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During late 2013 while I was traveling out-of-town for work, my wife Nicole found our “forever house”.
This home had everything she was looking for including an attached garage, open floor plan, updated kitchen, walk-in closet and a big backyard on a half-acre lot. She told me that this was THE ONE and as soon as I got home from out-of-town, I had to see it.
My wife has excellent taste and the majority of the time we are in sync. I wasn’t worried about liking it. I was worried about getting a BIG OLE MORTGAGE to pay for it!
Moving from our small bungalow (my bachelor pad she begrudgingly moved into when we got married) to a ranch twice the size of our current house was going to be a big upgrade for us.
When I got a look at the house she found, I loved it too. It felt like home instantaneously. Even the neighbors were perfect.
So … We decided to go for it.
I had a few nerdy money guy rules that we discussed to ensure this mortgage was obliterated in less than 5 years:
1. 15-Year Mortgage
In our first house together, I had made a lot of uneducated first time home buyer mistakes that I didn’t want to repeat. One of those areas I was bound to improve was with the mortgage process.
My first mortgage was based on a 30-year pay off period. 30 freakin’ years to pay it off! I’m sorry … That is just too long to wait to experience true debt freedom.
This time would be different.
When we bought our new house in 2013, the rates were at an all-time low. We worked with LendingTree and got hooked up with a $195,000 15-year mortgage at a 3% interest rate with no points.
This 15-year mortgage had higher monthly payments of around $1,900 (including taxes and insurance), but the bulk of it was going to the principal every month instead of our mortgage company’s pockets. Nicole and I agreed that if we couldn’t afford to pay the larger monthly payments of a 15-year mortgage then we shouldn’t buy the house.
Looking back, the 15-year mortgage was one of the best decisions we’ve made so far.
Not only were we paying less interest to the mortgage company by going with the 15-year mortgage over the 30-year mortgage, the mortgage principal went down by a sizable amount each month.
(Check out LendingTree to find the lowest rate possible for your 15 year mortgage. We’re glad we did!)
2. Additional Principal Payments
My second nerdy money rule to crush our new mortgage in 5 years was to make additional monthly payments toward the principal each month.
This required us to dial back our expenses slightly. Here are some of the ways we cut back:
- Less eating out for dinners
- Packing my lunch for work
- Dialing back our grocery spending (we love Aldi!)
- Cutting the cord on cable
- Going with high deductible insurance plans
- Saying no to family and friends more (this was the hardest)
Although these sacrifices were difficult at the time, we were prepared. A couple years prior, we had eliminated our $48,032 of debt (car and student debt). Having no debt definitely helped!
By reducing our expenses, we were able to make additional principal payments each month. This had a major impact in the dramatic reduction of our mortgage. Yes, we had a 15-year mortgage, but we wanted to turn it into a 5-year mortgage.
Here’s a snapshot of our payments in 2016:
3. Extra Money
My company pays us 26 times per year (every two weeks) as opposed to 24 times per year (1st of the month, 15th of the month). Nicole and I agreed when we bought the house, we would only live off of 24 paychecks annually instead of the 26 we actually received.
So twice a year, we have made a BIG payment on the principal with those two additional paychecks. This consistent biannual payment took a huge bite out of overall principal balance.
I don’t always receive bonuses for work. It depends on how my company is performing or how I perform that year. During the pay down process, I was fortunate enough to receive two bonuses for a solid performance. That unexpected money was also sent to attack the mortgage.
We also sold a lot of our stuff on Craigslist, eBay and Facebook Marketplace. A road bike, a moped, clothes, purses and furniture … anything we weren’t using regularly and didn’t bring us joy was sold.
4. 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. (spoiler alert: it worked!)
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 spreadsheet fans out there, Tiller is a great resource too. Your accounts are automatically updated each day.)
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.
Check out my weekly podcast about creating financial freedom for your family.
5. Have Fun
My wife is a good yin to my yang. She likes dreaming for the future with me and having a little less today so we can have more tomorrow. She also wants to make sure we’re enjoying our lives today.
With the madness that sometimes comes with my full-time job and two kids under six years old, we both agreed that if we were going to do this crazy 5-year mortgage pay off extravaganza then we still need to have fun.
Everyone defines fun differently. For us, it meant things like having themed birthday parties for our kids, driving to northern Michigan to visit our family for the weekend and going to Detroit Lions games (more torture than fun really).
The last thing we want is to be “house rich and life poor“. I can accurately say we still had fun during the pay down process. Nicole would agree.
6. Dream Big Dreams
In order to keep us motivated and excited about paying off the mortgage, we constantly reminded ourselves why we were doing this.
With a paid off mortgage:
- We would be able to go on an epic family vacation every year. Perhaps Mexico for a week during Christmas or Easter. The warm, beautiful sun would shine on our pale native Michigan skin while we lie on floating rafts in a picturesque infinity pool. Ah, so nice …
- Our kid’s college funds would be fully funded so they will have the freedom to attend college and not worry about student loans.
- We would be able to save for our first rental property and begin generating some true passive income. As the passive income builds over time, we would be able to reach financial independence.
These dreams kept us motivated and excited about the day our mortgage would be done for good.
7. Celebrate with the Family
On November 21, 2017, our family became completely mortgage free.
We had an epic celebration together to commemorate this big moment in our lives!
The sense of freedom is incredible. My personal stress levels have decreased immensely. Our young family’s future looks bright.
Now that the mortgage is all paid off, I compiled the full details of how we did it. I hope it helps you on your journey to mortgage freedom.
How would mortgage freedom change your life?
Please let me know in the comments below.
Check out LendingTree to get a low rate on your next 15-year mortgage. It worked well for our family!