Here’s how the story ends… My hands were shaking as I drove to the bank last Friday, I was going down to make the last payment on our mortgage. As I drove there, I keep thinking, “I can’t believe we are at this point! A paid off mortgage!!! I can’t believe we made it! We are finally at the end of this 5-year plan.”
With a confused bank teller (they don’t often have people coming in to pay off their mortgage, I’m told), she said, “Have a good weekend!” I smiled back as I walked out and said: “Oh it’s gonna be a great weekend!”
She just smiled and said, “I guess so. Congratulations!”
I walked out of the bank, raised my hands in the air and yelled “WOOOHOOOO!!!!” at the top of my lungs.
It felt amazing!
The mortgage dragon had been defeated.
A Little Bit of Background on our Paid Off Mortgage
In the grand scheme of things, it’s not very long ago. Though at the same time, it seems like ages ago.
Having kids will do that, they somehow bend time to make it feel like forever, and at the same time make it feel like years go by in a blink of an eye. It’s amazing!
Six years ago we moved into our custom built dream house, if you need a new house checklist this one is the best.
It was definitely a lot more debt than we were used to. We were sitting on a pile of debt, and it just felt wrong.
The idea at that point of a paid off mortgage was unimaginable. My dad, through his years of talking about money with me, had very early on ingrained that debt was bad and should be avoided as much as possible.
Now here I was, in the house of our dreams, and all I could think about was one number:
30 years of paying off this house.
30 years of looking at my mortgage interest and counting down an unimaginable amount of payments.
30 Years Is A Long Time
It didn’t feel right.
Honestly, it was stomach churning at first thought.
My wife and I managed to get through my education without loans. Now here we were with this burden. A 30-year burden. Could we ever get out of debt?!
I looked at my 2 year old and thought, “You’ll be older than me now, by the time I am done paying this house off.”
That’s a crummy feeling. To know you are going to be carrying around this ugly thing (the debt, not my child) for such a long time.
As time went on, this quote kept sticking in my head for months…
“Someone is sitting in the shade today, because someone planted a tree a long time ago” -Warren Buffett
I Wanted to “Plant my Money Trees”, but I was Digging a Money Hole
All I kept thinking was: “I want to have a secure financial future. I want to be financially free”. The idea a paid off mortgage bumped around in my head for years.
Then it happened… I started planting trees – literally!
We were in our new house and doing the landscaping. To save on costs I was digging all the holes and planting trees myself.
If you know me, manual labor isn’t my strong suit but… I figured, 20 trees and they wanted $75 bucks for each hole, I could dig holes for a weekend and save the $1500.
A Funny Thing Happened
As I dug these huge holes in the scorching hot sun I had a lot of time to think (about 25 hours over 2 days).
I like my job, but one day I am going to want to walk away. Looking at our nice new house, and our not so nice huge mortgage, made me realize that it wasn’t going to happen if I had a ton of debt.
If I had a paid off mortgage I would have so many choices. Work would be different because the mortgage wouldn’t keep me there. Every choice wouldn’t revolve around the mortgage and our cash flow.
Most importantly, I wouldn’t feel like I was burdened every minute of every day for the next 30 years. So, like a lot of people, I bounced the idea of paying off our mortgage with the people closest to me.
Here Are The Reactions I Got:
“That’s crazy, think of all the things you won’t get to buy”
“Don’t worry about it, just live your life and make your payments“
BLANK STARE after BLANK STARE kept happening.
It was clear many couldn’t grasp what I was talking about…
That is when I knew I was on to something!
Here’s Something You Should Know About Me
Here’s the thing… Most of my life my thinking has boiled down to the following thought/principle:
“If everyone is going left, I immediately start thinking what is on the right.”
It’s a thought that has helped me through my life. Not always, but enough, to keep me thinking this way. I have been this way long before the “Think Different” Apple campaign.
My parents always told me. “You see things differently than everyone else, that’s a good thing!”
My guiding principle is this:
If everyone thinks it’s impossible, you could be on the right track, or you could be crazy, dig a little deeper to see which one it is. Then take action.
That Was a Turning Point
I have seen people with debt in their 50’s and 60’s and I didn’t want that fate for myself. I knew I had to pick a different route to avoid this. So I called my mortgage broker and asked them “What are my options for paying this mortgage down quicker”.
They gave me all of them, when they were done I said, “If someone did all of these they could get a paid off mortgage pretty quickly. ” My mortgage broker agreed, but it was nearly impossible.
So like any personal finance geek, I grabbed a spreadsheet and worked out how I could get to that paid off mortgage goal faster.
Then I reworked it…
and reworked it…
Finalll I found a viable system that would work for paying off our mortgage. Then I turned to our budget and worked and reworked it until I could see us paying off our house quicker..
The Scary Truth of a 30 Year Mortgage
When I looked at our mortgage, over 30 years, the mortgage would cost us an extra $295,755 in interest over and above what our mortgage actual was. This means over 30 years we would pay nearly double of what our mortgage started out at.
If you ever look at your mortgage schedule, you will see in the beginning it’s mostly interest. So you are better off trying to put as much down as you can as soon as possible.
The trouble is that when you move into a new place, it’s usually the hardest time to do pay extra money on it. If you are looking for motivation for a paid off mortgage, the interest cost should be it.
Here Are the Tactics We Used to Pay Off Our Mortgage in 6 Years
Before I lay these out, I want to mention that every mortgage is different. When considering a paid off mortgage take a look at your mortgage and see what features your mortgage has with regards to paying it off quicker.
When taking on this type of feat, I want to make sure I had a lot of options with minimal commitments.
For instance, even if I could pay down $2000 a month, I would rather keep my payment at $1000 with options of doing an extra $1000 in a match-a-payment to get to $2000.
Because if I ever miss the one extra match-a-payment nothing happens. But if I miss a mortgage payment, well that’s a lot of hurt I’d like to avoid.
Just saying, we like to have a wide margin of safety. Something to keep in mind as you read on.
Related Post: Everything we gave up to be mortgage-free
Refinanced Our Mortgage
We were originally in a 10-year mortgage because we were worried about rising interest rates. By switching to a shorter-term mortgage it signalled to me that I was serious about paying off our mortgage.
We also saved a lot of money on interest by switching. We cut down our interest rate and that helped with the mortgage pay down.
If you are worried about rising interest rates,refinancing or locking in isn’t a bad idea.
Knowing what you are going to be paying for years to come can be a godsend to your budget and can give you peace of mind. I never regretted locking into a longer-term mortgage.
If you think refinancing is worth doing, take a look at Lending Tree to see their latest rates and decide if it’s worth doing.
Cut Down the Amortization
Amortization is a fancy 5 dollar word, designed to make most people fall asleep. With a mortgage it just means the length of time you will repay the loan. We decided to change ours to 25.
This would increase our payment but not too much. Plus it would save us 5 years at the end and a ton of interest over time. We could have cut it down to 20 years and it would have made it quicker, but it didn’t work right then at the time. Plus I like to have wiggle room in every thing I do financially.
This was an easy one, if you are getting paid bi-weekly it seems like a given. It’s the easiest part of getting to a paid off mortgage.
The way it works is instead of paying your mortgage twice a month it comes out every other week.
So instead of 24 payments, you have 26. It’s basically like paying an extra months worth of payments every year. A little bit at a time and it adds up.
Match a payment is when you can do a second payment on the mortgage on top of the original payment. So if your mortgage payment is $800 you can do another $800 for a total of $1600 every payment. Some banks offer this, and ours did and we took full advantage of it. For nearly 3 years we paid twice the amount on our mortgage every two weeks.
It got to the point that I didn’t need to ask, they would see my number pick up the phone and say “Another Match-a-payment?” I would say yes and that would be it. This was a great way to cut our mortgage in half. If you pay twice as much every time, you take down your payments by half.
At the same time, we started saving any way we could. This was to make sure we could accommodate any surprises that came up along the way.
15% Payment Increase
On many mortgages, you can increase your payment once a year by 15%. So if you are paying $100 mortgage payment, you can increase it to $115. Then the following year you can do the same on the $115 amount up to $132.50 and so on…
For the first couple of years we increased our payment.
The hard part of this was once you increase it you can’t go back down. We wanted to make sure we had our wiggle room available. This is a good option to have.
Like I’ve mentioned, we always play try to play it safe. So after the first two payment increases, we stuck more with the Match-a-Payment method.
15% Annual Lump Sum
Lump sum mortgage payments are great, some mortgages will let you do it in little chunks through out the year others will only let you do it on the anniversary of the loan.
Ours was flexible so when money showed up, we put it on the mortgage. For us, the lump sum was based on the total of the mortgage. That’s a lot of extra money you can put down, if you can find the funds.
Changing Mortgage Rate and Term
We went with a 10 year fixed rate mortgage at first. at a rate of 5%, it was a high rate for the times, but I thought rates would be going up and I din’t want to get caught like so many people did in the early 80’s. I was not going to lose this house, so I sacrificed cost for certainty.
Looking back it wasn’t the smartest financial decision but I’ve never dwelled on it. You do your best at the time. Move on… While we were doing everything else we kept putting money into a separate account for our lump sum payment. Our focus was simple it was to sock away as much as possible to get as close as we could to 15%.
Once we were 2 years in to making extra payments we jumped out of our 10 year and got into a 4 year mortgage cutting our rate down to 3%. We had to pay to get out of it but it made sense financially and emotionally.
Plus it had the added benefit of a ticking clock of 4 years to get it done. If you are looking for a great spreadsheet to crush your mortgage check out our Mortgage Free Master Plan
A Strange Problem at the End
While we were doing all of this, I started to look at, and update our mortgage schedule spreadsheet.
All of a sudden (Ok, not ALL of a sudden, more like 5 years in the making, “all of a sudden”), I realized if I put down any more we would have it paid off earlier than we expected. I called the bank and asked, what happens if I pay it off before the term was up.
They checked. I would owe 3 months of interest on the original amount of the loan. Even though I was paying it off it didn’t matter.
To the bank, you are closing the loan before the term and that means more charges for you. So we stopped our payments and took it down to our normal mortgage amount.
Making Mortgage Free Our Focus and Priority #1
This should have really been the first one because it is truly the most important. Really the biggest factor in our paid off mortgage was deciding to make it our #1 priority. Our kids were young and we were in a new house. We decided to enjoy this unique time of life as new parents and new home owners.
This meant that bonuses, tax refunds, gifts, everything we got went towards paying off the mortgage . It meant a lot of sacrifices over the past 6 years. We were really boring for 6 years. At least that’s the way I felt. Our lazer focus was on paying this mortgage off. Everything else was in second place to that.
Hand me downs, learning to make better homemade pizza so we didn’t order out (seriously I have an awesome dough recipe if you want it), taking in cans for the change….
You get the idea. Nothing was beneath us.
Anyway, we could make extra money, or save money we did. We still had our fun account, but it wasn’t what we were used to.
Big goals often require sacrifice.
If you can delay gratification it’s way better for you. When you do get what you are working towards later on. We saw all our friends going on trips, buying cabins and boats, quads, and pools…
We didn’t wonder how they did it, we knew how. It was all fuelled by debt.
We would hear things like “It was only $99 a month” and cringe.
That wasn’t the path for us.
All the while, we kept on paying down the mortgage. I have literally lived and breathed slaying this mortgage dragon. My only wish was that we had got here sooner, but I think that’s always the case.
Benefits of a Paid Down Mortgage
There are many benefits to paying down your mortgage, including building equity, saving money on interest, and creating a safety net for yourself. Building equity is like making an investment in your own home- as you pay down your mortgage, you own more and more of your home outright. This can be helpful if you ever need to sell or borrow against your home in the future.
The thing I like the most about having to pay down mortgage is that I am able to remove one of the largest budget items from our household budget.
Whether you’re planning for retirement or just want to sleep soundly at night, a paid-off mortgage is sure to give you peace of mind.
My Parting Advice If You Decide to Slay Your Mortgage Dragon
Remember: Starting any big task, like starting to pay down the mortgage, will seem impossible in the beginning. As time goes on it will get easier. Looking back on it you will think, “Hey it was pretty easy!” or a least, “It wasn’t so bad“.
Take it one step at a time. That’s the way every journey goes.
The point is to get started.
30 days from now you will be happy you started today. When you are making your last payment send me a message I want to hear about it. Now we have a solid foundation to start building our family legacy.
Having done this, I’m excited to begin and to share with you our journey as we go.
*Update: Two years after this was all done I can say that mortgage freedom is worth the journey. We are travelling to places we used to only talk about. We don’t stress about money, and we are so very fortunate to have all our debts paid off. If you are thinking about putting more down on your debt, I think it’s a great step to take.*
The First Step on the Road To a Paid Off Mortgage
Like I mentioned earlier, when we got started with paying off our mortgage the first thing I did was change the mortgage rate, a 1% difference adds up when you have hundreds of thousands of dollars to pay off.
The lower the interest rate you can get, with the terms that suit your needs, the better.
For us refinancing at that lower rate was our way of saying to ourselves: “Ok let’s make this happen!“
Remember one of the biggest part of your mortgage is the interest rate.
Check out Lending Tree’s rates to see how much money you could be saving with a lower rate. By refinancing, you could end up saving years of payments in just the interest rate alone. This is a long-term game and the interest you save by refinancing to a lower rate adds up quicker than you think!
Congratulations! There’s a lot to comment on, but this jumped out at me ” Work would be different because the mortgage wouldn’t keep me there.” Amen to that. Once the mortgage monkey is off your back, you’re not enslaved to a job. And I think we know a secret – boring is the new “cool.”
You should feel very, very proud of this accomplishment.
Thanks Mrs. Groovy, it really is a different feeling going into work. There is a feeling of being a little more free. Makes a big difference in our work life that’s for sure!
Congrats man! So cool! I cheated and just sold my house so we’re now debt-free completely, but unfortunately I still have rent to pay 😉 Soak it all up brotha – that’s quite a feat!
Thanks J! It’s a strange feeling not having a mortgage payment coming out, but I’m happy to get used to it. Congrats on being completely debt free. We will be there really soon. Can’t wait for that celebration. Definitely soaking it all in right now!
Awesome article! Thank you for posting.
Just to clarify — Matching a payment — is this matching a principal payment only or are fees and taxes included? Based upon the context of your article, I’m assuming it is a straight additional payment fees and taxes included.
I like idea of the annual 15% increase on the payment in terms of having discipline in getting the mortgage paid off—-it commits you to the goal. My family receives a pay check each week and I generally pay a standard weekly lump sum principal payment (not full principal just partial) on top of my mortgage in an effort to get it paid off quickly. I have that option.
The fact you did this so quickly with that sized mortgage makes me feel like I’m not doing enough, but I thoroughly enjoy reading stories such as this. It makes not having a car payment and driving a ’95 and ’98 Sabaru Forresters worth it.
That’s a great question! Matching a payment for us went all onto the principle of the house. You should check your mortgage document as every mortgage is different as to what and how much you can add to your mortgage at any given time. It sounds like you are making some good choices avoiding car payments. In all honesty, it never felt like enough to me, I wanted to have it paid off a year earlier than we did but it just wasn’t possible. Good job asking. Let me know if you have any other ones!
What a story! Congrats! I paid off my mortgage a few months ago at the age of 30, and it was a feeling like no other. Now I kind of don’t know what to focus on. 🙂
Wow! mortgage free at 30. Robin you are a star! You could focus on becoming financially free. That’s where our focus is going to be going forward. It’s going to be a fun ride!!!
I would love to know how you did that! so inspiring
THANK YOU! Just the tips I needed right now, can’t wait to start implementing these as soon as possible.
That’s awesome Katja. I happy you found it useful. Even putting a little aside every month adds up.Go for it!
It’s a great feeling isn’t it? We paid off our mortgage last month, but it didn’t sink in until this morning when I was paid, when I was able to redirect the money ringfenced for the monthly mortgage payments, plus our regular overpayment, into savings and investments. It feels real now! 🙂
HUGE CONGRATS on paying off your mortgage. Yeah it’s a little surreal at first, then when you get paid and don’t have to watch that money get sucked out it kind of hits home.
Awesome job, I can’t imagine the emotional and psychological high you are experiencing right now. I still have my mortgage, but after paying off my student loan and auto loan, I was super happy. $320k is an amazing sum of money, now it’s time to invest and build that nest egg!!!
Hi Erik! Investing here we come! This was an emotional roller coaster in some ways but we are happy we did it in the end. Way to go on your loans!
Love your story!!!!! Thx for sharing.
Question – If I divide one monthly payment by 12 and add that to my regular monthly payment will it be the same as paying every 2 weeks?
Hi Sarah, yes if you were to add the difference of the extra monthly payment and split it up over the other 12 months it would have basically the same effect. Great question!
Your information is AMAZING! How inspiring! Thank you so very much for letting us know this info that will literally save us 1,000’s of dollars! In this economy that means everything! But what an amzing thought and feeling it must be to own your own home! New goal for the bucket list!
Great tips! I am applying similar principles to my student loans.
I have been thinking of paying off our mortgage early for a few years now,I am starting this new year 2018 with at least $200 more a month onto my principle bal I am sure that will knock a few years off my 15 yr mortgage. Started today see how it goes and when will I get to see the balance drop. Super excited. Thanks for the advice. That is my GOAL.Eg
I love this goal Ethel! That’s how we started, just put some money down and see how it goes. Great way to start off the year!
This was so motivational! My husband and I have $10,000 in debt to payoff before we were hoping to tackle our mortgage! You have totally re-motivated me and I’m so glad to be so much more informed! We have been concerned about refinancing because of additional fees. Is it still something you would suggest doing?
enee1You would have to weigh out the cost of fees with the interest savings that you would have over the life of the mortgage. We did it because it made sense, and also gave us a time line to complete it. Once you crunch the numbers it will be clearer.
We have 2 mortgages. One on our condo which is in not shape to sell because of the Home Owner’s Association and our home. We’ve paid off all of our debt with the exception of our mortgages. I’ve been making extra payments towards our home and hope to pay it off just as fast as your guys did. Great job!
Congratulations! It must be such a great feeling to wake up in a house you own free and clear. We just bought a larger home in 2017 and have a 10 year plan to pay it off. We are still working on our consumer debt but I can’t wait until we finish our snowball and can attack the mortgage.
Thank you Sara, it’s great to have that house paid off feeling. I’m happy we did it. Congrats on having a 10 year plans, that’s the best way to get started on it.
you actually would have been wiser to invest the money rather than pay off your mortgage. You lost not only a tax benefit of deducting interest, you also lost a great opportunity to invest in a bull market. With that said, not having a mortgage is very liberating I am sure.
You’re right. It would have been wiser in hindsight, but given that we had just had the biggest financial meltdown since the great depression I wasn’t comfortable putting that money at risk. As for the tax deduction, I”m in Canada but even so, the idea of getting 30% back on every dollar I pay in interest sounds like a bad deal. At the end of the day I’m happy we did what we did. Not having any type of debt is hugely freeing. I’m 100% happy with the choice we made.