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Pay Off the Mortgage Early
In this article you will learn 7 simple, must-know steps to pay off the mortgage early! I will also discuss 5 reasons to pay off the mortgage early!
Pay Off the Mortgage Early to Get Amazing Peace of Mind
Many people throughout the world dream of owning their own home. And mortgages make it possible for people to be in a home generally a decade or two (or even more) before they would be able to otherwise (if they had to save up the money and pay cash).
But that mortgage comes at a hefty price. If you get a 30-year mortgage, for example, you will have generally paid close to 75 percent more for the home than you would have if you had paid cash. So, for example, if you purchased a $200,000 home with 20 percent down at 4 percent interest and took out a 30-year loan, you will have paid nearly $130,000 in interest!
If you pay 4.5 percent interest on that same loan, you would pay nearly $170,000 in interest over the term of the loan. How many amazing things could you do with that much extra money?! Even if you get a 15-year mortgage (which is what I would recommend that you do if you’re going to take out a mortgage or if you can refinance and shorten the term of your loan) at 4 percent interest, you will still pay the bank nearly $60,000 for the privilege of using their money.
Those kinds of numbers just make my stomach queasy. The sooner you pay off the mortgage, the more interest you can save, and the sooner you will be able to start using that money to build your own wealth, rather than the bank’s.
We have purchased two modest homes since my husband and I got married, and we have been able to pay off both of them early living on one average income. And the peace of mind that you feel and the freedom that comes from not having a debt in the world, not owing anyone anywhere anything, is priceless. It’s incredible. When you have debt it’s like you’re an indentured servant to your monthly payments, but when you pay those off, your money instead gets to work for you. And what an amazing concept that is. It’s powerful.
7 Simple Steps to Pay Off the Mortgage Early
One of my favorite quotes about the perils of debt is this one:
“Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation; it never visits nor travels; . . . it has no love, no sympathy; it is as hard and soulless as a granite cliff. Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you” (J. Reuben Clark).
So let’s help you work on getting that mortgage paid off early so that you can free yourself from captivity, OK? Let’s get you out of mortgage debt so that if something happens, such as a job loss or death of a spouse that results in a loss of income, mortgage debt can’t crush you. (You should also pay off your other debt as quickly as possible, as well.) Here are 7 ideas that can help you to pay off your mortgage several years or even a decade or more early.
1. Review your budget to see where you could reduce expenses in order to pay off your mortgage early.
In most cases, the primary way that you can pay off your mortgage early is to consistently pay extra money every month toward the principal. And one of the main things you can do to make that happen is to reduce your monthly expenses. Especially if you are new to budgeting, you will probably find that you can reduce your monthly expenses in pretty much every category. (Do you need help to create your first budget? Read this article.)
Here are some of the major areas where you can look to cut expenses:
- Significantly reduce the amount you spend on buying groceries and eating out. If you tend to eat out a lot or spend a lot on groceries, then this is an area where you can make huge changes to win financially.
Knowing that money spent on food is spent on something that is fleeting that you eat one minute and is then gone the next, I determined years ago that there are many, many other things I would rather spend my money on or invest my money for.
According to the Bureau of Labor Statistics, in 2015, the average American family spent $3,008 each year on restaurants and takeout. If you instead invested that money every year for 30 years at even an average rate of return of 10 percent (and good growth stock mutual funds can get better returns long-term than that), you would have over $540,000. Doesn’t that just make your takeout start to taste a little stale?
For at least the last 10 years we’ve spent less than $300 per year on eating out or takeout. Maybe that seems Draconian, but during that time we’ve also been able to save at least 15% a year toward retirement and, as I mentioned above, we paid off our two houses in less than 6 years each. And we did it on one income. So I think it was worth the tradeoff! 🙂
Because do you know what you have when you have a paid-for house? A six-month emergency fund? And a couple hundred thousand dollars in retirement accounts when you don’t plan to draw on them for at least 20 years? You have financial peace. Read this article to learn more than 50 ways you can cut your grocery bill and this article to find 13 tips to save money eating out.
- Downsize or sell your car(s). If you have expensive cars and car loans, downsize to less expensive cars and get rid of your car loans. This, perhaps more than any one other thing, can help you reach your goal of paying off your mortgage early. And if you can, sell one car, and become a one-car family. We’ve been a one-car family for most of our marriage, and again, it’s helped us to reach our financial goal of paying off our mortgage early. Read this article to discover more than 30 ways to slash your transportation costs.
- Look at ways to decrease or offset your housing costs. Another financial decision that we have made that has allowed us to pay off our mortgage early (while living on one income, with my husband as a stay-at-home parent), is that we live in a modest three-bedroom, 1,300-square foot home. Not only did this keep our mortgage payment lower, but it also has meant lower homeowners insurance, property taxes, and utility expenses, as well.
And now that we have three children, even though having more space would be nice, because we’re committed to staying debt free we’re planning to stay where we are for another five to eight years so that we can buy our next larger, probably somewhat newer and nicer home with cash! #100percentdownplan
If you are willing to live (or stay put) in a smaller and perhaps little bit older home, the savings can be substantial.
One way that you can offset your housing costs is by renting out rooms in your home on Airbnb.com or Booking.com. If you have one or more extra bedrooms in your home (or have a second or vacation home), renting them out on Airbnb, Booking.com, and similar sites can be a great way to earn extra income. We’ve been using Airbnb for the last couple of years for virtually all of our travel accommodations (when we’re not camping), and they’re awesome.
The hosts have been so great, and we’ve really felt welcomed and at home. And of course the savings can be significant! Sign up for Airbnb here and receive $40 off your first stay with them!
And I just have to include a shameless plug for my angel mother, who has been renting out spare rooms in their beautiful southern Utah home (not an affiliate link :D) for the last couple of years. If you’re in the area to play at Lake Powell or hike in one of the beautiful national parks or other scenic areas nearby, look them up!
- Reduce your cell phone and internet bills. Particularly if you have a family smartphone plan with data, the cost can get prohibitive. I know of a family that spends (or maybe spent—I really hope it’s spent) more than $500 a month on their family cell phone plan. That’s as much as some people pay on their mortgage or their rent. It’s crazy.
But a smartphone is not a need, it’s a want. And unless you make a really good income, when you spend that much money (or even just a couple of hundred dollars a month) on a cell phone plan and then another $50 to $100 on home internet service, you’re likely harming your overall financial well-being. Is being able to be “connected” 24/7 really worth giving up some of your financial comfort in retirement? I don’t think so.
That’s why we use a very inexpensive but great smartphone service provider, Republic Wireless. And that’s why I also recommend, if you use more than about a GB of data a month (I use way less than that), that you check out Mint Mobile. They have plans that start at less than $20 a month for unlimited data (though speeds are somewhat reduced after the first couple of GBs)—amazing!
*UPDATE*: As of September 2018, we’ve switched to Xfinity Mobile! And the service has been great. If you’re in an area with Xfinity high-speed internet and mobile, you’ve got to check them out! We’re paying an introductory price of $40 per month for our internet (same price as the much slower internet that we used to have from a different provider), and the cell phone plan is potentially virtually free.
Since we’re such light data users (especially given the fact that Xfinity Mobile has free hotspots it seems almost everywhere), we pay only about $3 a month for taxes and fees for each line. (That’s the price if you use less than 100 MB of data per month, which we do; then it’s $12 per GB per month, or $45 per month for unlimited data.) It’s such an awesome deal! And Xfinity Mobile has the same coverage as Verizon, which reportedly has the best cell phone coverage in the U.S.
You do need to sign up for Xfinity internet in order to use Xfinity Mobile, at least initially. You can then drop the internet service if you want, but then you’ll pay an extra $10 per month per line for the mobile service. Interested in signing up? Use this referral code to receive a sign-up reward: 1RQ4SP
- Decrease the amount you spend on entertainment and vacations. Another way that you can reduce your spending in order to have extra money to pay off the mortgage early is to decrease your entertainment costs. The great thing is that there are limitless possibilities for free and cheap entertainment.
If you’re serious about paying off your mortgage as soon as possible, you can cut your cable or satellite (and even ax your Sling or Netflix subscription), cut back on or quit going out to movies and concerts and ball games (except the wonderful, free kind), cut back on your drinking and smoking (or cut them out altogether), cut back on vacation and travel spending, and more. Learn more about cutting your entertainment spending here.
Want even more ideas for ways that you can cut your monthly spending? You can find more information on how to reduce your expenses here.
And find out how to create a workable budget here.
2. Use that extra money from reducing your expenses to help pay off your mortgage early.
Let’s say we use the same example of a $180,000 mortgage, with a 30-year loan (because the person took out the loan before knowing any better :)), and then the family decided to roll up their sleeves and pay off that mortgage early. So in addition to paying their roughly $1,000 a month payment, if they paid an extra $200 a month by cutting their grocery and restaurant bills, and started doing that after they had had the loan for two years, then they could save more than eight years on their loan! That’s awesome.
But let’s imagine they were even more aggressive in cutting their expenses, and they were able to pay an extra $400 per month by also saving on their transportation costs. By paying $400 extra per month after two years, they would be able to pay off their loan almost 13 years early! And what’s more, they’re only paying about $30 a month more than they would have been if they had gotten a 15-year mortgage in the first place.
So commit to paying that extra amount on your mortgage each month, treat it like it’s written in stone, and automate your finances so that you do pay that extra amount every month and get that mortgage paid off ASAP!
To help you get your finances in order and manager your money, check out a great free app called Personal Capital. Personal Capital can help you track your progress toward reaching your retirement and other financial goals. With Personal Capital, you can see not only all of your bank checking and savings accounts and even your credit cards and other finance accounts, but you can also link your retirement and regular nonretirement brokerage accounts.
This allows you to have a complete, overall picture of your current financial situation. And you can also view your account history to see how your accounts and overall portfolio have done over time. I love this very helpful tool and use it regularly! Sign up for your free Personal Capital account here.
3. Periodically review your budget to see if there are other areas where you can reduce expenses to pay extra money toward your mortgage.
After you do your initial review of your budget to see where you can cut expenses, do it again from time to time to see if there is anything in your situation that has changed. For example, maybe one spouse has returned to work. Maybe a child has flown the nest to go to college (though this may mean you are spending more on her rather than less J), or maybe you’ve paid off your cars and have extra every month after the monthly car payment you make to yourself each month. As you find more room in your budget, rather than ratcheting up your spending, ratchet up your debt payoff, and free yourself from financial captivity by getting that mortgage paid off as soon as you can!
4. When you get a raise, increase the money you pay toward your principal each month, rather than increasing your lifestyle.
Similarly, when you receive a raise, increase the amount of money you pay toward your monthly mortgage payment in order to pay off the principal balance more quickly. Being financially free years earlier is worth so much more than a fancier car or eating out more (does your waistline really need that?) or going out to more movies that you could wait a few months and see for free from the library or cheap from Netflix (or better yet, read a great book from the library, instead).
5. Use other “found” money to reduce your mortgage principal as you are able to in order to pay off the mortgage early.
Whenever extra money finds its way into your life, such as a tax return, also apply it to your mortgage balance, as well! (By the way, if you receive a tax return, adjust your W-2 so that you’re not giving the government an interest-free loan every year!)
6. Consider earning extra income to go toward paying off your mortgage early.
If you’re really serious about paying off your mortgage early, then also look for ways to earn extra income. That could mean one spouse finds a work-from-home opportunity (and maybe that opportunity is even blogging! :D). It could mean seeking raises or promotions. Or it could mean finding a profitable side job or side hustle. The time working on the second job would perhaps be a sacrifice, but the ultimate financial freedom that it would help bring about could be well worth it!
Here are some possible work-from-home jobs (though there are also others that would work, as well—this isn’t an exhaustive list):
- Become a professional blogger. I love blogging (love blogging—even more than my regular full-time job and even more than my freelance editing and writing) because I get paid to do something that I would do for free—teach people every day how to win with money—and I get to do it from home on my own schedule! I’ve taught volunteer community personal finance classes before, and I love it, but the reach of a blog is virtually limitless. You can literally help countless numbers of people to change their lives and successfully manage their finances.
And blogging is also a perfect job because you can set your own hours and work from anywhere that you want to. And the potential for income growth is amazing because of the potential to earn passive income. Really, it’s a dream job! If you’re interested in learning about starting a profitable blog (or a blog just for fun!), check out my free tutorial!
You can learn more about the benefits of blogging here.
And then if you decide blogging would be a great opportunity for you, I recommend the Blog by Number course and ebook by Suzi Whitford to get you started. It’s the course that I took to get started as a newbie blogger. You can complete the course in less than three hours (not all in one sitting, unless you want to! :)) and have an excellent introduction to how to start a blog and how to begin monetizing it in order to earn money.
Learn from a professional blogger who can help you start making money as quickly as possible so that you can earn more money toward reaching your financial goals and pursue your dreams. Enroll in Blog by Number today!
- Do freelance writing, editing, or proofreading. If you have been trained as a writer or editor, than working from home is a great option. I’ve been editing as my full-time job for more than 14 years now, and I’ve been doing freelance writing and editing for nearly that long, as well. Even before I graduated from college, I had been hired by a company to do freelance writing for them.Being a freelance proofreader is another option. If you love reading and have a good eye for detail, this may be the perfect job for you! If you’re interested in this line of work but don’t have any former training as a proofreader, check out this free introductory 60-minute proofreading online workshop from my friend Caitlyn at Proofread Anywhere. The course has received great reviews!
To find freelance opportunities, check out Upwork or indeed.com.
- Do freelance work in graphic design, translation, transcription, illustration, photography, teaching, and more. These are all great options for freelancing if you have the needed experience.
- Work as an accountant or bookkeeper. If you studied business management or finance or a related field, then this is a natural fit.
- Find work-at-home jobs such as customer service or related jobs. Some companies, such as Jet Blue, have some of their employees permanently work from home in either part-time or full-time positions. To find current job opportunities, check out my favorite job search site, indeed.com.
- Be a virtual assistant. This is a relatively new field, and one where you can develop your skills in one (or more) of several different directions. The pay can be great, and you can take on as much or as little work as you would like in order to work the number of hours that fit your current schedule.If you’re interested in making a great income as a virtual assistant, check out the course 30 Days or Less to Virtual Assistant Success, which has excellent reviews. Another good option is Introduction to Running a VA Business, available through Skillshare. And another great option is the course Become a Pinterest VA Today! by Kristin Larsen and Gina Horkey. It will walk you through everything you need to know to be a Pinterest VA. If you love Pinterest, this could be a great job for you!
- Do freelance consulting or coaching. If you work or worked in a job that lends itself to doing so, becoming a consultant or coach in the same field is an excellent fit and can be very lucrative. Put all of that experience and knowledge you gained to good use. Or turn one of your hobbies or passions into a side job by offering consulting or coaching related to that topic. Check out indeed.com for opportunities.
7. Keep your eyes on the prize.
There may be times when you are tempted to quit paying extra in order to pay off the mortgage early, but don’t give up on your goal! I know that there is an endless supply of shiny stuff that calls to us, trying to get us to spend our hard-earned money. But those things don’t have lasting value—they won’t change your life forever like paying off your mortgage early and opening up a world of opportunities can. Keep fighting for your financial freedom!
5 Reasons You Should Pay Off Your Mortgage Early
Need more convincing for why it’s oh-so-worth-it to pay the mortgage off early? Here are 5 of the top reasons you should pay off your mortgage early.
1. It could help you lower your blood pressure.
I’m teasing (mostly) about it lowering your blood pressure when you pay off your mortgage, but what I mean is that you won’t have to be throwing away money anymore by paying literally hundreds of dollars in interest every month. And there really could be actual positive physiological effects when you do. In fact, I think it’s highly likely that there are because of reduced stress or frustration or fear or other generally more negative emotions.
2. It will help you be able to buy your next home with cash so that you can kiss debt goodbye forever.
If you work to pay off your nonmortgage debt as quickly as possible and then also work to diligently pay off your mortgage debt and save or invest that money until you have enough cash to buy, you will be able to purchase a nicer, more expensive home (if you choose) with cash. That’s what we are working toward doing. In the next five to eight years, we would like to buy a nicer, newer, larger home for cash (#100percentdownplan!). It means staying in our smallish 1,300-square-foot home for several more years, but that’s something we’re willing to do to never be in a debt again.
3. It will give you a large amount of money you can use to invest every month.
One of the best ways that the average person can build substantial wealth over time is to pay off their mortgage and then invest that money in good stock mutual funds for the long-term. If we take that roughly $1,000 per month our hypothetical family was paying on their mortgage and invested that amount for the next 20 years until they were ready to retire early at say 59 (because those are the kinds of options you have when you have paid off your debt and worked to build wealth!), they would have $855,181! You could do some really amazing things with that $855,000! And if most of that money were put into Roth IRAs, it would be tax free when you take it out. Double awesome!
Are you interested in retiring early? Check out this article with the simple steps for how to retire early!
4. It will give you financial freedom and peace of mind.
As I mentioned above, one of the best reasons to pay off your mortgage as soon as possible is that it will give you financial freedom and a greater peace of mind. If something goes wrong in your family, such as a severe illness or a job layoff, you won’t have to worry about possibly losing the roof over your head nor paying the money that it would normally be costing you each month. You’ll still have your other household expenses, but if you have paid off all of your debt, you can live fairly inexpensively if you need or want to.
5. Paid for grass just feels better on your toes.
One of my favorite finance experts, Dave Ramsey, recommends walking on your grass barefoot after paying off your mortgage, because paid-for grass just feels better. And I agree.
Paying off the mortgage early requires diligence and effort, of course! But it is so worth it! My husband and I have owned two (modest) homes so far, and we have been extremely fortunate to be able to pay both of them off many years early by being very intentional with our money, keeping our eyes on the goal, and keeping our living expenses in check.
And the financial peace that paying off our mortgage early has brought really has been worth the sacrifice. The benefits really are priceless!
Do you have a goal to pay off the mortgage early? Or are you ready to set one now? Is there a particular area where you could save more or something you could do to earn more to help make that dream a reality sooner? Leave a comment below and let me know! I would love to hear your thoughts.
Invitation to Share
Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!
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