Ahhh, the American Dream, home ownership! It’s typically the biggest purchase anyone will ever make in their life. I bought my first home when I was 25 years old and I was so nervous but at the same time I felt so grown up, going to the bank, getting approved for a mortgage and buying a home all by myself was such a great feeling and I felt like I was doing everything right, adulting!
It was pretty scary and unsettling however when I was sitting in the closing office signing all those documents and papers and seeing the amortization schedule that shows how your payments are broken down each month and then seeing on paper the 30 years of payments that I was going to be responsible for well into my 50’s. Not only that but seeing how much interest I’d be paying was like WOWZA!
Those feelings soon dissipated when I left that office and my real estate agent presented me with a bottle of champagne to celebrate! I’ve always been told it’s normal to have a 30 year mortgage, that everyone does it and it’s just the typical way to purchase a home. Everybody has mortgage payments that last forever, right?!
Down the road a few years later I met the man who would become my husband and we ended up purchasing the home we currently live in and selling my first house. Once again the process of applying for that 30 year fixed conventional mortgage was upon us and we signed more paperwork and were happy with our 5.5% interest rate which was considered very low at that time.
A few years into our payments and after doing a bit of research and learning about different options we ended up refinancing to a 20 year loan with an even lower interest rate of 3.5% which saved us over $100,000 in interest payments alone! Our payments were practically the same as what we were paying on our 30 year loan so it was definitely a no brainer to refinance.
Something we have always done is making an additional mortgage payment each year by dividing the amount of one monthly payment into 12 and making that extra principal payment each month automatically which can cut up to 8 years off your mortgage by doing so. Another option that is popular is to make bi-weekly mortgage payments which works the same way, you are essentially making 1 extra payment a year by making 26 bi-weekly payments a year.
Prior to even considering paying off our mortgage early we made sure we were out of debt in every other area, no car payments, no credit cards, no debt of any kind. You can read about how we paid off $76,000 in about 18 months by clicking here.
After we were out of consumer debt I kept thinking about how awesome it would be to not have any more mortgage payments at all. The idea appealed to me more and more. I knew we would always pay a little extra each month but since we were already used to being on a budget and living beneath our means that if we stayed on track that we could realistically pay off our house in less than 4 years!
We decided to keep on trucking along and now every month that we sit down to do our budget we take all the extra money we have, every penny of it, and make extra principal payments to our mortgage each month. So in addition to our regular monthly payment we are throwing as much as we can towards that principal, some months it’s more than others because it just depends on what other irregular expenses we have that month. Any additional income we get like bonuses or tax returns also goes to paying the mortgage down.
We currently have quite an avalanche still to climb but we’ve already got about $200,000 in equity and each month seeing the balance go down and the equity go up is awesome.
While this idea may sound crazy to some, we both agree that paying down our mortgage is a priority for us and so we are putting off doing extra things like remodeling or other big home improvements at this time. Some people would argue that paying off your house is not a good decision due to the tax write off but I disagree, especially with the new tax laws for 2018 most people will not even be able to write off their mortgage interest because of the new standard deductions.
Of course there will always be those unplanned or unexpected expenses that come up so we made sure to have a fully funded emergency fund of 6 months expenses set aside in case we need it.
At the same time we still want to have fun and not deprive ourselves so we still budget for fun each month or for upcoming vacations. But we also realize that the more we put towards the house each month the closer we are to achieving our financial freedom.
We know that once we have paid off our house we will be able to do anything we want and that alone makes it worth it and helps keeps us motivated!
To me the feeling of having a 100% paid for house is peace of mind and to me it means financial security and that’s priceless. It is an investment in our today and our tomorrow. I know some would disagree that there are more lucrative ways to invest that money but since we already stash away over 15% of our annual income right now we are in an ideal situation to focus on paying off our house.
I don’t want to have to wait until I’m 60 or 65 to retire, I want to retire early! The earlier the better! There’s so much I’d like to do and see in the world that these next few years of commitment and sticking to the plan will help propel us to that next step, once the house is paid for we will be able to invest even more and set ourselves up for that early retirement.
Stayed tuned for updates on our journey and know that you too can do the same thing! So what would you do if you had no more mortgage payments? I’d love to hear your thoughts or comments!
