So here’s the deal. I really don’t want to have a mortgage anymore ;) We have $350,196.93 in mortgage debt, and I want it gone in 10 years. It’s time to get serious about “retirement” and not thinking about money any more! (I know I know, *everyone* wants to to do that — but today I actually DO SOMETHING about it ;))
I alluded to this grand epiphany last week when I was muttering about financial minimalism and cutting down our expenses, and this is the one major thing we have left to really tackle. We’ve gotten rid of a lot of nonsense already in our lives, but these damn mortgages keep popping back up and it’s driving us loco! They’re holding us back, baby! So today we finally jump on a game plan and knock these suckers out.
I present to you, Operation Kill Our Mortgages
I’ve been alluding to it for weeks on end, but after some good soul searching and sifting through all the advice from everyone – including you! – we have finally come up with a good plan that I really think will will do wonders if we can stick to it every month. It’s the only thing left in our financial lives that we have utterly avoided (with the exception of refinancing earlier), and it’s time for that to end! Operation Mortgage Pay Off is now in full effect!
Here’s what this means:
- Going forward, I, J. Money, will pay off an additional $2,000 EVERY MONTH towards our mortgages, no matter what. I don’t care if I have to take from savings, or start an 8th job — I’m gonna kill that debt once and for all.
- How? By applying all extra money I make on top of my normal “day job.” I’ve been consistently bringing in a little more than we need to live this entire year so far, so now anything OVER that amount (roughly $5,000/mo) will go directly to our mortgages. I’m already in talks with launching some new projects that could do the trick, but outside of that it’ll also mean no more investing unless I’ve met my $2k/mo goal. And now that I’m done w/ my $1,000/mo loan as well, I can apply that 100% toward this debt too – since I’m already used to not having it. That’s 1/2 the amount of money I need right there! (Though I’m still gonna miss the crap out of it).
My goal is to be MORTGAGE-FREE in 10 years. That would put me at 41 (yikes), but the happiest 41 y/o around ;) I don’t know what’s around the corner from today, or where we’ll even be in life just 3 years from now, but as it stands that’s the game plan. I’ll stick to it for as long as it make sense.
What this looks like
As of this second, we have a total of $350,000 in mortgage debt. And I’m not gonna lie – this $hit’s gonna be hard. But freedom aside, this will also save us a TON of money!! And when I say a TON, I mean well over $200,000!!! All by changing the payments of the same loan we already have.
Here’s a visual of what’s in store for Mortgage #1 (our 30 year fix):
As you know though, that only covers one of our mortgages. The other one is at $61,758.47, and is technically a maxed out Home Equity Line of Credit with a variable 2.8% interest. This one only requires us to pay the interest on the debt each month, and the rest is up to us until the maturity date comes around – a good 15 years away ;) (We also have the option of converting any portion to a fixed-rate loan w/ a current rate of 4.85% too, if we choose.) So the question I posed to y’all over a month ago was WHICH mortgage to start paying off first? The huge one with a much higher interest rate, or the smaller guy with 1/2 the interest, but the much shorter pay off time?
The overwhelming response was to play it financially smart and go for the 1st one. But I know myself way too well, and I have to go with the better likelihood that I’ll continue staying motivated and keep pushing through. And quite honestly waiting 8 years to pay off ONE of the mortgages completely bores me to DEATH. So, I’ll be sticking with my gut and going for the more *emotionally-based* decision in this case. Paying off the smaller, quicker loan, first.
(Which will take about 2 1/2 years to get rid of, saving us a cool $24,000 in the long run! To calculate this guy, we used Bank Rate’s interest-only mortgage calculator, which allows for entering scheduled extra payments).
It’ll still take us 8 or so years to pay off that 1st one once we’re done with this 2nd mortgage (well, actually closer to 7 since then I’d have an additional $200 to apply towards the principal too!) but I’ll be a helluva lot more EXCITED and confident now moving forward. Not to mention the added benefit of being able to refinance a lot easier w/ just the one mortgage on the books if we wanted to down the road. But this stuff really comes down to personal decision making. Only YOU know what’s best for you and your family, and sometimes that means going against the grain or the common cents if it happens to come out that way. In the end you still accomplish the same goals, it just might take a little bit longer than the other route. And as long as you’re okay with that, you’re good to go :)
Other things for us to consider
There are other things for us to consider too, especially as more time passes on earlier into the plan:
- The Mrs. will eventually go back to work and start earning a full-time salary again! We’re still a year or two away, but when she’s out of grad school she’ll have a killer PHD in hand for artillery! Gotta like like that :) Any salary will be better than her $13,000 she’s currently earning from her school T/A’ships
- Over the next two years I should also be making more money if I continue hustling. Not that I want to become one of those hardcore workaholics forever (thus the dream of freedom in 10 years!), but if I can work my ass off now for a few years, and reap the rewards for the rest of my life to come, then I’m all about it. The whole end goal here is to need LESS money to live on down the road and continue being happy w/ my current lifestyle. And right now, that means I need to keep on pounding away at it until all that debt is gone and I can go sit back and enjoy the spoils :) Or even keep on working, but at my own super slow pace!
So that’s the plan!! We’re about to kick some ass and blow these dang mortgages right out the door. It may be a little hardcore, and probably not wise for some others out there, but for right now it makes total sense for us. Our emergency fund is on lock. Our savings accounts are somewhat plump. And our investment portfolio is decent enough until we can start building it back up with anything extra that comes outside of this $2k allotment. It’s gonna take a LOT of work, and I’m sure I’ll be bitchin’ about it in no time, but you better believe I’m ready to start!
If all goes well, we’ll be officially mortgage-free by June 23, 2022 :) (And will have saved over $250,000 in interest!!) It’s a few months off from my master goal of 10 years, but something tells me if we work hard enough we’ll be able to shed those bad boys in no time… the hardest part is always starting!
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PS: Anyone want to join me? :) Maybe create our own “Mortgage Pay Off Club” to help each other stay motivated and keep track of everything? I know some of you already got your Millionaire Club card from back in the day, but you better believe this will help steer that ship too. Can you imagine what not your net worth would look like without a mortgage on it??
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J, I’m with ya!
Well, I’ve already been doing it so I guess I’ll be Grandfathered in! Except I’m sitting at $93k :)
Do you have any other debts outside your mortage and heloc? Sorry if I missed that above…
If so, I’ll send you a free copy of my Debt Snowball Calculator Pro. Takes payments, debts, budgets, etc. all into consideration to see an instant result on your debt free date.
I agree with your plan too. Pay off that pesky heloc before you ever touch the #1. Never know what can happen and it will be a weight off your back to get the heloc gone, even at a low 2.8%
Later man,
Eric
Count me in too. I basically have a mortgage with 188k of student loans. Don’t worry, I’m a recent dental school good but it sure is annoying.
Way to go J Money. Make a stand and take back your income!
I’m on board. I have $117k left and should be done in 4 to 5 years. I friggin love making that extra payment each month. It always sparks a fury of me re-examining amortization charts and our budget looking for more cash to throw at it. Currently put an extra $1200/month
I probably could put more towards it but 4 to 5 years aint bad.
I gotta say, I think you should still try to put some away for retirement, it’s a great time to buy. but hell what do I know, the housing market may turn around and you could turn a profit on this deal in no time.
Keep it up!
I don’t have a mortgage, but I can definitely see the perks of going full steam ahead. Good luck and I hope you stick with it!
why don’t you refi. instead of paying a ton of extra cash down every month? with 15yr fixed mortgages at 3.5% right now you can likely half your mortgage term and save the interest your looking for without dumping cash into a house that you can’t pull out if you get into financial trouble. another option would be to take the money your saving every month after a refi. and plow more cash into your 401k/roth
Good for you! The first month you have no mortgage payment, you know what real freedom is.
Congrats, man! That’s an ambitious and awesome plan. Mrs. J Money is on board with that? This is just another reason that I’m going to still hate your monthly Net Worth updates.
I’m on board. I bought my house in Jan 2007 @ $296k
My wife and i have been on a mad dash. We have no debt, been max investing in our tax sheltered accounts. So everything left has been paying off the mortgage.
We currently are at 119k.
If we continue at the rate we are going, without any major changes in life (including salary raises). We are at max 48 month away from financial freedom of our mortgage. Which will mean we will have paid off our entire 296k loan in 8 1/2 year. I expect us to beat our 48 month max.
My goal is 34 months, to line up with my 30th birthday. Not sure if we can make it or not, but that’s the goal.
Great plan. I want to be mortgage free before I retire, as I plan to spend some of my money on travels.
Have you thought about focusing on the larger one until you can refi? It’s 80% of your current house value. Interest rate will not go up within in the next 12 months, and from the look of gobal economy, maybe 24 month. After you refi the larger loan you can focus on the smaller one. It doesn’t have to be all one or the other all the time.
Good luck!!!
Wow that’s great!
Will you be paying off your super secret 3rd mortgage that you aren’t allowed to tell us about or add to your net worth?
@Eric – Oh cool! You’re already a head of the game :) The mortgage debt is all we have left – nothing else, so it’s going to be AMAZING once that’s outta there. I finally have a new big goal to shoot for now! (used to be to blog full-time, but we’re now 10 months into that, woo!)
@Emily – Yeah girl! GREAT field you’re in for sure to pay that debt off, and then you’ll really be living the good life :) If you open up a shop in the DC area be sure to let me know!
@Matt – Nice! 4-5 years is incredible man, good for you. If all goes well here, I’ll still have money on top of the extra $2k to invest with, but we’ll see how it goes for the next 4-5 months. I agree 100% that it’s a GREAT time to buy right now! Everything’s so cheap!!
@20’s Finances – Thank you! I’m trying to set myself up to succeed, but we won’t know until it’s in effect baby ;) Fingers crossed, haha…
@jim – I just refi’d and was told that I was lucky that I could even do that (had to go through the same lender as everyone else rejected us — too far underwater). I like the idea of plowing more into our Roths, but I’ve been doing that for a good 4-5 years now and I need to just get rid of these mortgages once and for all ‘cuz I’m tired of thinking about them. Things may change down the road, but for now – it’s operation kill mortgages all the way!
@Tea – YES!! Coming from someone I admire too ;)
@Hank – Haha… yeah, Mrs. BudgetsAreSexy is ofcourse in on it, though she probably doesn’t care one way or the other. She just likes feeling secure and knowing we’re “on the right track.” Every now and then she has something that’s super important to her regarding money (usually a big cashs savings), but other than that it’s all up to me and I fill her in every month :)
@Cole – Hot damn! That’s so awesome – congrats to the two of you! This helps inspire me even more, thanks for sharing with us :)
@LLF – Haha, yeah – I blogged about it and a good 75% of my readers who commented said the same thing — go w/ the 1st mortgage first ;) But honestly I don’t want to wait 8 years and then tackle the little guy after, I like the smaller wins first to keep me motivated. Financially stupid, yes, but emotionally it’s much better for me.
@Maydog – Funny, funny.
It sounds like a great plan. I will be putting my money to work on other debt first before attacking the mortgage, but I am sick of owing money as well. There seems to be no good investment alternative anyway.
I am with cashflowmantra on this one – we have to get rid of the bad negative wealth first (this will be done by next Spring though). We do intend to be rid of the mortgage within five years, however, so technically you can count me in. BTW a friend is doing a mortgage challenge (aiming to be mortgage free in three years on a rather small budget) and if you are interested to have a peep her blog is http://mortgagefreeinthree.com/.
My plan is to pay off some 0% credit card debt (by year end-2011), pay off about $11k of student loans (year end 2012) and then my remaining $96k of mortgage debt (I intend to make my final payment the day of my 30th birthday St. Patrick’s Day 2017 – and throw a HUGE party.)
Your timing on this was perfect- just last night I was talking about reducing my 403b/ 457b contributions and pushing ALL of that into my mortgage- paying down the 2nd before the 1st.
Thanks for reinforcing my decision!
@cashflowmantra – Exactly. I mean, I still feel like it’s a GREAT time to invest right now w/ everything being so pummeled lately, but the cool thing about debt is that it’s a guaranteed win right from the get go ;) And eventually it has to be taken care of at some point.
@Maria Nedeva – Oh wow, yes! I will most def. check that out, thanks! I need all the inspiration I can get :) (and glad to hear you’re up for the challenge too – it’s going to be a wild ride!)
@Walnut – I Love it!!! Better not forget to invite me ;)
@Amalia – Hey, cool! We can all rock this $hit together :)
I will join you! Does it count that I am debt free though? Being debt free is the most amazing feeling ever! I wish you all the luck paying your mortgage off early :)
I had already started doing this about 6 months ago. I am not going nuts with it but I did refinance from a 30 year to a 15 year and am paying extra on top of that. Wife and I should have the house paid off in 10 years time! Glad to see so many other SMART people who are looking forward and realizing it can be done!
Let us all have the best of luck and not get discouraged. You may get bored with it, but with this little support group we will overcome those dang mortgages and live life truly free of ALL DEBT.
You can count me in for the mortgage payoff club! My husband and I started off 2010 with 2 mortgages totaling upwards $510,000. Yeah, seriously.
As of today, we’re down to one mortgage at $387,000. And our employee stock purchase plan quarter is over in five days so we’ll be able to bring it down to $382,000 next month.
Our retirement account will be fully funded each year and our kids 529 accounts are being contributed to each month. We also have our sinking funds set for replacement vehicles, insurance & other irregular bills. Every spare penny after that is going toward retiring that freakin’ mortgage.
I love reading about people trying to get their mortgage paid off. It’s such a huge goal, such a big job and sometimes I feel like my husband and I are going at it alone while everyone else is taking lavish vacations and funding advancements in the technology of paper thin flat screens. I’m looking forward to reading your updates of your mortgage payoff adventure.
We’ve been working on this since be bought our house in 2004. We have a 3 more months to go. I can’t wait! Right now it’s slow going, because we are on a really reduced income, as I am on maternity leave(unemployment insurance) and my husband had to take a lower paying job due to the job market.
I second that you never know what will happen. Just 1.5 years ago, we were both working full time jobs making 150K between the two of us. Then we both lost our jobs…. shortly after, I had a baby and can’t go back to work, then my husband had to take a lower paying job due to the economy. Plus, we are now expecting our 4th child, so with daycare cost it’s not worth it for me to actually go back to work for the next 4-5 years.
However, when we did have the great jobs with great pay we stayed living on our old reduced budget and dumped everything we had on the mortgage. Now we are living on one reduced income, but once the mortgage is payed off, we will have breathing room and we won’t have to worry ever of losing our home.
Financial freedom and flexibility is priceless.
Sounds like an awesome plan!!! I wish I could pay $2,000 month extra on my mortgage. Awesome.
@Ashley @ Money Talks:
Don’t get hung up on the dollar figure on how much extra you can pay on your mortgage. Any extra on a mortgage will significantly reduce the term in which you will owe the bank. Start small, but i’d recommend starting after you significantly reduce the other debt payments in your life.
Quick reason why: Lets say you have a $1500 mortgage and another $1000 of other debt (cars, credit cards, personal loans, etc).. and you start by paying extra on your mortgage, what happens when you lose your job? you can’t pay $2500 a month and feed yourself working at a fast food restaurant. However, if you take all your extra money and reduce the “other debt” load. Typically you can knock out some or all of that much more quickly. Then the cash flow situation is much different. You end up with $1000 a month you can pay extra on your mortgage when you have a job. Then if for some reason you don’t, the amount of money you need to meet your mandatory expenditures is much less, and you will be able to survive much longer on a fast food job and your savings.
Some things my wife and I did to help us on our journey.
1) No consumer credit card debt. – if you have it pay it off (which will free money up in your budget)
2) Review your standard of living for hidden costs. – We made decisions to not upgrade our cars. Change daily habits to treats. (Such as 2 people * $5 coffee * 30 days = 300 dollars of coffee a month), I’d even challenge people to sell expensive cars, and buy less expensive vehicles. They both get you from point a to point b, but just less money. There are lots of places you can change how you live, if your willing to live a bit less of a typical “American Life” … But by doing this, you can actually attain the true “American Dream”
3) Work Harder. – I don’t try to be not sensitive. But it is possible to raise your income by working harder. In the last 5 years (about the same length of time i’ve had the mortgage), i’ve raised my income by 88.52% of my original income. (yes, that is right, i’ve almost doubled my income). The key is work hard, ask for opportunities to put your neck out on the line, and deliver. (or else you might not have a job at all) Then ask for a new and harder job.
Cole
I would love to get in on this game but it’s hard for me to know what’s the best place to start putting my money. Like getting x in emergency fund, still “living” (not eating just rice and beans every. single. day. for example), etc.
Good luck! Kill that debt once and for all.
@LB – Oh nice!!! Well aren’t you sexy! :)
@Matt – For sure :) Nice work refi’ing to 15 years, that’s hot.
@Jennifer Lissette – Wow, you guys are killing it! I love hearing everyone’s stories and plans too – keeps me on track and REALLY wanting to do good!! Esp since I have to hold myself accountable with this blog, haha… win-win :)
@ib – YES! That’s exactly why I think it’s smart as hell to nix these crazy mortgages and large budgets in general – you just never know. I’m glad you guys are still going strong considering everything :) And congrats on the new baby – woo!
@Ashley @ Money Talks – You could, if you worked 16 hour days like me ;) Haha… gotta love it all though or you’ll go cRaZy.
@Cole – Damn, well done! Lots of great points for sure. And cash flow is a very important consideration when paying off debt, I’m glad you brought that up.
@Jay – It def. takes some thinking and figuring out what’s important to you, that’s for sure. It’s taken us 4 years to get to this point, and every year priorities shift a little :) I don’t know your situation, but I will say that I wouldn’t be paying off any of my debt without having a cushioned emergency fund. That’s 100% liquid money I can touch anytime we need to – which you can’t usually do after paying off debt. Maybe a good starting point is figuring out how much money you need to survive every month, and then putting aside X months of that number – whatever you’re comfortable with – and then working on debt from thre? That’s pretty much what we’ve done, but again – all situations and personalities are different. Gotta go with what makes you most comfortable/excited.
@Justin Wright – Thank you, sir! That’s the plan!
I’m with ya, just have to finish paying off this consumer debt first. I’m already making accelerated biweekly mortgage right now, but I want to dump another 20% on it as soon as my debt is paid off! I’m sitting just below $230,000 right now, 2 years into a 5 year fixed mortgage at 3.99% amortized over 35 years. I want to have it paid down enough in 3 years that I can amortize it over 25 years at minimum, then go nuts on it.
I wish you all the luck in the world, but I won’t be joining you. My husband and I have student loans that are higher than our mortgage plus we plan to move in 3-5 years and need savings for the next house (the current will become a rental) and I’m only putting 12.5% away towards retirement now. Once I hit 20-25%, I pay down the student loans and we have our rentals bought I’ll start working on the mortgages but that will probably be 10-15 years from now and you will be long done with your mortgage pay-off by then, I expect.
Congrats on being so aggressive! Can’t join your challenge until I get a mortgage…
Actually yes you can. Before taking on a mortgage, save aggresively for the down payment. Agressively pay off ALL other debt so the mortgage will be the only debt. And finally, when you do take on a mortgage, don’t start with a long amortization, but the shortest on you can realistically afford. Set up your repayment as biweekly (every 2 weeks, not twice a month), round up your regular payment, and then whenever possible throw extra payments at it. No reason you can’t take on a mortgage with the plan to pay it off in no more than 10 years. Don’t accept what the lender suggests (monthly payments, 30yr amortization. All of that is for their benefit to get the maximum amount of interest out of you.
Oh, and NEVER take as big a mortgage as you qualify for.
Agreed on all points! You can even start “paying” your monthly mortgage amounts into a savings account too so you get into a good habit and used to it faster :) Then when it’s time to get one you’ve already got tons saved up AND it’s not as big of a change… And if you’re lucky the monthly payments turn out LOWER than you’re used to now, thus saving more every month! Esp. if you don’t take out the max amount you qualify for..
You go J. Money. You have the plan so execute and see it through till the end. No doubt you can pull it off.
J Money! Love the plan. My wife and I have been looking to do the same thing but we can afford to do $900/month extra on our mortgage saving $124k and paying it off in 12 years! Going to take dedication but we want this thing paid off! I love how down to earth you are.. looking forward to reading about your progress.
You can certainly do it!!! Yep, you surely can, and I would have chosen to pay off the smaller one first also. You’re giving me motivation to get rid of these student loans even quicker. In fact, just made my 3rd payment this month. GO J MONEY and FAMILY!!! :)
Sorry if I missed this somewhere, are you going to continue to contribute to your retirement accounts still, or no?
Good luck! We’re paying $500 extra every month and it’s not making much of a dent. Kind of discouraging, but we’ll stick with it while we can.
Yay! Congrats on finalizing your mortgage pay-off plans. Sounds like you’re pretty pumped; I hope it all works out for you. :-) I’d join ya but I’m not a homeowner…for now.
Im with you, in the same boat except in 43 or 44 (forget my age all the time) I have the mortgage around 230k a 2nd at about 35k and a visa at 11k left in debts, Im focusing on the visa and 2nd right now and would like those gone by 2015 then attack the mortgage. I will still be squirreling money aside in savings and investments though. its a game to me =o)
Also working on extra incomes and if all goes right 75% of that goes towards debt and savings.
Sounds like an awesome plan J! Good luck; I know you guys are gonna kick ass. We’ll have an aggressive payment plan once we buy our home as well.
This is awesome, J. Money! Good for you!
Best of luck with your plan! I’m excited to read about your progress.
Count me in, too. We already have a plan in place to kill our 2nd mortgage by 2014, but we haven’t figured out a plan for the big one yet (mainly because we’re not sure we’ll still be in this house past 2014). But I love a challenge!
Count me in! We’re currently overpaying £658 and increasing this to £1,458 in January to make the payments £2k – we have a mortgage balance of £109k and want it gone by December 2014!
Good luck J!
@Cassie – Yeah girl! Do it! I have a feeling it’s gonna get pretty addicting once we see how much an impact it makes every month. I’m pretty excited! :)
@Ginger – That works too! Whatever makes the most sense for you in your current situation for sure – we all have our own paths :)
@Jenna, Adaptu Community Manager – Haha, true dat. Debt?
@Rafiki – Thank you! Gotta start so I can finish, right? :)
@Derek – BankAim – Awesome man! You guys have a great plan too it seems :) Soon enough we’ll be mortgage-free in no time!
@Ms. S – Awww, well just reading comments like yours helps to keep pushing me forward! I got your back too – time to get rid of that student loan debt! :)
@brooklyn money – Yup, I am, just not as much as I have been in the past. Anything on top of the extra $2k will go toward retirement. Some months I reckon I’ll have some, and others I won’t. But after going hardcore the past 5 years w/ retirement, it’s time to focus more on my mortgage debt for a bit. Perfect world I’ll be doing both though :)
@retirebyforty – It’s not? Seems like a decent amount to be at lesast scratching the surface :) Guess not extreme though… still, ya gotta do whatever you can my man!
@Jen @ Master the Art of Saving – Haha, I wouldn’t be a homeowner either if I could turn back the clock ;) Though I have learned a lot so I guess I’m glad I went through it all…. just goes to show that the “American dream” isn’t necessarily for everyone.
@Jeff @MyMultipleStreams – Yeah! It IS a game! And one that you can WIN too :) I think your priority list seems smart too – id’ go for c/c debt first as well, and working my way down the rest. We’ll motivate each other – sound good?
@Briana @ 20 and Engaged – Thanks! Once/if you do, let us know what your plan is gonna be :)
@Melissa – Thanks! Should make for interesting net worth updates down the road :)
@Alexis – That was my problem every single year actually, and kinda right now too — the fact that we want to move and go back to renting a smaller place. But when it comes down to it (which is what’s gotten me to act finally) is that either way – whether we live there or we sell it or rent it out or whatever – we still owe all that money. No matter which way you slice it you still owe the mortgages, so figured we might as well start knocking it off now and try and keep up a good pace :) If we sell later, then we get our money back!
@Laura @ no more spending – Awesome! That’s quite the leap come January, I’m impressed :) We’ll celebrate together once we’re all done!
Wow. That’s a big goal. We’ll be discussing this at our next Women’s Saving Club meeting — whether to pay down a big debt or put $2000 in savings each month. Could we be sure to get a better investment return than our mortgage interest these days?!? But there’s something to be said for the freedom of not having ANY debt.
I got serious about my mortgage a couple of years ago. I had just signed a new 3 year term and I decided that it was enough. I did not want to have a mortgage over my head for the next 9 years. I am now 9 payments away, 18 weeks…
It is a great feeling! Good luck with your plan!
@Tara – Oh cool! Yeah, let me know how it goes :) Normally I always advise to SAVE save save and INVEST invest invest, but after doing that for a while and completely ignoring our mortgages, I’m trying to kill kill kill our debts! I want to know what it’s like to be completey 100% debt-free, even at the sake of saving a few more pennies in the long run. Imagine the freedom you’d have w/out owing anyone money?? Crazy. You’d be purely working for YOU – not to give someone else the money ;) (well, except for taxes/etc – can’t really avoid that much, haha…)
@B-Kat – Wowwww cool!!! Let us know when you’ve finally knocked it all out okay? We could throw a blog party for you if you’d like ;)
I would definitely like a Mortgage Payoff Club!! Let’s do the damn thing!
I have just one caution or maybe after affect of paying off your mortgage.
I spent seven years paying off my mortgage. Done by age 49. I was so focused during those years I didn’t realize how much delayed gratification I was delaying or how occupied my mind was with the goal. Every time I spent money I always compared it to money that could have gone to the mortgage. I delayed some things a little too long. Such as a new roof. But now that the house is paid off, i’m aware of how my mind and energy has been freed up. And now though I earn an average income I feel incredibly rich. My fixed expenses are 10% of my take home. That leaves 90 % free. Can you even imagine? I get paid once a month. I used to wait patiently through the month for the next paycheck. Now the money just rolls in. So don’t delay important things too long, and the time will go faster than you can imagine, and you will feel SO FREE when you are done!
@Ann – Thata girl!
@Homefree – I love that!!! And no – I can NOT imagine having 90% of my income free like that! Haha…. wow. What a great affect for sure. And I agree that going *too* hardcore w/ the mortgage can for sure lead you to miss out in life. Which is something I plan on watching myself, and the reason for me capping my extra payments every month at $2,000. If I put EVERYTHING towards it I’ll go crazy and most def. miss out on life around me. But I love traveling and exploring way too much to do that anyways, so anything over that $2,000 goes to living life and investing here and there. We’ll see if I need to tweak as time goes on :) Thanks for sharing.
I LOVE this post. I think the greatness of what you continually write about isn’t about conventional saving and investing – take big risks and make it rain. 6/23/22 – beers on me.
Thanks dude, that means a lot. There’s always mad ideas floating around in my head, so when I finally get some that make sense I love sharing them, haha… ;) I’m gonna hold you to that beer offer!
I’m about a month late to the game, but I’m definitely in! I’ve been paying over $1,200 extra per month on my mortgage for the past 3-4 months, and I hope to not slow down. Someone might have already asked this, but when are you going to create the super sexy “Mortgage Pay Off Club” badge so I can rock in on my blog??
Aww yeahh!! GREAT idea my friend, very very smart. I shall make a badge and holler back one day soon :) Keep up the good work w/ the extra payments! Not many can pull it off, my friend.
Whoa. I’m new to the world of savings and working on debt and this post just blew my mind and got my rear in gear to make a plan! I don’t think we’ll be in our current home long enough to pay down the mortgage, as we have a few other debts to pay down first. Thanks for writing a post that finally got me moving and excited to start planning our financial future better!
Great! Come back anytime and continue getting motivated ;) That’s the main purpose of this blog, so I’m glad it’s workin’!
Wow! I can’t believe there are other people who think like me out there. I have been thinking about this since the first year we moved into our house. Then came the two kids, so I don’t know if its possible anymore. But, i still lay in bed at night, crush numbers in my head and dream. My goal is an interest free life! No interest on credit cards, mortgages, cars! How does that sound?!
That sounds brilliant! And SEXY!!! ;) Welcome to the club of all-night-thinkers! Haha… and the best part of it all is that it really IS possible. Just gotta keep hustlin’ and staying motivated! You can do it, my friend!
Great Blog! I’ve been working on making extra payment to my mortgage for the past 6 months and after the holidays I plan to step it up big time. Over the past 6 months or so I’ve been doubling my principal only portion. Every month the principal only portion of my payment increases by about $2.45 so I’ve been adding that every payment. It so awesome to see that principal and interest balance shift on my mortgage. I can’t wait until it is a 50/50 split and teeters towards the principal. I like running the numbers on the extra applied to principal every month and how it compounds. Even If I stop with the extra payments I still get the advantage of the increase in the portion of my payment towards principal. I don’t have any concrete goals set yet for paying off the mortgage but the earlier the better!!! Good luck w/yours J. Money!
Thanks J Dub! Keep on killin’ it yourself too :) Every bit helps!
Excellent goal! We paid off our mortgage coming up on a year ago, and it was the best thing we ever did. We drive very old cars and haven’t been on vacation in years, and have old furniture. We also have no debt whatsoever and are now saving close to 10K per month. So it was an absolutely wonderful decision. My encouragement to you, however, is to NOT “put the Mrs. to work”, for you will be losing much more than you are gaining. Or if you do put her to work, expect the only “sexy” you get to be your budget, for after she looks her best for other men all day long she’s pretty much done with it. Keep her home and let her manage everything at home, one of the absolute best things for your home and family!
Haha, well I’ll keep that in mind, sir ;) She’s a pretty independent woman though, and I can already tell she’s getting antsy now that school is coming to a close. If she wants to go back to work, whether for money or just to keep her brain pumping, I’m gonna of course support her all the way. We’re both free to work as hard or not as we want, so as long as everyone’s happy our home will be happy!
And man, BIG CONGRATS on paying off all that debt – including your mortgage, that’s incredible! Saving $10Gs a month? I hope you guys start going on vacations and enjoying some of it now that you’re more secure and solid. Moneys’ gotta be spent at some point, eh?
I hear ya! We’re saving up to retire now, but will finally take our first vacation this coming May, with cash! It was a difficult 13 years, when all the Mr. Smith’s and Mrs. Jones’ were out enjoying life to the full and we were scrimping and saving. Now we ARE the Jones’s! :)
Haha, YEAH you are! And you’ll be sleeping a lot better now for the rest of your lives than most people will be ;) You guys should be proud of ourselves!
Now to flip-side this! My spouse and I are saving 15% of our income towards retirement. In addition to that, we (somewhat comfortably) have over $2,000 left over each month to add to a down payment on our future home. We currently rent, have 8 months of expenses set aside and no kids yet. How many years should we stick it out and save this kind of money before putting an amount towards a down payment? To think about how we potentially could put down $250,000 cash after 6 years with a nice cushion in the bank if we waited is quite tempting.
Ooh la la, yeah it is!! And that’s the *perfect* position to be in too :) Lots of cash stored up and lots of housing prices depressed. I think it really comes down to when you really want to start owning, as well as when you come across that perfect first house you guys like.
Of course, it also depends on how much you want to spend in general for a house too, but the idea you can front pure cash to buy it outright over just a downpayment is pretty awesome. You’d save an incredible amount of money over time! But the downside is you’d have to wait so long to do that too…
I say you keep on stacking up that money and looking around, and as soon as all the variables line up you jump on it and just get a killer deal. The more cash you have to put down on it, the better you’ll be in negotiating too. I’m excited for you guys!!!
Hi J Money,
My husband and I refinanced our home mortgage with a first payment due January 1st, 2011 (3.75/15 years). Our original balance was $243,500.00 and I’m proud to say that as of today, we owe $142,600.00. It has not been easy but we have to kept our focus. I’m even more proud of our accomplishment since we’ve also gifted our son his college education (pay as we go tuition) and we are on our way of sending our recent high school graduate son off to college. We are hoping to do the same thing for him!
Our goal is to be completely debt-free by January of 2018 or SOONER (including the house).
Good luck and continued success in chipping away your mortgage debt.
We were nearly bankrupt 5 years ago, due to a failed business. Last year we finally paid off the last of the debt, including our mortgage of 250K. It’s all gone and we’re debt free. The cool thing is it is allowing us to move from Ohio to Washington state, something we couldn’t have even considered had we still been shackled with debt. I will never go in to debt again, for any reason.
@Mrs. Frugalista – Woahhh you are KILLING IT!!! Congrats!! And totally helps keep me motivated too as every other week I start doubting myself and wonder if I should just go back to investing and/or just saving it all again ;) But I *truly* want to be debt-free 100% and I think I need to stick to it! So thanks for the extra encouragement!
@Mike – Wonderful!! And so impressive that you stuck to it and didn’t go the bankruptcy route :) I know everyone’s situation is different, and some people actually DO need to file for bankruptcy, but for the most part I see a lot of people just not wanting to deal with it and decide to screw their responsibilities and start from scratch. So good for you on digging yourself out and accomplishing a remarkable come back!
Have you guys started a newer, more successful, business in the meantime? I don’t know many entrepreneurs who can stop building ;)
I like your goal to need LESS money. I think it’s a great idea. I also have a mortgage and I often wonder when I’ll be done paying it off. My current goal is to pay off my college loans and then concentrate my efforts on getting rid of my mortgage.
That’s not a bad plan either – whatever gets you more excited! :)
hey guys looking for some advise,
i am recently 24 and we wanna pay off our mortgage earlier 119k on a 30yr term is it worth accelerating the payments each month even if we only plan on staying in the house for 5 more years? house is in a great location and we bought it as a flip..which is coming along nicely. but i just wanted to know if there is any advantage to paying down a mortgage on a house we don’t plan on making our forever home.
I think it really comes down to your own preferences. Some people love having no debt, and others prefer having more cash saved or invested while slowly paying down debt. So there’s the emotional side of things, and then the financial side of things :) Financially, if you didn’t put the money towards the mortgage, you’d want to be putting it somewhere that earned *more* than whatever interest you’re paying on the mortgage. So if the house is at 5% interest, and you decide to save it or invest instead – you’d want to at least make 5% or more to make it financially worth it.
There are tons of other factors too like how much you guys have saved already? How much other debt you have? How much income/expenses/etc? Hard to advise without knowing all the variables, but the good thing is either way you go you’ll be moving ahead to financial freedom :) Keep it up!
Here is another approach that I have taken. I had enough saved up to pay cash for my house, but instead, I took out a mortgage at 3.5%. With my tax rate, and the tax deduction that you get on mortgage interest, I’ll effectively be paying 2.8% to borrow this money. These same numbers (or better) would probably apply to most borrowers today. I then took the cash that I saved for the house and fed it into S&P ETFs (kind of like a mutual fund). Obviously only time will tell what is going to happen – but in the worst 30 year period (also the duration of my mortgage), the worst we ever got out of the stock market was ~3.8%… that would be if you bought at the peak of the great depression.
So, doing the math, a worst case scenario:
3.8% > 2.8%. Also, chances are pretty good that you will do better than 3.8%, and you’re guaranteed the 2.8% mortgage (unless they change the interest tax deduction).
I hope this logic helps some people to divert their efforts toward investing, and away from simply paying down the mortgage.
I think that it comes down to what you feel comfortable doing. I contribute 15% of my income towards retirement (Roth IRA and 403B), any money leftover after that goes to savings and paying down the house. For our family, paying off the mortgage signifies having more freedom to do the things we feel our important to us.
@B. money – That’s not a bad idea either!, especially if you have that much cash built up :) I’m sure it’s harder to unload a big batch like that as well, I don’t think I could do it even if I wanted! Haha… I just got a $20k chunk for something and it’s hard as hell to apply it right away to the mortgage, so we’re going to fund our Roths and SEP instead with it – which is our 1st importance right before paying off the house… but MAN would I like to just kill more of these mortgages off. Thanks for sharing your thoughts w/ us.
@Mrs. Frugalista – I’m right there with ya. When your #1 major expense goes away, it opens the doors to unlimited potential! I can’t wait for that day to come! :)
My wife and I are ONLY 24 years old and ONLY make 50k a year, but we have managed to buy a house in cash! It helps that we are in the midwest and we got a small house, but over the last 2 years we lived on a third of our income. Now that we closed on a house, we are saving up to eventually upgrade. Never going to have any debt!!!!!!
The borrower is slave to the lender…
LOVE THAT! Way to realize (and *act* on this) while you both are so young – that’s pretty impressive. While I can make up excuses all day long that I could never buy a $350k+ house in cash in the DC area, you can certainly adjust your “needs” and come up with a better game plan before jumping in – something I failed to do when we got his house. So again – better to learn early than later! :)
Here’s a tip I read about, if you make your payments in increased installments you can also pay off your mortgage faster. For example, if your mortgage is $1000. you break up the payments into 4 payments, $250 a week or $500 bi weekly, this can shave years off your mortgage.
Yup! Agreed! Someone else just told me that today too randomly enough :) He’s paying one extra payment a year and says it’ll cut down on like 7 years of payments in the future – pretty crazy stuff.
Thanks for this great topic! Nice to see others out there that despise their mtg as much as I do. 2.5 years into a 30-yr $205k loan I finally woke up and started paying extra. Last Oct we refi-d that sucker into a 15-yr on the $193k balance (after closing costs). Am paying $300 per month extra and also throwing large chunks at it whenever a small windfall comes our way (i.e. tax refund etc.). Our balance is already down $5,400 since closing the loan.
We could probably up the extra payment to $400 or $450 per month but as others have alluded – we don’t want to completely miss out on life with modest vacations and such. If I drop dead a year from now I would hate to think our family never took fun trips or somewhat enjoyed life.
It’s all about that balance. Our mortgage should be gone in just over 11 years but hopefully much sooner! Again, great topic; SO motivational!
Good for you!!! And looks like it only took you 2.5 years to wise up where it took me 5 to finally do something about it, haha…. It’s def. hard at times to keep pushing forward with this type of plan, but the smell of financial freedom sure does help motivate you more :)
I’ll see you at the finish line one day soon, friend!
We paid off our mortgage last August. We are debt free. I performed about 100 loan payoff scenarios for about five years prior to paying if all off. None of them worked exactly right but the point was that I wanted to pay off my home. It’s a great feeling to not have any more debt. I am not as worried about my job or any of the issues going on there. I could survive on 1/3 or 1/4 of what I make so that is a great stress relief. It’s wonderful. Keep working on it and I am sure that if you calculate 10 years, you will pay it off in 5 to 7 years. Have fun!
AWESOME!!! That’s the best feeling in the world too, right? Knowing you can live off soooo much less cuz your house is covered? Love it…. can’t wait to be there with ya!
I guess my question is, is it really worth it? Sure you can save that money, but won’t you be loosing money as well? Mortgages tend to have very low interest… what would happen if you invested that 2k per month? Wouldn’t it tend to grow faster invested than the interest on the mortgage alone? Mortgage interest is also tax deductible. In addition to the lost investment opportunities, there’s less tax liability. Does prioritizing the mortgage actually work out to save more money than other options?
It’s all about the psychology of it. You are exactly right – one could take the extra and invest it and make a much better rate of return. But for some of us, the way we are wired is that we just sleep much better knowing that we do not owe anything to someone else, and they can’t come take it (the home) away.
It’s just about the way different people respond to different scenarios.
YUP! What Kevin said (thanks Kevin :)). More than likely you WILL save more by investing, but at the end of the day it’s about what makes you happier/more comfortable. I switch back and forth all the time – sometimes I invest more, and then others pay off more debt – but as long as you’re doing what’s best for you at the time, it’s all good. The point is really to KNOW what that thing is that makes you happiest, ya know? Once you figure that out you’re golden.
Hi! We paid ours off in 48 months. We were able to refinance for $0 with Wells, they had a special. I keep track of our neighbor’s real estate tax bills, once I was able to lower ours because it was higher than the neighbors. I call State Farm every year to check our Homeowner’s policy. A couple of times the value of our home was out of whack and I have a high deductible now. Our rate is lower than most because we have four cars (2 are kids). Instead of having an umbrella liability policy that was costing us $721 a year, I insured our home and four cars with an additional $!M policy. It is peanuts compared to our umbrella.
D.H. bonus money went into mortgage too. I’m so happy with it being paid off, you will be too. If you make it a consistent priority, you will get it down faster. Good luck!
Awesome!! Way to go :) I def. hope to be in your shoes one day! 48 months is incredible… I’m going to pretend your mortgage was $48,000 to make myself feel better, okay? :)
I’m definitely joining this – in fact this post inspired the title for my blog, http://www.Mortgage-Payoff-Club.com
A huge props and shout out to J. Money for that.
It only has one solitary post right now. But I need to start somewhere. I started the blog to get myself inspired to actually pay the sucker off! Maybe if I post my mortgage balance in big fat red letters it’ll actually inspire me. :)
But yeah we should totally have a badge for this made up. I’d proudly display it.
The site has moved to http://mortgagepayoff.club/. :) Let’s get thee mortgages paid off! :)
hey! been a while! no longer have any mortgages anymore myself, but only because I cheated and went back to renting haha… I’ll have to include the new site in my next roundup for people though – thx for the heads up (and glad you’re still at it!!)
Nice dude! Congrats on getting it up :) I’ve toyed with starting something similar myself, and making it interactive and a cool “thing” out there, but alas time and energy need to be focused elsewhere at the moment. So run with it and help motivate everyone! Maybe you can get a badge up and going?
How did you create your badges? I have weak Photoshop skillz – although I could probably shake off the dust on them and make one. :)
haha.. yeah, I did in photoshop and using a free graphic I had found too and changing. doesn’t have to be real fancy really, just something to get the party motivated!
BTW – have you been able to keep up with this plan every month?
I have about 80% of the time. The first 10 months or so I rocked it without a hitch, and then since then been putting $2k in here, and maybe $1k there. My life/priorities have changed a bit since originally posting this (like having a baby and now moving) so not sure how long I’ll continue doing this for, but ultimately I still want to be mortgage-free within the next 8 years – however that looks. It’s definitely not easy, but it IS do-able!
I applaud your debt reduction aggression! However I have done a lot of options-weighing and have determined that with such a relatively low mortgage interest rate (after taxes yours is less than 4.5% – mine’s a bit lower) I am much better off to max out my retirement accounts before paying any extra on my mortgage. Investing overall comes out ahead, but investing within available tax sheltered accounts is a huge no-brainer. After all, you may not always have access to funding those accounts. I’m about your age, and if saving $200K+ on mortgage interest blows your mind, try messing around with some compound interest charts and see how much you could end up with in over that same 30 year stretch if you invest that money instead! If you can’t convince yourself now, maybe one day when your savings account is paying more than 5% again you will be convinced that leverage isn’t always bad when it comes to investing.
I think there are def. pros and cons to both sides. I go in phases of killing my investments and not touching my mortgages, and then doing both at the same time and/or only mortgages :) But as it stands I max out all my retirement account each year and I find that’s quite enough at the moment so I push all extra money towards these dumb mortgages of mine. We’ll be switching things up in the future with a move and my wife no longer working (yikes!) but we shall see what happens then… For now, we keep killing the mortgage to be debt-free!
Leverage isn’t always bad when it comes to investing? Wasn’t that partially what the whole crash of 2008 was all about?
Personally, I’d much rather have the peace of mind of no payments whatsoever – especially since I’m self employed. There is always a risk borrowing money because you are banking on always having an income to pay off that debt.
In this economy – something could happen that would make that hard for a while. For me – the risk of debt is now too great.
The borrower is slave to the lender. No payments = financial bliss.
-cdub
Being completely debt-free would be amazing for sure! My favorite part is that you then don’t NEED to bring home as much money if you don’t want to which is great. More chances of doing stuff you truly love for a job since it’s not completely for money anymore :)
Hi J.Money,
We made the first payment on our refinance on January of 2011. The loan was a 15 year/3.75%/$244K. As of April 11th, 2013, we have a $0 balance. We paid $165K with our salaries and savings. We made tons of sacrifices since our salaries, although very good in today’s standards, do not go very far because we live in a high cost living state (New Jersey). The remaining amount left on the mortgage was paid with the sale proceeds of our rental property. We sold it to our sons and their mortgage will be $60 after they collect the rent from the upstairs apartment. Yes, it can be done! You just have to follow through with your goals and make them happen. We lived way below our means and now, 27 months later, have peace of mind. By the way, we are completely debt free, no mortgage, no car loans and we don’t carry any credit card debt. Life is good.
YOU ARE MY HERO!!!! I should print this comment out and plaster it on my wall actually, jeez… So inspirational!
J Money – Do you have a running list as to where you are today in your mortgage payoff plan? Sorry if I missed it, there is a lot of good information on your page that I have not come across it yet.
Thanks for the kind words :) No, I don’t have a specific page on it but I do update the balances every month in our Net Worth recaps – here’s the page here if you want to check them out:
https://budgetsaresexy.com/category/net-worth/
Great reading about this. My husband and I each had a house when we got married. One at $160K (30 yr. 5.875% Fixed Rate obtained Jan 2008 – about $1350/month with P/I/T) and the other at $92K (30 yr. ~4.5% Fixed Rate obtained June 2008 – about $700/month with P/I/T). Right now we rent out both houses netting about $1300/month for the first and $900/month for the other.
So…..over the past 2 years we have managed to save about $100K cash. We now have about 135K left on the one house (I pay an additional $300/month on pricipal) and 85K on the other (he pays an additional $100/month on principal).
Now, what to do with that lump of money? Do we pay off the lower value/lower interest rate house like you did and then put the extra money (minus repairs and taxes) from rental (~$600/month) into the larger value/larger interest rate house and continue to pay that with the $300/month additional princial? OR do we put down about 50K on the larger house and re-finance for a 15 year fixed rate mortgage it for a lower rate while continuing to pay the extra $300/month on the home while also going at the same rate of payment on the other house but just putting a large lump sum value (~35K towrds the second house)?
We plan on keep on working for the next couple of years (I am 32 and he is in his early 40’s) at the same jobs earning about the same amount of money. Due to circumstances beyond our control, we are moving soon and will be renting a third place on the opposite coast. We have budgeted and we think we can continue to save about $25K/year at our new location and evenually put that towards buying off the other house in 4-5 years from now.
Sorry so long. Thank you.
Wow, cool situation to be in though :) Congrats on the successful rentals and cash flow – we just jumped into renting out our house too, so our “mortgage payoff plan” here is currently on hold while we’re adjusting…
It’s hard to give advice when I don’t know you two, or what your risk tolerance/preferences are, but I like to usually go with what makes me *feel good* in situations like this. There are pros and cons to either route you take (and I really don’t think you can go wrong with either), so it really depends on what excites you guys more, and what will help you sleep better with at night :) cop out answer, I know, but it’s the best I can give as it’s what I’d do in your shoes.
Good luck!
We are in a very similar situation. I have been home with the kiddos for the past seven years. Over the years we have paid things off, sold things and now left with only our mortgage. Next year my youngest starts kindergarten. At that point, I hope to find a job in my field. We are so used to living off my husband’s salary that EVERYTHING that I make will go towards paying off our mortgage. We currently owe $238K and are awaiting the sale of a chunk of land we own to add to the debt pay-off. Good luck!!!
CONGRATS! That is awesome!!! What a wonderful position to be in – it’s gonna go away so fast!! :)
I just hit your site today after being referred from Yahoo. I read the above article and man, I was in the same boat as you. I originally got my house in 2004 at 5.5%, 15-year. My amount in 2004 was close to 1300/month with PMI. After getting rid of PMI, it got knocked down to a little over 1250. I refinanced in 2010 and I’m currently on a 15-year, 4.75% mortgage plan. I didn’t have a good paying job when we got our house, so I was just rolling with it until we refinanced. By 2010, after refinancing, it got knocked down close to 900/month. I figured then I can pay more on this to knock this gorilla off my back. I was very fortunate last year to get a bump in pay and some more money to work with. Currently, I’m paying an extra 1200 a month and projected to finish paying it off Jan. 2016. But I’m not happy with that and I know I can do better than that. So within the next few months, I’m going to get a part-time job and add another 1000 a month to the 1200 I’m paying additional in principle. I’m hoping to knock this huge ass gorilla off my back in 5/2015. Wish me luck!
Nice man! First on going with a 15 year loan, and then by upping it by an extra $1200 – and now a side gig on top?? That’s exactly how you crush it, brotha. Especially if you throw 100% of the earnings right to it – I love it!
Come back when it’s completely gone and tell us about it – okay? I give you full bragging permission :)
Will do sir. I have a credits/expenses spreadsheet that I created to keep track of the household expenses. Man, when I delete that amount for mortgage, it’s going to be a crazy sight to see how much my house is paying me back!
I’m still trying to figure out what to do with all that $!!
:)
Damn good problem to have ;)
Update –
With my tax refund which I hope will be in the $6,000 range, I’m hoping to use that and pay off the house by middle of April. Can’t believe it’s only 3 months again from being completely debt-free! (other than the normal debt – credit cards, daycare, etc.)
incredible!!! I can’t believe it’s already been a year since we last chatted here too? And this whole time looks like you’ve been hustling – well done, sir. Well done :)
Wife and I were just discussing this today. We bought one property cash last summer and are working to have our second paid off by 20/20. Part of our future “vision”. ; )
Bah-dum-ching!
If one has been with a great company for 15 years, with a total compensation approaching $200 K/yr (base $130 K), with a pension…would you recommend hanging in there for 20 years (pension value would double) or begin new job search to get closer to family? Expecting first child and the “family vs future” thought is percolating quite a bit. I think I’m overthinking it. Please advise.
Great question indeed! The *financially* smart decision of course would be to stick with it for 5 more years and then make the move. But not everything in life is so cut and dry, as you’re finding out. I unfortunately can’t tell you what the right answer is – only you know it – but I will say that either route you take will be fine :)
Try looking out 10/15 years from now and asking yourself how you feel about each? Will that double pension be *needed* in the future? Does it open opportunities up to retire early and thus spend more time w/ your family than the opposite? Or are you guys a-okay with $$$ and it won’t affect y’all much?
You could always wait until *after* the baby arrives too and see how it goes/what you’re thinking. Some people want to move closer right away, like we did, but others not. I think you just have to weigh the pros and cons for a while :) Double money in the future is no joke!
Great post! Have you made any posts since this one with an update on your mortgage progress?
Thanks man, glad you liked it :)
Yeah, once a month I post up my net worth here and it shows how our mortgages are doing. I’ve since stopped paying $2,000 extra a month (lots of variables there), but you can see all our worth updates here:
https://budgetsaresexy.com/category/net-worth/
I’ll be dropping the next one tomorrow – watch for it!
Can I recommend a better way to pay your mortgage faster?! I would love to take credit for the idea but it isn’t mine…..I read about it online….so it must be true….lol. But seriously, you are already setup to do it and IT WORKS.
First you must have enough equity in your home to open a HELOC. Which you already have. Check
Next, take a look at your mortgage payoff (amortization) schedule. You will see that banks have the same philosophy that we should…..they pay themselves first. Let’s say your mortgage payment is $2000/mo. In the beginning years when you make that $2000 payment maybe $200 goes to paying down the actual house and rest goes to interest…..TO THE BANK! That sucks for you. (Btw, I’m just throwing out random, made up numbers, as an example). Later in the mortgage, say year 15, half way through a 30 year fixed, it is probably more equal……$1000 goes to pay on the house and $1000 to interest…..THE BANK again….ugh. Late in the 30 year fixed you are FINALLY paying more on the house and only a little in interest to the bank…….maybe $1800 to the house and $200 to the bank. THIS IS WERE YOU WANT TO BE…ASAP.
There are several ways to pay down the house quicker:
1) pay extra every month. One problem here is it is painful to stick with for long periods. The the main problem I see is it doesn’t get you across the halfway point fast at all……what I mean is to the point where more $ pays the house and less to interest. Yes, it is faster than never paying extra but your money would be better invested and you getting the mortgage deduction on your taxes. My opinion only.
2) bi weekly mortgage payments. The problem here is you usually have to renegotiate your payments with the bank and lock yourself into making 2 payments a month instead of 1. And in all reality it doesn’t shave that many years off your mortgage. I haven’t run a calculator on it recently but check it out for yourself.
3) 1 extra payment a year. The problem here is again it doesn’t shave many years off your mortgage similar to problem #1 and you would be better off investing and receiving divies……my opinion only.
4) THE BEST APPROACH IF YOU ARE SERIOUS ABOUT PAYING DOWN YOUR MORTGAGE! btw another requirement to having enough equity and opening a HELOC is having extra, left over $ each month. If you have no room left over in the budget and no home equity this will not work for you. I assume most folks here have something left over each month, and the desire to do something with it, thus the financial blog reading.
Here is how it works:
Pay down some or all of your HELOC so you can write big checks. The idea here is to write big checks to your first mortgage from your HELOC. The reason why? It more quickly pays down your principle in two ways: 1st with the big check, 2nd) now with each monthly payment…..look down your amortization schedule and compare the 200k principle/interest to the 175k principle/interest…..now look at 150k and 125k and so on. Depending on your situation with extra money and the ability to quickly repay your HELOC you could easily payoff a 30 year mortgage in 3-7 years.
For example, you owe 200k on a home and have a 25k HELOC. Your monthly expenses are 2k, you bring in 4k…..(I like easy numbers in examples don’t you…lol). Btw, we don’t care about the interest rate on the HELOC because the interest you pay is tax deductible just like your mortgage interest.
Here is what you do. Write a 25k check to your mortgage from your HELOC…..or do an online transfer. Now you owe 175k on your mortgage and 25k on your HELOC…..hmmmm, you still owe 200k. Don’t worry it gets better because you have extra $ each month (2k extra in our example). But now however look at your mortgage amortization schedule at 175k and compare it to 200k and see how much goes to principle and how much goes to the bank for interest. It changed! Now you still have to make a mortgage payment every month BUT with each payment now more goes to principle than when you owed 200k and LESS goes to interest and out the window……gone forever to the bank. Now when you get your 4k monthly (or 2k biweekly check) transfer it all into your HELOC. So now we have 1) mort. 175k 2) 21k owed on the HELOC 3) your HELOC payment due is $260……due in 3 or 4 months…..notice not this month….or next month…..nice, breathing room. 4) we now have nothing in our checking…….doh, we have to eat! Wait about 3-5 seconds after transferring 4k into your HELOC……However long feels good to you……now transfer back 2k into checking to live on, since in our example monthly expenses are 2k. You will see that now you owe $300 on your HELOC payment. It went up because now you owe more……BUT, the good part….the date you owe that payment 3-4 months from now never changed. So now you have the option for 3-4 months. Continue to steam roll your HELOC and pay it down aggressively or wimp out be the lazy consumer and take a vacation build up a cash cushion etc…..but I know you won’t! Let’s stay on track and pay that mortgage off! When you have paid back the 25k HELOC write another 25k check, or transfer, to your mortgage. Now you owe 150k and EVEN MORE goes each month to paying home and EVEN LESS goes to the bank in interest. Rinse and repeat until your mortgage is GONE! depending on how much extra money you have is how quickly you can turn and burn paying down your HELOC and knocking another big 25k chunk off your mortgage. Look at you amortization schedule and image yourself down in the bottom half. Now go get there!
200k mort. 0k HELOC. Bank act
175k. 25k. 4k
175k. 21k. 0k
23k. 2k living exp (1st mo.)
23k. 4k
19k. 0k
21k. 2k living exp (2nd mo.)
How fast you repay the HELOC and do this again is a function of how much EXTRA money you have each month.
Is there a risk to this approach. Yes, but there is risk in just getting out of bed everyday. The risk isn’t huge but you should understand it. Here is an example of the risk. Jerry does this technique and gets down to only owing $1 on his home. Since he has been super aggressive in this technique he has no money in savings/investments…..and no friend to loan him a buck. Poor Jerry. He loses his job. The bank is salivating they can foreclose on him take his house and get $. The bank forecloses fast. Jerry has no house and no money to live on will searching for his next job…..ouch. Now we have Julie she has made the regular monthly mortgage payment. She owes 190k BUT she has 200k in dividend stocks paying her 12k a year or $583/mo. Which she can sell as needed to pay monthly expenses. She can relax and search for over 4 years drawing down here money or get a lower paying job she likes and supplement her income with dividends…..in other words she has choices. On top of her financial cushion the bank won’t foreclose as quickly on Julie…..it simply cost too much for the low reward.
Paying down your mortgage is great. It will take away stress and free up tons of money. Just be careful to have a cushion until you get it paid off completely……and even then you will always owe taxes and bills but they are so much less than a mortgage…..easy peasy on any job or cover with divies.
I hope the examples I gave made sense. I think it is a great technique. I have been using my HELOC to invest in dividend stocks and real estate investment property. I keep enough on hand to pay it off at anytime. For now I will invest with it and take the tax deduction. In the future I will may change gears after becoming FI of my monthly expenses and pay it off completely. I will definitely be mortgage free by retirement.
Sorry for the gigantic post…..lol.
Good luck! Great blog!
Hah! Definitely long but appreciate the thought and info :)
To be honest though, I’ll never mess with my HELOC again after doing something similar back before the market crash. I was xfering money back and forth and all over to try and game the system, and then as soon as the crash came my HELOC got frozen and I lost the ability to take out all my money I had poured into it! In fact, two of the first blog posts on this site that started over 6 years ago is on this:
– Operation HELOC: The Good :)
– Operation HELOC: The Bad :(
So needless to say there’s always risk involved as you alluded to above. And since i’m underwater anyways, I don’t have anything I can take out of the HELOC even if I wanted to ;) I could probably just take out a huge chunk from my savings to pay down the main mortgage and still reap the benefits you mention, yeah? If the $25k came from there instead of the HELOC?
Either way, I always enjoy hearing ideas and other peoples’ perspectives. So thanks again for stopping by and sharing :)
HI J. Money. I paid off 2 mortgages in my day, and it was the fact that I was completely debt free that was one big factor in going with retirement for both my wife and myself. We are not completely there yet, 3 more months for me, and 4 for my wife, but once the end is in sight, it’s a thrill to anticipate the big change in my life. I’m not that young, since I’ll turn 59 just a few days after I retire, but better late than never. We are convinced that we will still be able to save money even when we retire, and that’s a big boost against my fears of saying goodbye to a good income. Once you’re mortgages are blown away, you get more than just a financial boost. You get a sense of financial peace and security that is well worth the effort. And also, I’ve noticed that debt seems to generate more debt, like a form of cancer. So this keeps you in the black in a permanent way, and puts you ahead of the financial wave. Nobody who pays their house off ever regrets it. And I say you are right to pay off the small one first. Emotions are the largest component to good money management. Get some momentum.
Thanks Garry! And congrats to you and your wife for being SO CLOSE to that finish line!!! I can’t even imagine how exciting that must feel after years of hard work and determination – good for you guys.
And you’re right, hardly anyone ever regrets paying off their house in full. I only know one person who looks at it as “losing a fortune” since the market blew up right after he paid it off and he would have doubled his money or more…. I still argue with him to this day on it, but I did get a nice guest post out of it which he was kind enough to share on this site :) If you’re interested you can read about it here:
https://budgetsaresexy.com/2011/12/how-i-lost-a-fortune-getting-out-of-debt/
Thanks for stopping by!
As someone who paid off her mortgage six months ago, I can tell you the sacrifice is worth it. My husband and I scaled way back on lifestyle to dump piles of money at our $280k mortgage for 7 1/2 years. It’s only boring for the first couple of years. Trust me, a few years into it, when things start to snowball, every new month is more exciting than the last. The peace of mind we now have is amazing. It took a few months for the shock to wear off, so it’s only just now that we’re saying to ourselves, “I can’t believe we did it!”
Rock on – that’s wonderful!! I can’t even imagine how that would feel… I unfortunately had to pause this as life make some interesting turns since writing this (had two babies, moved to another state, business slowed up…), but I do hope to breath some air into being mortgage-free again in the future. For now will have to live off the highs people like you are riding who’ve accomplished it! Congrats! :)
I’m with you on not having a mortgage anymore! Unfortunately for us, we are still just about where you were when you had posted this article. :( But at least I now can say we are heading down the right track. Since we bought our home roughly 6 years ago, we’ve refinanced twice: once to a 20yr, and now to a 15yr. We did that exactly one year ago this month so we have 14 years left (at most). For me, the best feeling is seeing the amount of principal we now pay off each month. Our last payment was the first time that 2/3 of our payment went to our principal (this is only 1 year after our refi). If things go as planned, I will have our mortgage erased by retirement (13 years) if not sooner. Cheers! AFFJ
Oh yeah – you guys are gonna KILL it! 15 year mortgages are no joke – way to go!! That’s a much better position than we’re at!
Ok – I’m reading this ’cause I need a little inspiration (and there’s lots to be had here). We’re looking at retirement in about 10 years. Our mortgage is down to $63K. Spouse has a pos 457 account in the amount of $120K. Once our mortgage is down to $50K, she wants to take out a $50K loan on her 457 account and kill the mortgage once and for all. We could pay her 457 loan off in about 1 year and we have just under $1M in other 401/Roth accounts. When I run the #’s, it sounds like a good idea – we’d be paying back her 457 loan at 3.75% interest and we’d still be paying our retirement accounts about $2500/month. We’d take our house out of the danger zone about a year or so earlier than if we just kept paying on it. Am I missing something? We both have very secure jobs. Appreciate any and all suggestions/comments. Thanks.
Congrats on getting so close in your journey – that’s awesome!!
Honestly, I’m too scared to ever touch my retirement accounts so that would never even enter my mind, but I have heard of others doing similar things over time. I guess the only red flag I see off the bat is that your money wouldn’t be invested that year and in theory you’d lose all profits, but if your mortgage has a higher % rate than your loan, then of course you’d be saving there which is nice… As long as no one gets fired (cuz you’d have to pay back the 457 ASAP right? Or is that rule different than 401ks? Haven’t done the research myself…)
I feel like that once you only have 1 year left to go though, why not just keep doing what you’re doing and plow it away on schedule? What is this “danger zone” you’re referring to? Your plan is already working pretty well, so why mess with it?
Either way I think you guys will be just fine though. Maybe do a little more research and then go from there. Good luck! :)
I just found your site, and thank you for the inspiration. I would like to join you in this journey of debt-free.
Thanks for stopping by :) I hope you do join the journey! The ending will be fantastic.
I’ll join you. Ok, I’m done. :) We just paid off our mortgage today! The nice thing about a 15 year mortgage, is that after 15 years, you’re done paying off your mortgage. Actually we paid it off in 12, but had 2 previous homes were were paying for. So in total we had just over 15 years of mortgage payments. Good luck J Money!
HAH! Nicely done man, congrats :) That’s quite an accomplishment.
Awesome! I was disappointed after looking at the updates and three years later you’re still paying on the HELOC. I understand things change and life and goals don’t always cooperate. Having a plan–any plan– is better than no plan and will put you way ahead in the long run.
We started our mortgage payoff journey on Jan 1st, 2013 with a balance of $177,650 spread across 3 rental mortgages. We are one payment away from paying off the second of three houses. That will leave us with a balance of approximately $63,000 on the last house. It has been just under 24 months and we’ve paid off $109,000.
I blog about it to keep myself accountable and read the experiences of others to keep myself motivated (that’s what brought me here). I’ve watched the stock market zoom to record highs over the past two years and yet I am content with the guaranteed interest savings (return) of 4.375%.
Carry on!
Nice work man! You’re on a damn good mission over there :) I was killin’ it for a while, but unfortunately had to scale back and re-prioritize. And since we’ve been still investing these past years it hasn’t made me too upset about it, hehe…. I would like to get this jump started again though. I can’t imagine what it feels like to be *completely* debt free! And since it’s now a rental, it would also mean a pretty sexy income stream every month :) Of course, as long as we don’t sell it by then (which is even more than likely).
Thanks for stopping by to say hello – off to go check out your blog now.
Well, J. Money, an update to my quest to killing the dragon (in other words killin’ da mortgage). As of 2/23/15, I will be the master of my domain! Let’s just say the tax refund and help from work gave me enough ammunition to slay the dragon. To say that I’m debt-free (other than the normal day-to-day debt) is the greatest feeling in the world! And the best part…..we didn’t have really much to cut back on. Our 2 children never went hungry or or without clothes through this journey. Now, we get to enjoy the money we work hard for every minute to do WHAT WE WANT TO DO WITH IT!
Now the question is with all this extra $, what do I do with it? :)
YES!!!! YOU DID IT!!!
So cool man – totally happy for you guys (and only 80% jealous ;))
If you ever want to write up your story and share details/numbers/thoughts/advice/etc on it, just let me know. Might make for a cool article for my readers? Who doesn’t want to pay off their mortgage?? (Besides those who invest the $$ instead, but that’s a small %)
Some other important considerations that were left out of this article. Although I did not read all of the comments…
Bi-weekly payments allow you to pay one extra payment per year and save several years and thousands in interest on the back end of the loan. This is all without costing you a penny more. Some banks and mortgage companies are very specific on how you’re allowed to do this but there’s usually a way if you ask. This is a must do…
If you have multiple properties and decide to pay the mortgages either down or completely use snowballing techniques taking the money from paid off ones and push it into the next ones.
Unless, there’s higher APR’s then pay those first.
However, the best thing about real estate is the ability to leverage money! No where else can you get hundreds of thousands of dollars at very low rates. So my game is building equity and pulling it out so I can better leverage myself.
Here’s an example: If you own two houses free and clear, one worth 300 k and the other worth 400 k you can live in the 400 k house and rent out the 300 k house for say 1995/month.
Or you can cash out refi 200k (up to 75% equity) on the 300 k house. Then take 50 k and put four seperate down payments on four 200k houses. Now you’ve leverage yourself up to 800k on this deal alone. You still rent out the 300 k house for 1995/month and then rent out the new four houses cash flowing $600/month (Market dependent easily done in mine). That’s now 2400+1995=4395/month passive income… This does not include five people now paying mortgages for you and building equity, tax advantages and possible appreciation.
This is not without risk… Or management processes and systems.
Back to paying off mortgages, if your APR is low and you can do better elsewhere I’d recommend buying other rental properties or index funds and EtF’s.
An important consideration with paying off the mortgages early is that the money is no longer liquid. That is without doing a cash out refinance which can be expensive.
With that being said real estate gets very interesting when it becomes exponential (better and possibly worse)… Having 10 properties if you raise the rents $100 each it’s $1000 per month. If they appreciate 10k that’s 100 k increase to your net worth.
I regularly save for down payments on houses that cash flow at least $600/month (With 30k or so) after the PITI. I’ve currently got six properties all with APR’s under or around 5%. At these rates it’s almost free money when you consider inflation. Not to mention other people paying the PITI and while you write off the depreciation. The real estate income is also looked at as passive income so it doesn’t raise your annual “salary” the same as when you go to work because of the depreciation you’re writing off. Instead of paying off the mortgage you can save for another down on a property. The first four are pretty easy, 20% on SFH and 25% on MFP. Properties 5-10 get a little more difficult with 20% on SFH and 25% on MFP plus 6 months liquid on primary and I believe 3 months liquid on what your buying. Every time you’re able to do this it’s an extra $600/month. Real estate is my choice of wealth building paths. Thanks I enjoy your blog and hopefully was able to add value to it!
Thanks for sharing your strategy/tips with us :) I’m not a real estate guy myself (don’t have the personality for it), but I wish I was. Financially/logically it seems to make a lot of sense to build a portfolio around it. Def. one of the ways millionaire become millionaires!
With the goal being to pay for houses with cash after you max out your 10 residential mortgages…
So what’s the progress? Are you still doing it?
I actually created a “Mortgage Payoff Club” so we can help eachother do this…. see it here:
http://mortgagepayoff.club/
Nice work! Clever url too :)
I ended up going for a solid 2 years (paid off $60,000+) and then had kids and moved and changed everything up ;) Here’s the write up on it if interested:
https://budgetsaresexy.com/2013/10/regret-paying-2000mo-extra-mortgages/
Hey J$, I read this after reading your post with the guy who regrets paying off his mortgage.. And paying off the mortgage makes sense! I admire that you have a solid and defined plan to get there :) I also have a plan to pay off my biggest debt so far – student loans to be paid off in 3 years.
Also, I’m hoping to buy a house soon. But here in Canada, the houses seem to be about 30% more expensive than they’re worth, we’re having a housing crisis. So I think the wise decision is to wait it out and save up a good down payment while we wait :P then I get to possibly join the Mortgage Kill-off Club!!
Hi friend! I wouldn’t rush into it at all… plenty of time to buy a house when it’s right :) There’s lots of pros to renting too which I will hopefully be doing for the rest of my life myself – hah! I’m over home ownership… (and obviously pretty biased)
I think mortgage debt should be included in any net worth calculation.
I personally agree with that too.
Hi J,
What’s the update? Are you on track? It seems we have almost the same target. We hope to pay off ours by 2020 and would have saved $500K+ in interest. I recently wrote about it here https://99to1percent.com/pay-off-mortgage-5-years/
I’m better than on track – I’m mortgage free!!!
(but only because we cheated and SOLD the house, haha…. https://budgetsaresexy.com/we-sold-our-house-no-more-mortgages/ — good luck with yours! :))
We just refi’d on a 10-year note to eliminate the temptation of skipping those helpful extra payments. It was scary, but we’re pretty excited. After we address some other goals, I think we’ll end up making some add’l payments to kill it before the 10 years are up. Your daily emails set the tone for keeping our financial goals up front. Thank you!!
Rock on!!! 10 years is amazing!!! I didn’t even know they had that option? Most people tend to talk about the 15s so way to amp it even more :)