We Revamped Our Budget
Whenmy husband and I got married in 2011, I began meticulously tracking our expenses and earnings.
During this period, we were putting extra savings toward paying down our student loans and making the minimum payments on everything else. We continued that for about three years until he graduated with his doctorate in 2014, and we began making more money.
So in 2019, I took what I had learned from those early years and I put us back on a bare-bones budget, with every spare dollar going toward a modified snowball-style debt repayment plan. Even small steps like pausing subscription services, reducing our “fun” budget to $50 per month, and cutting down on coffees and lunches out made a big difference.
We owed less on our credit card than the other loans, but we decided to pay it off first before the promotional 0% interest rate ballooned to an 18% interest rate. We also made sure to maintain an emergency fund of about $1,200 during this time.
Make One Extra Payment A Year
This is an alternative to making a payment every two weeks. At the end of the year, give yourself a holiday gift by making an extra payment. Heck, do it at any time.
Or, if youd rather, just add an amount equal to one-twelfth of your mortgage payment to each months payment. For instance, with a $1,013 monthly payment, one-twelfth is about $84. So, youd pay $1,097 monthly instead.
How To Pay Off A 30 Year Mortgage In 15 Years
Houses are expensive. They cost so much that we have to break the payments down into smaller chunks to keep them manageable.
Typically, 30 years is an average amount of time to pay off a mortgage. But what if you dont want to be normal?
What if you want to own your house free and clear in half the time? You can, using these techniques for how to pay off a 30-year mortgage in 15 years.
First, you need to learn about the subject so you can succeed. Youll learn about everything from extra payments to terms you should know about mortgages.
The more you understand about house payments, the better off youll be, and the easier it will become to remove this debt from your life quickly.
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How We Paid Off More Than $80000 In One Year And Changed Our Approach To Debt
My husband and I were able to pay off over $80,000 in debt in the past year. But getting to that place was a journey that started with a major wake-up call.
Because of a misunderstanding, we thought we were nearly done with payments on our first car in 2019 and we purchased a second. When another auto-payment withdrew in September, though, we realized that we actually had $14,960 left on the loan for that first car, and that we now had to make payments on two auto loans at the same time.
That’s when we knew that we had to take a hard look at our consumer debt.
I had paid off my student loans in 2014, and thanks to my in-laws, who offered to cover the last $20,000 of my husband’s loan earlier in 2019, we weren’t contending with his student debt anymore, either. But when we sat down and tallied up everything, we were shocked to find that including the car loans, we had $80,936 in consumer debt spread across a handful of outstanding hospital bills, a camper trailer payment, and a credit card.
After taking a few days to process, we decided to reevaluate every place our money was going and establish a proactive plan for getting out of debt. A year later, we had paid off the full $80,936.
Here is how we did it.
How Much Extra Should You Pay To Payoff Your Mortgage Early
You dream of paying off your mortgage early.
You long for the day when you are debt free.
But how do you do it?
How much must you pay each month to be out of debt by a certain date?
What if you wanted to pay off your mortgage in 15 years instead of 30? How much would you save?
The good news is this mortgage payoff calculator makes figuring out your required extra payment easy.
You choose how quickly you’d like to pay off your mortgage, and the calculator will tell you the required extra monthly payment to get it done. It will also tell you how much interest you’ll save!
However, before you start making your extra payments, there are a few factors you’ll want to consider first . . . .
Bought A Foreclosed Fixer
My husband is a Mr. Fix-it of sorts, so this worked for us because it meant we were able to do a lot of the work ourselves. We also had times where family and friends pitched in with smaller projects like painting and roof replacements.
Ill be honest though. I dont enjoy that kind of work much at all so it felt like a huge, overwhelming job to me.
It also took up most of my husbands free time for the first couple years of our marriage, which of course had its downsides and often felt like a big sacrifice. We ultimately did it though because we knew the long-term benefits would be significant.
Cut Back On Your Other Spending
If youâre putting more money into your mortgage, you will have less to spend on other things. So help yourself by limiting other monthly expenses. For example, if you subscribe to five streaming services, maybe you can cut that back to three. Look for subscriptions you donât use anymore or donât use regularly.
Here are 25 ways to cut back on your spending right now.
Cutting costs also doesnât have to be a permanent thing, either. Once youâve paid off your mortgage, you can decide to go back to spending money on the things you cut. This is just a temporary measure to help you focus on paying your mortgage.
Make Larger Or More Frequent Payments
If you already have a mortgage, try making extra monthly payments. If you get paid twice per month, make a payment each time you get a paycheck. You could also make an extra lump-sum payment at the end of the year.
Another simple way to put more toward your mortgage is to round your payments. If each of your payments is $1,004, then pay $1,010 each time. As time goes on, maybe get more aggressive and round to the nearest $100. Regularly paying just a little extra will add up in the long term.
Own Your Home Faster And For Less
Of all the benefits to refinancing your home, paying off your mortgage in less time is the biggest. Reducing the term of your loan by refinancing can not only shave years of payments. It can save you tens of thousands of dollars in the process over the life of your loan.
Because paying off your home earlier reduces the overall amount of interest youll pay, it could let you to retire earlier, travel more, or put extra cash in your pocket. Youll increase your homes equity faster. Youll not only own your home in less time, but youll pay much less to own it. Talk to one an Ark Mortgage Advisor to see how you could benefit from refinancing your home to shorten your term.
Also Check: How Does 10 Year Treasury Affect Mortgage Rates
Make A Mortgage Payment Every Two Weeks
Most people pay their mortgage bills once a month. However, a strategy that allows you to apply more money towards the principal each month, save on the interest that accrues, and lessen the term of your mortgage loan is to make biweekly payments that are half the size of your monthly mortgage.
Suppose your mortgage is $1000 per month. With biweekly payments, you would pay $500 every two weeks. What difference does it make to make a half-payment every two weeks rather than one large one? By paying once a month, you make 12 payments a year. By splitting it up every two weeks, you make 13 payments a year.
That often reduces your loan by approximately five years.
Make A 20% Down Payment
If you donât have a mortgage yet, try making a 20% down payment. Private lenders will require you to pay private mortgage insurance if you have a smaller down payment. That extra insurance cost will only make it harder to pay off your mortgage quickly.
If you canât afford a 20% down payment, you may want to double check that you can reasonably afford the home. Having a smaller mortgage is the easiest way to pay it off quickly.
Read Also: What Does Rocket Mortgage Do
Early Mortgage Payoff Examples
Imagine a $500,000 mortgage with a 30-year fixed interest rate of 5%. If you paid an extra $500 per month, youd save around $153,000 over the full loan term and it would result in a full payoff after about 21 years and three months.
If you had a $400,000 loan amount set at 4% on a 30-year fixed, paying an extra $100 per month would save you nearly $30,000 and youd pay off your loan two years and eight months early.
If you had a $300,000 loan amount set at 4.5% on a 30-year fixed, paying an extra $250 per month would save you almost $70,000 and youd pay off your loan seven years and six months ahead of schedule.
Or consider a $600,000 loan amount set at 6% for 30 years. Paying an extra $1,000 per month would save a homeowner a staggering $320,000 in interest and nearly cut the mortgage term in half. To be more precise, itd shave nearly 12 and a half years off the loan term.
The result is a home that is free and clear much faster, and tremendous savings that can rarely be beat.
The list goes on and the savings may shock you. While most people tend to be alarmed by the amount of interest they pay the bank over 30 years, its equally shocking how much you can save simply by paying a little extra.
Should I Pay Off My Mortgage Early Pros And Cons
Many financial planners have clients that ask, Should I focus on paying off my mortgage early? The reason many people hang on to their mortgage and make the monthly payment for thirty years is they think they need the mortgage interest deduction as a write-off .
The other reason they give is that they cannot possibly squeeze another dime out of their budget to pay it off early, even if they wanted to. If you think about it, these reasons are actually excuses. Mathematically, wouldnt you be better off with no mortgage rather than a tax write-off of the interest-only? The more years you pay, the less interest there is, so the smaller your deduction.
Also, EVERYONE, including me, can squeeze a few extra dollars out of their budget, and every little bit helps.
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How Much Can I Save By Reducing My Loan Term
Choose your rate and term and calculate your potential new monthly mortgage payment in seconds. You might be surprised at how affordable it is to own your home,,, and in a lot less time than you thought. See how much interest youll pay over the life of the loan, and experiment with prepayment amounts to calculate their impact on your mortgage.
Make Dreams Become A Reality
The sense of freedom we now have is incredible. Without a mortgage, my personal stress levels have decreased immensely. Our young family’s future looks bright.
Here are some of the ways we are already bringing our post-mortgage dreams to life:
The following spring after we paid off our mortgage, we took our family to Cabo San Lucas for a week of fun in the sun. We hit up Disney World, Los Angeles and Florida that year.
Now, were addicted to getting out of town when its cold in Michigan. Money well spent!
Our family charitable giving has gone from 1% to 5% . Were proud to give more, but were more proud to highlight the fine people leading these charities.
Here are a few charities that I admire and Ive had the pleasure to interview on my podcast:
- Sandy Hook Promise: Preventing gun violence in schools
- Feeding America: Helping 37 million Americans who face hunger
Design a 30-Hour Work Week We Enjoy
Nicole recently took a part-time job that she loves. After 5+ years as a stay-at-home Mom, she was ready to add something else into her life. Now, she has a nice balance of work and family life that makes her smile.
I decided to leave my full-time career in corporate event marketing and pursue my passion of helping young families build wealth full time. It was a big decision to leave a six-figure career and become an entrepreneur, but we were financially prepared for the big leap and I was ready for a change.
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Youre Adding To Other Debts To Pay Off A Mortgage
If paying off your mortgage early means you need to take on credit card debt, then donât pay off your mortgage early.
At the same time, donât make extra mortgage payments if it means missing payments for your other debts, such as your student loans.
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Have A Monthly Budget Party
Nicole and I agreed to meet every month to create and review a monthly budget. I dubbed this the budget party.
She did not find it to be much of a party per se, but I figured if I call it a party she might be more willing to show up.
Pick a Budgeting Tool
The monthly party consisted of pizza, a glass of wine and us developing a zero-based budget through Mint where every dollar that we earn each month is committed. This way we were controlling our money instead of our money controlling us.
For the couples out there, Zeta is a great resource too. This tool is specifically designed to help couples track their finances together.
This party also helped us to discuss other important things like:
- Upcoming family events
- Date nights
- Future goals
With two little kids under 6 years old running around the house, we didnt get enough time to talk. Our Budget Party helped with that.
Related Article: 15 Budget Apps That Make Your Personal Finance Goals Easy
Make Consistent Additional Principal Payments
Since paying off the mortgage was a big deal to both of us, we ensured that the extra principal payments were included in this budget each month. With the additional principal payments being automated, it became our way of life.
It’s kind of like when you set up automated 401k contributions. You don’t even allow yourself to realize you have access to that money. And then you look back years later, and you’ve made HUGE financial progress. In a sense, you set it and forget it.
How I Paid $100000 Off My Mortgage In Under 2 Years
LearnVest is a program for your money.
In our Money Mic series, we hand over the podium to people with controversial views about money. These are their views, not ours, but we welcome your responses.
Today, one man shares how he’s tackling one of the biggest debts many of us will ever take on: a mortgage.
It was the day my lifelong dream of being a homeowner finally came true, and I moved into a beautifully renovated three-bedroom bungalow in the suburbs of Toronto, Ontario.
I purchased my home for $425,000, and through all my years of hard work and financial discipline, I was able to make a sizable down payment of $170,000, which left me with a five-year fixed rate mortgage of $255,000 at 3.04 percent.
Six digits of debt are intimidating, especially when you’re a single homeowner. But at 29 years old and just 15 months after buying my house, I’ve already paid $100,000 off my mortgage.. and I plan to pay the other $155,000 off before I turn 31.
How did I do it? Let me explain.
A House Starts With a Dream
Ever since I was 10 years old, I’ve dreamed of being a homeowner. That’s when I was sitting at the dining room table at my mother’s house and heard that my aunt, who had lived paycheck to paycheck and rented an apartment her whole life, had been laid off from her job after 20 years and would have to move in with my grandmother. There was no way I ever wanted to find myself in that situation, middle-aged and unemployed with no savings in the bank.