How I Paid Off My Mortgage In Four Years

How I Paid Off My Mortgage In Four Years

A couple months ago I shared with you that I paid off my mortgage.  What I didn’t share with you was how I did it.  Needless to say, this post is long overdue.  This story is both a happy and a sad one.  Keep reading to find out why.

In 2008 I started the process of having a house built (I actually signed the loan paperwork on my birthday).  I built a normal sized house and had a low and very manageable mortgage payment and yet I HATED having the mortgage.  It just made me feel like I was lacking some stability.  I am risk adverse and although I have good assets and good employment there was always this little nagging voice in my head telling me that I could technically lose my house since it wasn’t paid for.  I knew I could not go 30 years with this nagging voice in my head, so I took steps from day one to make sure I could rid myself of my mortgage ASAP.

First, how I got my mortgage down from 30 years to 9 years. 

1.)   I chose a house design that was affordable.  No McMansions for me.  I wanted something with an open floor plan and enough bedrooms that if I have a couple kids someday we will still have plenty of room. 

The house I chose to have built is 2100 square feet (plus unfinished basement that could be converted into additional living space in the future.  It has a big family room, dining room, open kitchen with eating area and “Morning Room”, first floor laundry room, three bedrooms, loft (which can be enclosed to make a 4^th bedroom if it is ever needed), and two and a half baths.  In my community, this is a pretty common size of house.  It is not too big for a single person, but yet large enough for an average sized family due to its open living spaces. 

2.)   I didn’t listen to the bank!  I was approved for a much more expensive house than I built.  While the bank may have thought I could afford the payments on a McMansion, I knew I couldn’t if I wanted to continue the same lifestyle and saving habits I had developed.  Also, I wanted a low enough payment that should I be without a job for an extended period of time I could still make the payment with my savings, investments, and other supplementary income.

3.)   I put 30% down on the loan.  While this was certainly not encouraged by the builder or required by the lender, I insisted on doing this in order to keep my payments as low as I could.  I was able to save up the large down payment during the eight years prior to this that I had rented.  This took a lot of will power (sometimes I really struggled with wanting to spend some of the money I had saved!) but in the end I am glad I was as diligent about saving for the down payment as I was.

4.)   I had good credit.  My credit score was 801 when I applied for the mortgage… and because of the score being what it was the lender gave me the lowest interest rate they were offering at the time.  Every little bit that I didn’t have to pay in interest helped my chip away at the principle!

5.)   From day one I made double principle payments.  This is rather easy to do at the start of a loan because the principle payment is generally pretty low while the interest is high.  For instance, if I was paying $700 a month and $80 of that was principle while $620 was interest, I would make my regular $700 payment and then I would send in an additional $80 and have it applied directly to the principal.  Each month that amount would increase slightly.  Doing this each month will reduce the life of the mortgage from 30 years to 15! 

6.)   Whenever I had an extra windfall (bonus at work, rebate checks, birthday money, etc.) I applied it to the principle on my mortgage.   I figured out that if I was consistent with this over the years I could easily knock another 6 years (at least) off the life of the loan.

And what about the other 5 years of the loan? How did that get paid off?

So if you are doing the math, you will know that I was basically taking a 30 year mortgage down to a 9 year mortgage.    You are probably a little confused how I ended up paying off the loan 5 years sooner – in just 4 years. 

This is the part of the story that is sad. 

I have written before about the death of my Dad’s cousin.  I was the beneficiary of her estate.  She and I were very close, and very much alike in how we managed money.  I remember in the last couple weeks before her death she looked at me one day and said, “You’re going to pay off your mortgage, aren’t you?”  I told her I was, and she smiled and said that is what she wanted me to do with what I inherited.  It makes me cry just to think about it.  

A year later when the estate was settled, taxes and lawyers were paid, and life started to return to normal, I went into the mortgage office one gloomy, rainy day and paid off the balance on the mortgage.  When I handed over the check I felt like my cousin was with me in spirit.     

Some say I was lucky but I don’t feel lucky.  I feel sad.  While I love having no mortgage, I would much rather have debts if it meant my cousin was still alive.  I miss her so much.  :(

I paid off my 30 year mortgage in four years (almost to the day) and obviously the inheritence helped, but even without the inheritance I was on track to do it in nine years.    If someone like me (single, average income levels) can do it, so can you.  It just takes a good budget and a lot of will power.