I have a question about how to pay off my mortgage faster.
I’ve read in your books and in several interviews that you paid off your first home in 9 years on an average income of $35,000—and you had 5 kid! Could you explain how you paid off your mortgage early?
Here’s how we paid off our mortgage faster — in only 9 years!
Paying off a mortgage faster isn’t easy, but it isn’t super complicated either. It takes planning, focused attention and some discipline. We started simple and slowly and built from there.
There are five things we did to pay off our mortgage quickly. 1. We bought Smaller; 2. We Paid Extra; 3. We Used a Budget to Manage our Excess; 4. We Hated Debt and Stayed Focused; 5. We communicated with our mortgage holder.
Our first home was a 1458 square foot repo. We purchased it from the bank and got a favorable mortgage rate of 11% (the going rate at that time was 13%. We were able to pay off our mortgage fast using the 5 tips in this article.
1) Pay off your Mortgage Faster by Saving a Larger Down Payment
Years ago, when borrowed money was easier to get, down payments could be lower or non-existent. Even today, FHA homes only require a minimum of 5% down. At the time we purchased our first home we were earning about $20,000 per year and had managed to save enough to put a 15% down payment on the house. The larger down payment meant that we’d have a smaller monthly payment because we borrowed less. Read more about how we managed to save our down payment here.
2) Buy a smaller home
We bought a small (1,458-square-foot) repossessed house and financed less than the bank said we could borrow. Many people think that buying a bigger house is better. Larger houses cost more to heat, cool, insure and maintain, and you pay more in property taxes. Don’t buy a larger house to impress your friends and family — they aren’t the ones who will lie awake at night worrying about making the mortgage payment, or have to pay the higher utility bills or maintenance costs. Thinking small helped keep our mortgage payment manageable and allowed us to pay extra each month. As a result we were able to retire our mortgage debt very quickly.
3) Have a Budget to Control Spending
Having a way to control your saving and spending is the key to reaching your financial goals. Our budget allowed us to save in advance of all anticipated expenses. It also revealed when we had extra money, which we used to pay off our mortgage faster. Our first additional principle payment was only $1 extra on our mortgage. The next month it was more, and then as our income increased, so did the amount we paid of extra principle we paid on the mortgage. But the key to paying extra was that we had a great budgeting system (that we still use today) that let us know whenever we had extra money and how much extra we could afford to pay on the loan.
4) Hating Debt (with a smile) Helped Us Pay Off our Mortgage Quickly
We avoid debt like the plague. It’s an attitude we both share. If someone tries to entice us to make a purchase with credit, we simply walk away. We are so addicted to living within our means that the lure of buying now and paying later is very unattractive. So paying off our home mortgage was more of a priority to us than buying new cars or taking fancy vacations. We bought gently used cars when needed and took enjoyable annual vacations, spending only the money we had saved for that specific purpose. By avoiding debt, we were able to keep our monthly expenses lower and raise the amount we paid off on the house each month. Our book, America’s Cheapest Family Gets You Right on the Money describes many ways that we have found to get better quality items for much less than retail!
As we watched our mortgage’s principal balance plummet, we experienced a feeling of euphoria. This led us to find more ways to save money on other expenses such as groceries, home repairs, clothing and car insurance, so we could put more on the house and pay off our mortgage as quickly as possible
5) The Day we Finally Paid Off our Mortage
The day we made the final payment was memorable indeed. We had called the mortgage company the week before and told them the date that we intended to make the final payment. They sent us the final mortgage pay off amount and we mailed them the check. You can’t imagine the feeling of accomplishment and relief at reaching that milestone! It was electric!!!!
By the way, make sure that you request a paid in full document / zero balance receipt. A month later we received a release of the deed of trust from our County Recorder that served as proof of our ownership and that our mortgage was completely and finally paid off!
An Early Mortgage Pay-Off is Achievable!
You can see that paying off a mortgage early isn’t rocket science, but it does take some careful planning and a commitment to a long-term goal. If you follow these five steps you’ll be on your way to accomplishing a financial feat that many people don’t even consider. Paying off your mortgage early will set you on the path to financial security!
Give it a try — it’s fantastic!
Watch this video where we describe the process mortgage payoff process.
In this video, we share with Gary Foreman from Stretcher.com many of the tactics we used to pay off our mortgage in 9 years.