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It's not easy to pay off a mortgage early, but it can be worth it. The author is not pictured.
- Holly Johnson and her husband paid off around $100,000 in mortgage debt in less than two years, on a mortgage balance with an interest rate of 3.75% APR.
- They had spent the previous five years paying off car and student loans, and focusing on saving.
- There are plenty of arguments against paying off your mortgage early, but they chose to do it for lifestyle reasons - not financial ones.
Even though I wasn't always financially astute, I have always been a big dreamer when it comes to money. But for me, the driver behind my dreams has never been a Ferrari or a mansion for my friends to drool over. My dreams have always been on the practical side, maybe even what some would call boring.
For example, I've always wanted to pay for my children's college education and I still dream of paying cash for a rental property one day. In addition, I've always wanted to pay off my house early - real early.
My husband and I didn't really focus on paying off our home until our early 30s. But we were also focusing on other goals at the time - goals like saving for our children's college, socking away money for retirement, and getting our business off the ground.
Around the time we were 36 years old, however, we decided to get serious. Why? Because we spent the previous five years paying off the last of our car loans and student loans and building up a giant emergency fund.
By the time 2016 rolled around, we were ready to pay off our home early and put it behind us.
So, that's exactly what we did. While our mortgage balance for our house in Central Indiana started at around $155,000 (we put down $60,000 on our home when we bought it to avoid PMI), we only owed around $100,000 by the time we got serious since we had been "rounding up" our payments slightly all along.
Read More: I moved my emergency fund to a high-yield online savings account, and after earning 20 times more interest I'd tell anyone to do the same
Once we started throwing all our extra money toward our mortgage, it didn't take long to make an impact. I know for a fact we paid $3,000 or $4,000 toward our $1,500 mortgage payment most months in 2016 and 2017, but I also know we paid between $5,000 and $8,000 a few times. Those big payments made a huge impact, not only in our mortgage balance but in the amount of our payment that went toward principal instead of interest from that point forward.
Yeah, I know paying $3,000 or $8,000 in a single month sounds like a lot of money. It is a lot of money! The thing is, we're both high earners who have avoided most of the trappings of having a big income. Where many people who earn multiple six figures per year drive new cars and live up to the limit of their means, we share a 2009 Toyota Prius and don't even have cable television. We also cook most of our meals at home and live frugally when we can. All those choices make a big difference in how much discretionary income we have each month.
Regardless, with enough extra money going toward our home loan, it didn't stand a chance. We got it down to the point where we owed around $20,000, and we made one big final payment from our long-term savings in early 2018. With a few clicks of a mouse, my husband and I were mortgage-free at age 38.
Why pay off your home early?
You may be wondering what the big deal is. Who cares if you pay on your mortgage for 15 or 30 years? It's entirely normal these days to automatically take out a 30-year home loan and make the minimum payments for your entire working life. And, why not? Long-term mortgages make your payment less expensive every month, and that frees up cash for other goals like savings.
But I've always felt that 30 years is a ridiculous amount of time to pay on a mortgage - especially if you plan to live there forever. There will always be those people who suggest leveraging debt to buy a bigger home or extending your mortgage to increase your cash flow, but I don't really care what they say.
Also note that, from time to time, experts will chime in to say you should never pay off a home loan early. This argument is due to the fact mortgage interest rates are still historically low, as well as the existence of the mortgage interest tax deduction.
Read More: I hustled to pay off my mortgage years before I had to, because there's something even more important than the math
But tax reform passed in 2017 drastically reduced the number of people who will qualify to deduct their mortgage interest on their taxes, and interest rates are low, yes, but they're still higher than what you'll receive in a high-yield savings account.
Example: My emergency savings is in a CIT Bank Savings Builder account earning 2.45% APY, but the mortgage we paid off was at 3.75% APR.
Still, the biggest reason we paid off our home loan had nothing to do with money - it's the freedom being free of debt brings to your life. Not having a home mortgage payment is one of the best things we've ever done for our finances and our sanity.
It's true we have to pay around $2,200 in property taxes and $1,200 in homeowner's insurance each year, but the fact our annual housing costs (not counting utilities, maintenance, and repairs) add up to $3,400 means we spend almost no time worrying about money or bills.
Now that we've been mortgage-free for more than a year, I can honestly say I don't regret a thing. I don't miss my mortgage payment at all, and we're saving and investing even more money now that we don't have a regular house payment to cover.
Different people learn to tolerate debt in their own way, but I've learned I don't really tolerate it at all. And now I can approach 40 the way I always wanted - entirely debt-free and living life on my own terms.
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