Picture Paying Off Your Mortgage

Recent posts on Sweet Digs Seattle:

• Calling all Redmond Bargain Hunters 

For most people their home mortgage is the biggest chunk of debt they owe. The Get Rich Slowly blog recently had a great guest post from Free Money Finance about how they paid off their mortgage in 7 years and have been living debt free for the past ten years. This isn’t for everyone and the post includes a little disclaimer to that effect. To me owning a home outright without a mortgage payment is like getting your cake and eating it too. Here’s how one couple did it:

1. We spent less than we earned starting as soon as we got married in the early 1990’s. We saved quite a bit, combined it with some previous savings and the equity from the sale of our Northeast home, and were able to come up with a down payment of about 35% of our new home’s value.
2. We bought a house we could afford. Instead of stretching to buy the biggest house possible, we decided what we needed in a house and purchased a place that met those criteria. In the end, we only borrowed about 60% of what the bank said they’d let us borrow.
3. We applied everything we could to retire the mortgage: extra payments (from still spending less than we earned), pay raises, bonuses, income from a side business, my wife’s income, and gifts. If money came in, it usually went to paying down the mortgage. However, we did not sacrifice what we considered to be better investments, such as fully funding my 401k.
4. Within five years, we had the house completely paid off. We lived there a few more years, then when we moved to Michigan, we sold the house and paid cash for our new one. It’s now been ten years since we’ve had a mortgage.

In the early years, I got the biggest thrill out of paying extra on the mortgage. I’d make an additional payment and wipe out six to eight payments at one time (Quicken would show me the results.) During the first year, I eliminated several years of payments on a 30-year mortgage (something like eight years) and the thrill of making such great progress simply built and built into a snowball of enthusiasm. Each payment I made had a dramatic impact on the total, which fueled more payments, which had more impact, which fueled more payments and so on and so on… [read more]

Now when I read that the biggest thrill these people had was paying extra on the mortgage I think to myself “get a life!” but they will certainly have the last laugh on this one since they’re “now on track to retire by age 55 with more than enough to live on and no debts outstanding.”