Five years ago, I made a pivotal decision – I wanted to be mortgage-free. Now, I stand before you, mortgage-free, and willing to share the tips and tricks that helped me achieve this significant milestone in less than five years. This journey might seem daunting, but with a well-thought-out plan, you too can relish in mortgage freedom.
I remember watching numerous videos of individuals paying off their mortgages early and wondering, “How can they do it?” For someone with an income range between $60,000 to over six figures and a mortgage of over $250,000, the task seemed insurmountable. However, with a mixture of determination, discipline, and a handful of side hustles, we embarked on the journey to mortgage freedom.
I’m happy to say that as of March 2022, I paid off my mortgage early! Today, let’s dig into how I did it, step-by-step.
A Deeper Dive: Why Mortgage Freedom?
One of the frequently asked questions is why should one pay off their mortgage early? Why not invest that same amount of money for a higher yield in the stock market?
The answer lies in one’s personal financial goals. For me, the idea of owning a home without any risks associated with mortgage payments was comforting. This motivation stems from the fear of unforeseen circumstances like a layoff, where the regular mortgage payments might become a burden.
Some people will do the math and realize that paying off your mortgage early is NOT a good idea. But, you must take the math away from this and think about the psychological benefits. Here are a few questions to consider:
- If you got laid off tomorrow, and income stopped…would you still feel confident with a mortgage payment?
- Are you staying in your home (or planning to) for longer than 5 years?
- After you pay off the mortgage, what is your financial plan?
As Dave Ramsey often says: 100% of Foreclosures happen on a home with a mortgage. Without a mortgage, you completely eliminate risk. THAT, above math, was my ultimate goal.
The Strategy: Early Mortgage Payoff Tips
1. Save Aggressively:
My journey began with the clear intention of paying off our mortgage early. The first step involved saving up as much money as possible and paying off extra every month. Whether it was $100 or $1000, every additional amount mattered. This strategy reduced the overall loan amount, consequently reducing the total interest paid over the loan’s life.
2. Refinancing and Restructuring the Loan:
An instrumental move in our journey was refinancing our loan. We were able to lower our interest rate from 4.25% to 2.5% and restructured our loan from a 30-year mortgage to a 15-year mortgage. Although this increased our scheduled monthly payment, it significantly reduced the total interest paid and helped us become mortgage-free earlier.
3. Embrace the ‘No Spend Month’:
Another strategy that significantly boosted our mortgage payment was the “No Spend Month.” This concept involves restricting all non-essential expenses for a month and saving as much as possible.
Gamify Your Mortgage Payoff
One of the more nerdy things I decided to do was actively track my mortgage payoff on a Microsoft Excel template. This way as I put more money down towards the principal, I could see my overall interest cost go down and see how many months/years I had left on the mortgage!
I originally used this template when I had my mortgage kick-off in 2017. You can find similar templates by opening Microsoft Excel and then searching “Templates”. The best way to find one like this is to search for either “Loan Amortization” or “Mortgage Amortization” schedule.
The Result: A Mortgage-Free Life (Paid Off My Mortgage!)
In less than five years, we went from a mortgage of over $250,000 to being mortgage-free. With the strategies outlined above, we were able to significantly decrease the total interest paid and own our home much earlier than expected. This journey required discipline, sacrifice, and relentless determination. But the freedom and peace of mind that come with owning your home outright are unmatched.