In February of this year, my husband, two sons, and I walked into the bank and paid off our mortgage. Then we drove home, ate cupcakes, and celebrated the beginning of our mortgage free life!
I’ve been dreaming about paying off my mortgage from the moment I signed up for it. My dad planted the idea when I was just a kid.
Living Mortgage Free
Did your parents talk about money when you were a child? My dad loved to talk to me about financial matters. When I was small, he taught me how to roll coins and balance a checkbook.
When I got older, he talked to me about his old jobs. There was the time he worked in his dad’s grocery store, his short stint as a security guard, and that year he sold insurance door-to-door.
My dad is a vivid storyteller. He weaves most of his tales with a hearty laugh and a big wide grin, but one financial story makes him beam more than all the others.
“Which story is that,” you ask. The tale of his seven-year mortgage.
Shortly after I was born, my parents moved out of the city. They bought a modest house on a quiet street with a big, wide backyard.
As the ink was drying on their mortgage papers, my dad formulated a money-saving idea. “Why wait thirty years to pay off the mortgage,” he thought. “What if I could do it in a fraction of the time?”
When he came home, he enacted a plan. Any time my parents came across extra money, they would use it to pay down the principal. From that point forward, they sent every raise, bonus, and birthday check directly to the bank.
They accomplished their goal in seven years! Most impressive of all, they paid off the mortgage on a single, middle-class income!
“There is no better feeling than living mortgage free,” he told my brother and I, “nothing provides better peace of mind.”
The Safe Feeling of Owning Your Own Home
My dad loves his family. He is the kind of guy who cooks every holiday dinner and stocks the house with the best groceries when I come to town. He buys my mom flowers once a week and sends text messages to say how much he loves my brother and I.
Living mortgage free released my dad from the hefty financial burden of owning a home. It also settled his worries and brought him peace of mind.
“If anything happened to me, I wanted to know that the bank could never take the house away from your mom,” my dad always says. “I wanted to know that you would be safe here without me.”
Reflecting back, I think my dad told us this story to help us feel safe and secure. He wanted my brother and I to know that we would never have to move unless our family decided to do so.
I’m not sure if my dad intended to impart any wisdom beyond that fact, but in telling this story, he set off a spark in our minds.
Mortgage Free Living
I kept his wisdom in my back pocket when my husband and I signed the paperwork to buy our first house. It was a hot day in August, five days after my twenty-fourth birthday.
A few weeks after signing the paperwork, a thick envelope full of mortgage papers arrived in the mail. I pulled out the stack and began to read, but I couldn’t seem to get past the first page. My eyes kept shifting to the number 30 printed in bold above the words “mortgage term”.
I couldn’t stop staring at that number. Thirty years seemed like a lifetime to me. I wasn’t even thirty years old! To pay off the mortgage, my husband and I would need to write three hundred and sixty checks to the mortgage company! By that time, I would be fifty-four years old.
I didn’t want to wait that long to end the financial burden of owning a house. I kept thinking about my dad’s mortgage pay-off story. How could I pay off that mortgage? How could I be mortgage free and debt free before age forty?
Racing Towards the Goal of Mortgage Free Living
Honestly, I can see why some people never want to own a house. Mortgages are expensive, and property taxes, repairs, insurance, and other assorted costs add up each month.
I felt burdened by that big payment and determined to get rid of it, but I didn’t have the money to make any extra payments. In fact, my husband and I paid PMI on that first mortgage. (That PMI payment is a story for another day!)
So I set my sights on the target of living mortgage free even though I couldn’t do anything about it yet.
Two years later, we got to take our first crack at it. After interest rates fell, we modified our thirty-year mortgage to a fifteen-year. Then we started throwing extra money at the principal.
During that time, we lived like an old married couple rather than two young twenty-somethings. We ate at home, shopped sparingly, and didn’t take any extravagant vacations other than our honeymoon.
Putting Our Plans on Hold
We were making significant progress and forging ahead when I fell in love with a water front property. At that very moment, I knew our plans for mortgage free living would have to wait.
We could have continued our race to pay off the mortgage, but we didn’t. Life is meant to be lived. When I found that little piece of heaven, I knew we should buy it. My husband wholeheartedly agreed.
Some financial goals can keep us locked on a path we don’t like. Those goals might keep us working in a job that makes us miserable. They might force us to work a high-paying job rather than opting for a more simple life.
An early mortgage pay-off may have been the original goal, but in this case, we set it aside for just a little bit.
In fact, rather than paying off our house, we applied for a cash-out refinance on it! Our $237,000 loan ballooned into $400,000 as we used the money from the cash-out to buy the new property outright.
Mortgage Free at Last
We halted overpayments until 2012. When my husband’s hard work helped us pick up the momentum once again. We refinanced our 4.5% fifteen-year mortgage to a ten-year mortgage at 3.125%.
Then I created a mortgage chart and began counting down the months. I kept track of the balance and marked off each payment as soon as we made it.
In February of this year, we walked into the bank with enough cash to become mortgage free for life! We paid off the house eighteen and a half years after purchasing it.
Refinancing our Mortgage
Thanks to rising home values and shrinking interest rates we refinanced our house five times within those eighteen years.
Here is a breakdown of our mortgage terms and interest rates:
- 2001: $247,000 / 30 years / 6.875%
- 2002: $243,000 / 30 years / 6.000% (got rid of PMI)
- 2003: $237,700 / 15 years / 4.875%
- 2009: $400,000 / 15 years / 4.500% (cash out)
- 2012: $335,000 / 10 years / 3.125%
When interest rates dropped in 2003, we cut fifteen years off our mortgage and paid roughly the same amount each month.
You can see the big bump in 2009. That’s when we set our initial goal of living mortgage free aside to buy a beach property.
During this period in our lives, I lived and breathed mortgage calculators. As soon as rates dropped, I ran the numbers to see how much more we could save by refinancing.
How to Live Mortgage Free
Does mortgage free living sound like a dream? Would you like to pay off your mortgage early? If you set that goal, let me know, and I’ll cheer you on.
But before you start the quest for a mortgage free life, you might need to do some homework. Here are a few things to check off before you start attacking your mortgage debt:
1. Pay Off All High Credit Card Debt
Mortgage rates are incredibly low right now. If you have credit card debt, you need to pay that off first.
2. Create an Emergency Fund
Make sure you have an adequate emergency fund. Before the pandemic, financial experts thought three to six months was enough. I think you should save even more than that. Don’t pay off your mortgage until you feel safe and secure with a sizable financial cushion.
An emergency fund can cover unexpected job losses. It can also help you take time off to care for a sick spouse, child, or parent.
3. Sign up For Life Insurance
Sign up for life insurance if you have a spouse, partner, or children who will need money in your absence. Paying off your house provides peace of mind, but your family will still need money to pay for food, utilities, and property taxes.
4. Sign up for Long-Term Disability Insurance
After you sign up for life insurance, it’s time to sign up for disability insurance. A thirty-year-old has a 50% chance of being disabled for three months or longer before turning sixty-five. Review your policies at work or buy an individual plan outside of your employer.
5. Fund Your Retirement
If you receive a company match, save at least the minimum amount in your 401k before throwing money at your mortgage. It makes absolutely no sense to turn down that free money. Don’t let the lure of fewer mortgage payments prevent you from receiving your company match.
How to Accelerate Your Mortgage Free Life
After you complete the items above, you can begin your quest towards living mortgage free.
The easiest way to accelerate your mortgage payoff is to buy a modest home. The less you pay upfront, the less you’ll pay over time.
My parents saved money by moving us way out into the country. This approach will work for some people, but others will be unable to handle a long commute. I don’t blame them.
A second trick is to rent out a room or basement in your house. I live in a college town where a lot of homeowners rent out rooms to college students. If you don’t mind living with renters, this is an easy way to let someone else pay off your mortgage for you.
There are many other ways to house hack your way to a mortgage free life, but I’ll let you read about those elsewhere. My husband and I never tried any of these techniques.
Instead, we threw bonuses and raises at our mortgage. Then we made all efforts to stop buying other stuff. We minimized our expenses so we could focus on the big one!
The Power of a Debt Free Life
Before I paid off my house, my dad often joked about winning the lottery. “If I win the lottery, I’ll pay off your house and your brother’s too,” my dad used to say.
That speaks to the power of living without a mortgage. Forget spending money on a lavish vacation or a new car.
“Before you can enjoy the rest of the money, you have to free yourself from the financial burden of a mortgage,” he said.
Living Debt Free Without a Mortgage
March came and went this year without a mortgage payment, so has every month since. Living mortgage free feels like a dream. With a ten year mortgage, we used to send thousands of dollars to the bank each month! Life is so much better without that burden.
We are incredibly fortunate to be at this point in our lives. We didn’t beat my dad’s record of seven years, but I’m more than okay with the timeline to pay off!
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