Many people don’t even think of doing an early mortgage payoff. Or if they do consider it, they decide not to pay off the mortgage early based on a couple of commonly held beliefs:
- that it’s good to keep a mortgage “for the tax deduction”
- or that it’s better to “invest instead”.
The thing is, neither of those beliefs are necessarily true.
You can both invest and pay off your mortgage. And you may not be getting any tax benefits at all from having a mortgage.
(Many people don’t, so check with your tax person to see if you even take the mortgage deduction.)
We sure weren’t taking a mortgage tax deduction, and we knew we didn’t have to make a choice between paying off our mortgage early or investing. We could do both!
So we decided to go ahead and pay off the mortgage early.
Here’s our mortgage payoff success story, which I’m so happy to be able to share with you. I hope you’ll find it inspiring, but more than that, I hope you’ll find it actionable.
For us, that meant tackling our $95,106 loan amount.
Once we really got started, it took us 3 years of focused effort to pay off our mortgage.
Those 3 years were after we’d already spent years slowly but surely paying off all our other debt first.
(Credit cards, my student loan, my husband’s car loan, a home improvement loan, etc. You can read our whole debt free story here.)
Here’s a screenshot from our credit union showing a big fat ZERO principal balance due:
We were so happy to see nothing owed! (And still are today, because it was the very last bit of debt we had.)
How did we pay off our mortgage so quickly?
I’ll answer the normal questions below (technical stuff plus where we got the money), but first let me say this:
It wasn’t by winning the lottery, using some complicated scheme, or making biweekly mortgage payments.
In fact, the real answer isn’t very exciting.
But that’s good! Because you don’t have to be lucky or some kind of personal finance whiz to pay off your house early. What you have to be is committed.
So how did we pay ours off 10 times faster than normal?
We “just” prioritized our wants and needs day after day by budgeting.
If you’d like to do the same, here’s a free printable budget you can use for that.
Prioritizing meant building up an emergency fund, and then sticking to our long-term financial goals even when life threw in monkey wrenches like health issues and a car accident.
(That emergency fund is critical, because you need a cushion in case of something like job loss, which we’d both been through in the past.)
Yes, all that takes time. But life-changing good things do.
Of course, there’s more to it than that.
Things that made the process go faster:
A few things did speed the process up a little bit, so I’ll go over those here too.
But really, NOTHING helped us pay off the mortgage early as much as prioritizing and staying focused on our goal.
Those are the most important things, by far.
1. We didn’t have a 30-year mortgage.
We initially took out a 20-year mortgage. So maybe it was a mindset thing even then: we didn’t want to owe on the house forever, and 30 years kinda felt like forever.
Having a shorter mortgage term helps, because the shorter the term, the less interest you’ll pay overall.
(You can get a good idea of how much principal and interest you’ll pay for various lengths in one of these mortgage calculators.)
If you have a 30-year mortgage right now, don’t let that discourage you. It’s not a deal breaker; it’s just what we did.
2. Refinancing for a shorter term and lower interest rate.
We also refinanced a few times before getting serious about paying it off.
(Once we even refinanced to get cash out for home improvements, which I totally regret. Ugh! Clearly that was pre-debt payoff desire.)
And before we even started tackling the mortgage, we refinanced to get an even shorter loan term (a 15-year mortgage) and to get an even better mortgage rate. Lower interest rates DO speed things up when it comes to paying off a mortgage.
Then when we were less than a year away from paying off the house, we refinanced one more time for an even better interest rate.
3. Minimizing costs and fees.
Those last 2 refinances were through Pentagon Federal Credit Union. PenFed has lots of ways to qualify for membership, and you don’t have to be affiliated with the military to join. (We’re not.)
We went with them because they were having a deal at the time where you could get a TRUE no-cost refinance. Those are super rare. Refinances almost always cost you something (sometimes quite a bit!) so if you’re considering doing the same you’ll want to make sure it’s truly worth it.
Again, changing our mindset and prioritizing made the biggest difference. Once we’d done that, refinancing just helped us reach our early mortgage payoff goal that much faster!
How we actually went about paying off the mortgage early.
The technical details were pretty simple. Here’s what we did to make it happen.
We checked for penalties and fees.
Before we even made a single extra payment, we first checked our mortgage to make sure it didn’t have any prepayment penalties. If we’d found out there was a penalty, we would have weighed the financial and emotional pros and cons of doing so anyway. (Can you pay off mortgage early without penalty? Read your mortgage paperwork or call your lender to find out.)
We also made sure we were allowed to make as many payments to the mortgage as we wanted each month, and that we wouldn’t be charged any fees for doing so.
This was important to me, because I wanted to be able to send in little bits of money here and there as it came in, vs. saving it up each month to make one single larger payment.
Then that’s exactly what we did.
We sent in extra payments, early and often!
To get it done as quickly as possible, we threw as many dollars at the mortgage as we could, as often as we could. We made our extra mortgage payments online and designated them as “principal only”. We could have also called and made them over the phone, or mailed in a check, but I preferred to do it online.
(Marking the extra mortgage payment amounts as principal only is critical. Otherwise the extra money would have just gone to reduce the following month’s payment amount, or to delay needing to make a payment. You want to make sure it reduces the balance owed.)
Some months we sent in as many as 8 payments: our “standard” monthly payments of the actual minimum plus $35, and then other random amounts as we got them.
We stayed obsessed with paying off the mortgage.
More specifically, we obsessed over making progress. We spent time tracking how far we’d come and playing out various future scenarios using my debt app.
Because when you’re getting out of debt, obsession is good. And we celebrated every step of the way.
We mentally broke the mortgage down into smaller portions, so that we had more opportunities to celebrate our progress. We got excited when it hit each mini milestone.
For us, this was the best strategy to pay our off mortgage early.
We got our payoff amount from the lender.
When it came time to make the final payment, we called and got our mortgage payoff amount (since interest is calculated daily) and then sent in the required amount by the date specified.
Seeing that zero balance was worth all the time and effort.
So where’d we get the money to pay off the mortgage early?
We got the money from our regular full-time jobs, taking on extra work, doing odd jobs, working nearly full-time in my side business in addition to my regular job, doing $3-$5 surveys, etc. In short, from anywhere and everywhere we could think to bring in money.
I know there are people who will think “oh, if I made in [fill in whatever number sounds like a lot to you], I could pay off my mortgage early too!” or “oh, but I live in a high cost of living area and my mortgage is a whole lot more so this doesn’t apply to me” — but if you’re thinking either of those things, you’re missing the point.
Yes, it can be a huge struggle just to get by at all – let alone to pay off debt – if you’re making very little money. (I’ve been there — having spent a few years living WAY below the poverty level.) And yes, things are more expensive in a high cost of living area.
But you can be in or out of debt regardless of how much money you make right now, and you can pay off your home (and get out of other debt) regardless of where you live or how much you’re starting with.
Because it’s about what you do with your money that matters most. There are rich folks who declare bankruptcy, and there are people who become millionaires on a tiny salary.
Do you want to pay off your mortgage early too?
If you’re in a high cost of living area with a more expensive mortgage, maybe it will take you longer to pay off your house. But you can still do it if you want to. And the sooner you start, the sooner you’ll finish.
Maybe you’re barely making minimum wage right now, or you don’t have a job. Things don’t have to stay that way forever. You could ask for a raise, look for a better job, or work odd jobs. (See this post on making extra money for a list of ideas.)
The bottom line is: you can do things to change your current situation if you don’t like it. That may mean making some unpleasant choices, and it will probably take time. It did for us.
We all love to hear about the overnight success story, but the truth is that an overnight success is usually preceded by years of hard work and struggle. Years that are WORTH IT.
Know that every little bit helps.
You don’t have to start out all wild and crazy in order to pay off debt, or have some high-powered job. You just have to start with one change. Our initial goal was to “Pay a minimum of $35 extra per month toward the mortgage”. So we did that much at first, even though it didn’t feel like much. Later, we were able to kick it into high gear. We had more money because we’d paid off our other debt, gotten raises, worked extra, etc.
Once YOU start seeing progress — even if it’s just a little bit of progress — you’ll want to go further. It’s kind of like when you finally lose that first 5 pounds. It feels good, and so you keep at it.
Bottom line for us? We paid off the last $49,500 of our mortgage in less than a year. From a starting point of $35 a month to an ending point of $49,500 in a year is quite a change, but hockey-stick shaped progress is NOT uncommon for folks who have gotten out of debt.
What it takes to get out of debt.
Finally, if you wish you could pay off debt (whether that’s your mortgage or any other kind of debt) you’ve got to start by doing something that’s not as obvious as it might sound:
You’ve got to quit borrowing money.
That was by far the biggest step we took in our whole get-out-of-debt journey. And it was the hardest thing to do, in retrospect.
We get so used to using debt for everything — disasters big and small, things we forgot, stuff we want — that the idea of getting by without it doesn’t even seem realistic.
But it is.
To quit borrowing money, you have to save money to build up an emergency fund, track your spending, and budget. Not borrowing will probably mean waiting on some purchases, and looking for other ways to buy or borrow things you need. You might even have to do without some things you initially thought you needed.
Once you get the first debt or two paid off, you’ll have more money, which makes everything easier. Things will cost you less, because you won’t be paying interest on top of the purchase price. You’ll feel more satisfied, because instead of sending your money off to your creditors, you’ll get to CHOOSE what you want to do with it.
Becoming debt free — including your house — is totally doable, even if you can’t see exactly how to get out of debt yet. As long as you’re willing to do what it takes and you stick with it, you’ll get there.