loan I just completed. Its a bit of a vague term and could be done different ways, but the end result is that there are no out of...

3.5% 30 Year Fixed No Closing Cost Refinance (Nov 27, 2012) We finally closed this week on our 3.5% 30 year fixed refinance with no closing costs (no closing costs = a credit from lender/broker large enough to offset refinance costs). It took us over 2 months (67 days from initial...

Appraisal Appeal Unsuccessful (Nov 05, 2012) Not much of a surprise, the appraiser dug in and didn't budge after we submitted our appraisal appeal: Our more favorable comparables were based on county property records. Interestingly the appraiser indicated the MLS data is generally considered more accurate...

Comments (7)

2million, I have another idea for an investment opportunity. Give me some of your cash! Just kidding, I like your strategy with paying down debt. Keep it up!

Posted by Steve | February 19, 2010 9:24 PM

Hi again 2million, I have an idea for a future blog entry that could help some people thinking about getting into the investment rental market. Could you possibly describe how you came to rent your 3 properties, the choices you made and why you chose those properties specifically in terms of cost, financing, rentability, location etc. etc. Also, perhaps tell us the pros and cons and what you've learned about rental investments. Were you happy with it? Any mistakes or things you'd do differently? Did you make money or lose money and how much? Things like that?

Posted by Steve | February 19, 2010 9:28 PM

Hi 2Mil,
May I suggest a blog topic for you that is of interest to me and hopefully others. I am 40 and from what I see on the retirement calculators, I must save something like 1.8M in order to retire and live as todays standards. Whether it's truly 1M or 2M or whatever, it's a huge financial burden to save that amount of money if you are also raising a family with kids as I am doing. I wonder if you could speak to how you see retirement. Do you plan the 2M to be your retirement? Will it cover both you AND your wife based off your current lifestyle? Do you plan to continue to work after 60/65?
Lastly, in order to help your retirement and or your financial position currently, how do you save on electricity, cable, internet and landline or even food because I find these are the big expenses I have.

Thank you for your time!
DT

Posted by DT | February 22, 2010 11:16 AM

Geeeez, just bombard 2million with all these questions. LOL. DT, I asked first so 2million is obliged to answer my question and then yours. Ha, just kidding. Ya, my big expense is just a phone line. I can't believe they charge me $45 per month just for DSL and local phone. I mean geez. It should be around $25 tops. They really get me with the "subscriber line" taxes/charges.

Posted by Steve | February 23, 2010 4:27 PM

I admire your ambition as i too am on the path of paying down debt. The difference, I am actively paying down student loans as opposed to rental properties. Can't wait for the day until I have AT LEAST ONE loan paid off... Even that will be a relief!

Anyway, I feel you pain/slow gratification! Keep up the dedication!

Posted by MyFinancialObjectives | February 24, 2010 6:52 PM

I like the feeling of paying off debt, but I'm very fortunate that most of my debt right now is like 2.1% or less per year, so I'm kinda putting it off for now.

It is def. a good feeling though to see that balance go down!

Posted by Justin's Advice | February 25, 2010 12:07 AM

DT & Steve - thanks for the topics ideas - noted!

Posted by 2million | March 4, 2010 9:03 AM