Paying Off Your Mortgage: Your Key to Financial Freedom
In the last several days, I’ve written about my personal real estate history, where I concluded that a buying and holding real estate is the best strategy (as opposed to serial buying and selling). I’ve also written about my financially savvy sister, who’s just a few years away from owning her home outright.
The conclusion is inevitable: Forget about trying to “make money” on a house. Our goal should be to buy a home in a place we wouldn’t mind living in forever, and then paying off the mortgage.
Here’s the thing: What difference does it make how much your house goes up in value, or how much it’s worth? Even if you sell it and realize a fat profit, you’re still going to need a place to live. That’s what makes real estate different from any other “investment.”
Furthermore, it’s possible that we may never again see the kind of appreciation in California that we’ve seen in recent run-ups. If that’s the case, the ability to pay off the mortgage — and live essentially for free — becomes the chief benefit of home ownership.
Imagine how much less stress you’d feel if you owned your home outright. You’d save thousands of dollars every month. You could quit that high-paying job you hate and do the kind of work you really wanted to do. You could travel around the world and give more money to your children and grandchildren.
Will it be easy? No. But is it possible? Yes. There’s all kinds of information out there about how to do it, including this article from Investopedia. Here are the key steps:
1. Live within your means. To pay off your mortgage, you’re going to have to free up as much money as possible. You can’t have credit-card and other consumer debt dragging you down. Pay cash for everything, and buy quality used vehicles; they’re a better value than new cars.
2. Buy a reasonably priced house. Obviously, the lower the price you pay for a house, the easier it will be to pay off. Instead of buying a “dream home,” buy one that will allow you to pursue your dreams.
3. Get a fixed-rate mortgage with no prepayment penalty. A mortgage with no prepayment penalty allows you to make extra payments whenever you want. Extra payments are applied directly to the principal. Making just one extra mortgage payment per year cuts a 30-year loan to 22 years, for example. Tax refunds, bonuses and inheritances can all be used to pay down your mortgage.
Simple, but not easy. It takes focus, discipline and the ability to forgo momentary pleasures for the promise of long-term gain. But it can be done!
Are any of you out there already trying to pay off your mortgage, or do you know someone who is? We’d love to hear from you.
Recent Redfin posts:
The (North) Hills Are Alive…With Short Sales and Bank-Owned Homes
A Not-Surprising Price Reduction
