The word mortgage comes from French. It comes from the combination of mort (meaning death) and gage (meaning pledge). It’s a bit sinister, but it literally translates as pledge until death. For a 30 year mortgage, that might not be far from the truth.
We have a small 2br/2ba condo that we’ve now rented for about 10 years. I can hardly believe it’s been that long. Being the slow and steady folks we are, we’ve just steadily made our payments against the note.
When interest rates were really low in the early 2020s, I made extra payments thinking that avoiding the interest over the full life of the loan was advantageous. Keep in mind this may not have been an optimal strategy. I was excited about the idea of owning a rental unit free and clear. We could have refinanced or kept the cash as capital for future acquisitions.
We’re now in the final slog. If we can continue to plow our retained earnings back against the note instead of taking them out as profit, we should have the property paid off by the end of this year.
It’s hard to articulate just how slow this last stage really is. When I started making aggressive payments, I could see the months remaining on the note ticking lower with each passing month. The progress was visible. But now, in the final months, we’re up against less friendly math.
To be fair, nearly all of our payments go towards principal. Therefore, there’s hardly any interest left to pay. But, the real prize is to not have a required monthly payment. Here’s what our journey looked like, and my best guess as to how we’ll finish up.
Why The Last Year Feels So Different
Early in a mortgage, most of your payment is interest. That’s not a conspiracy, it’s just math: the bank is charging you a percentage of whatever you still owe, and early on you still owe basically everything. As the balance shrinks, less of the payment is interest and more of it is principal, even though the total payment (if you’re not making extra payments) never changes.
I can’t share our actual loan numbers, but I can show you the shape of it with a hypothetical. Let’s say you took out a $100,000 mortgage at 4% for 30 years. Your fixed monthly payment, principal and interest only, works out to $477.42. Here’s what the last 12 payments of that loan look like:
| Payment # | Principal | Interest | Remaining Balance |
|---|---|---|---|
| 349 | $458.73 | $18.69 | $5,148.04 |
| 350 | $460.26 | $17.16 | $4,687.78 |
| 351 | $461.79 | $15.63 | $4,225.99 |
| 352 | $463.33 | $14.09 | $3,762.66 |
| 353 | $464.87 | $12.54 | $3,297.79 |
| 354 | $466.42 | $10.99 | $2,831.37 |
| 355 | $467.98 | $9.44 | $2,363.39 |
| 356 | $469.54 | $7.88 | $1,893.85 |
| 357 | $471.10 | $6.31 | $1,422.75 |
| 358 | $472.67 | $4.74 | $950.08 |
| 359 | $474.25 | $3.17 | $475.83 |
| 360 | $475.83 | $1.59 | $0.00 |
Look at that interest column. By payment 349, you’re paying $18.69 in interest on a $477 payment. By the final payment, it’s $1.59. Compare that to payment one on this same loan, where $333.42 of the $477.42 would have been interest. That’s the whole story of why the early years feel like you’re barely moving the needle and the last year feels almost silly by comparison, you’re basically just handing yourself money at that point.
This is also why my extra-payment strategy from a few years back was a mixed bag. Every dollar of extra principal I threw at the loan when it still had a big balance was doing real work, knocking out a chunk of the interest that would have accrued on it for years. A dollar of extra principal now, this close to the end, saves us maybe a few cents of interest. The math hasn’t changed direction, it’s just running out of runway to matter. I also told myself that in a low interest rate environment, paying down debt was actually a superior option to cash in a savings account.
Not About the Interest Anymore
If the interest savings are basically rounding error at this point, why keep pushing? Because the number we actually care about isn’t the interest line, it’s the “required monthly payment” line, and that one hits zero regardless of how small the interest gets. Once that note is gone, every dollar of rent is ours to keep, invest, or do whatever we want with, no note, no bank, no monthly obligation hanging over the property.
That’s a different kind of win than the interest math measures. It’s the difference between “the loan is cheap to carry” and “there is no loan.”
Where This Leaves Us
Assuming we keep redirecting the rental income the way we have been, towards mortgage payoff, we’re on pace to send that final payment before the end of the year. I’ll admit I’m looking forward to it more than the spreadsheet says I should, given how little interest is actually left on the table. But there’s something to be said for owning a thing outright, even a small 2br/2ba condo that’s spent the last decade making other people’s lives a little easier while quietly paying for itself.
Mortgage, pledge until death. We’re about to prove the etymology wrong on this one.
A reminder that we’re not licensed financial or investment professionals, just sharing what we’ve learned and how we think about it. Talk to a qualified advisor before making decisions with real money on the line.