How to Pay-Off Your Mortgage in Half the Time
I recently came across an article about a couple who is paying off their 30-year mortgage in half the time. While 15 years may seem like an unachievable amount of time for many homeowners, it really can be done. Therefore, if you are thinking about paying off your mortgage more quickly I have some tips that this couple shared to help you out.
How to Pay Down Your Mortgage Fast
After several months of home searching in 2000, the couple found the home they wanted at $349,000. It was right at $50,000 less than they were preapproved for. They put 20% down on the home, which brought the loan down to $260,000 and got a fixed rate of 8.3%. They borrowed from family and saved for their 20% down so it was a down payment they felt comfortable making.
They also got to bypass mortgage insurance by putting 20% down. However, their monthly payment was still just over $2,400 monthly. They then decided that if they cut out their cable they could add nearly $200 more monthly to their mortgage payment. This one well thought out action instantly took six years off their mortgage loan time.
Over the next few years they started added as much money as they could save to their mortgage principle. They used $2,000 from tax returns each year and applied it to the principle of the mortgage. They sold a car that they did not use often for $6,000 and added that to the principle of the mortgage too. When opportunity arose they sold things they no longer needed on eBay and the husband did side jobs for friends to earn extra money.
In just a few short years the couple was able to refinance their home to a 15-year fixed rate with a 5.7% interest rate, which made their new monthly mortgage payment lower than what it was before. The new payment of $2,230 was actually saving them a couple hundred each month since they were used to paying $2,600. So, they continued to pay the $2,600 monthly and add each year’s tax return to the mortgage principle. Now, their new payoff date is 2016 instead of 2030. Currently, the couple is continuing to save every penny they can so they can pay-off their mortgage loan by their goal date of 2015.