How We Paid Off Our Mortgage

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After my husband and I bought our house, we had a lot of discussions about our next step over the next couple of years. When we bought it, we have always felt that it was not our ‘forever home’ but just our first home. It sits on a busy street but it’s in a great location that’s close to both of our jobs. It’s also in a good school zone. We hadn’t considered yet that we should pay off our mortgage, which ultimately is what concluded we should do and we have been thrilled! 

When we bought the house, we were renting and paying $1250/month for a 2 bed, 1 bath home. Our landlord was putting the house up for sale. We considered buying it but she was asking more than what it was worth, plus as cute as the house was, 1 bathroom was about 1 bathroom short of what we were willing to accept in a house we were going to purchase. We needed to get out our rental, the house was on the market with a lot of showings (if you’ve ever rented a place that is up for sale, you know how obnoxious this is), and our lease was expiring in two months.

 

Moving into another rental wasn’t something we wanted. To sign a year lease, and look at possibly moving again the following year. So we talked with a lender and got preapproved for a home loan. Our priority was to find a home where our monthly payment would be less than what we were paying in rent. We purchased a 3 bed, 2.5 bath house with a mortgage payment at 4.35% interest that totaled $1,000 including taxes and insurance. We were thrilled, we were paying less monthly for a bigger house and we were going to be building equity and not dealing with a landlord! (For first time home buyers, click here (Do’s and Don’ts for the First Time Home Buyer)

 for my advice on buying your first home and avoid the mistakes that I made).

 

From the get go, we decided to keep paying what we had paid in rent since that’s what we had budgeted for and it worked for us, so every month we were paying an extra $250 towards our principal to save in overall interest.

 

After about 2 years, we started to get antsy. We didn’t want to live in this house forever, so what was the next move? Do we sell and upgrade? But the market had increased so selling and buying felt more like a lateral move, if we were going to stay in the neighborhood we were in (which was a non-negotiable for me, less so for my husband). Should we buy an investment with our savings? We definitely weren’t comfortable with holding two mortgages, so we decided against that. Then we decided, let’s pay off our mortgage, then save for our next home and use our first home as a rental. Boom! We had a plan, it was perfect for us.

 

The plan to pay off our mortgage, then save for our next home and rent our first house out was the exact solution toward building wealth and obtaining financial freedom. It was a safe plan too. Plus, we were willing to sacrifice and stay in our home for as long as it takes to happen because it’s a comfortable home, just not where we see ourselves in the long term.

 

So now you know why we did it, here’s how we did it…

 

We looked at ways to cut expenses so that we could live one a single income. My husband has steady job with benefits, whereas I’m in real estate so my income isn’t as reliable. So we chose his salary as our baseline to stay under.

 

I can feel a lot of you may be rolling your eyes about one more person telling you to stop spending money on buying a cup of coffee every day, but it’s serious! There’s so many things we spend money on that seems like nothing, and in the long run it’s adding up big time. These minor expenditures could make the difference between living debt free and never getting there. I’m not going to list everything out here, but if you want to read how I am able to save a lot of money, click here.

 

We had our budget in order and our living expenses were covered by just my husband’s salary (this was after 401K contribution, retirement savings are priority). Then we’d take whatever was left over that we didn’t spend each month (my income), and put it toward extra principal on our mortgage. My commission based income was all over the place. Some months we wouldn’t have anything extra and other months we had a lot. Any extra money that we received (birthday gifts, bonuses, refunds, tax returns, etc) went toward the mortgage as well.

Staying Motivated To Pay Off Our Mortgage

Paying off our mortgage became a game or race to us, it was so fun to dream about how it would be when we finally paid it off and we would re-evaluate our spending and what we could do or how we could bring extra income in so we could pay it off as soon as possible. This made a huge difference. We were on the same page and therefore we were each other’s support system and kept each other focused. If you have your goals in front of you and you take the time to enjoy your dream you’ll feel proud of what you’ve done so far. This will keep you motivated to stay on track to do it!

 

There were times when it felt like it would take forever and that we had nothing to show for all of the hard work we were putting in. I would want to quit so I could actually spend the money I was making on things for my life. My car was 12 years old, my bathrooms are outdated, I would rarely buy new clothes, etc. But we were sacrificing for the bigger picture and now that we’re here it feels great. I am incredibly proud of what we did.

 

There’s a lot of debate about whether it’s financially smarter to pay your house off early. Versus putting that money into investments. Stocks should generally yield a highest interest rate than the interest you’re paying on your loan.

Paying off the house was financially a better decision for the following reasons:

  1. Automatically we’d be ‘saving’ 4.35% of our money by paying the house off early. We have long term goals for this house. Keeping it and renting it out while having a mortgage against it would cost us 4.35%. Plus if you add the future income of what the rent will bring in and depending on how long we keep it as a rental, then final sales price if we decide to sell at retirement, the total ROI will be incredible.
  2. Tangible asset. I just prefer to have my money going toward real estate that I can see and touch and drive by. I prefer the cash flow of a rental check sent to me monthly. Real estate is more satisfying to own, stocks don’t feel real to me a lot of the time. We have those investments as well, but I prefer to put the bulk of my money in real estate.
  3. A big step toward financial freedom! The trade off of investing money elsewhere before paying off debt is not worth the potential higher returns. It is hard to put a value on the emotional benefit of paying off your mortgage. The value of building wealth and stability is to reap the emotional ease and lifestyle that those things bring.

What’s Next?

So now I’m onto my next goal which is to buy our next home. But now that we’ve been in our house for several years we’re not sure we even want to leave. Life is good here, do we really need more? I don’t think so. We’re debating just staying where we are and buying an investment property instead of turning this home into a rental. Maybe we don’t need to ‘upgrade’ after all. Our home is humble and it fits our needs. Moving into something bigger might just slow down our financial goals. So, we will continue to think on this and in the meantime, we continue to save my entire income. Even though we paid off our house, we did not increase our expenses just because we could.

 

Are you working on paying off your mortgage? I would love to hear from you in the comments about your choices and how you’re achieving your goals.

 

Cheers!
W&S

Comments (1)

  • How This Couple Will Get $1,102,405 For Paying Off Their Mortgage Early – Wealth & Stability

    December 26, 2018 at 2:04 pm

    […] After a lot of thought and conversations, we decided we would pay off our mortgage as fast as possible, then save up for our next home. I was so excited! It would mean being in the house a lot longer than we had planned on, but our long term goal of financial freedom was much more of a driving force for me than anything else. Here’s what we did to pay off our mortgage in only 6 years […]

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