Burning My Mortgage
I woke up this morning on a mattress I have owned for probably ten years. Once upon a time, it was cloud like and comfortable but now it is well past its prime and it has lumps and bumps and I toss and turn all night and usually wake up with aches and pains. It hit me this morning that I have owned my home for less time than I have owned this mattress. And over the course of my home ownership, I have been so aggressive with my mortgage payments that the idea of spending a good chunk of money on a new mattress has never even crossed my mind. I think it is time to go shopping for a new one though because this morning when I woke up, I woke up, completely mortgage free!
Eight years, two months, one week and two days ago we took on this mortgage and suddenly, it's gone. It is such a surreal feeling knowing that a fairly large amount of money is not going to be withdrawn from my bank account on a weekly basis. In this time of a housing crisis, where prices have hit an all time high and mortgages are harder to come by, I feel extremely lucky to have this home secured for our family to live in. This roof and everything under it is mine!
I assume people aren't here to read about my giddy feelings though! I assume people are reading this, hoping that I will share some magical tips on how this mortgage got paid off. I will share what I can for sure, but I will say one thing up front. I have been conscious of literally every single dollar that has come into my house and equally conscious of every single dollar that has left the house. I have written every single bill, every debt and every payment down in my Budget Binder for the past eight years. I was always looking for ways to trim the bills and at one point I even cut cable for years. But it didn't stop at cutting the cable! I am very intentional with my spending and large purchases. Anything that was put on the credit card had to be paid off within the month it was due, so I didn't pay any additional interest. I drive a beat up old 2012 van that has close to 300k km on it and I desperately need a new vehicle but until it no longer runs, I'll be driving it. I didn't upgrade my cell phone every two years just because the phone company said I could. If my phone was in good shape, I would continue to use it and save the thirty bucks a month on the phone upgrade charge. We ate at home much more than we ate out. My kids are very well dressed, but their clothes were always purchased on the sale rack or at a great little thrift shop I discovered in Florida while visiting my Mom! I very rarely will pay full retail price for anything. I have not been on a proper vacation since my honeymoon....and I am not even with that dude anymore, so does that even count!? Drive thru coffee has never been my thing and I prefer to make my own coffee at home and save the three dollars a day. That really adds up you know. If you don't believe me, take a pen and paper and track your needless spending for a month. If that money was put on your mortgage as a pre-payment, directly off the principal, it would make a big difference in the long run, potentially taking years off of it in fact. So before I get into the actual couple of key things I did with my mortgage, understand that I was purposefully not a big spender and I have lived frugally.
My trusty Budget Binder is always at my fingertips.
I will share a few tips but first a disclaimer...I am NOT a money professional so if you have any additional follow up questions on any of these tips, please see your financial professional! These are just things that I implemented and they worked out well.
Tip #1-When you are signing all the dotted lines for your mortgage, just say NO to mortgage insurance. It is seriously such a waste of money. Take out a life insurance policy instead. Mortgage Insurance just pays the balance of your mortgage, so if you have been working hard at paying it down and get your mortgage to a small amount of money that is still owed and then something happens, the insurance payout is only going to pay that small amount remaining whereas a life insurance policy will pay you the full amount that you originally signed up for. Mortgage insurance is something that bank will probably try to urge you to buy. Firmly say no. If you're like me, you may even tell your mortgage broker what a waste of money it is and that it is gross that the bank offers it.
Tip #2-Instead of paying one monthly mortgage payment, sign up for weekly. My mortgage came out every Friday and over the course of a 25 year amortization, just the simple act of paying weekly vs. monthly took the amortization down to 18 years and this was without making any additional principal payments. Weekly pays your mortgage off faster because an additional full monthly payment comes out over the course of the year because there are some months with five weeks instead of four. I liked the weekly payments actually because the amount was fairly small as opposed to one big lump sum once a month.
Tip #3-Once I was comfortably paying that weekly payment, I asked at the bank about how much extra I could pay every year without being penalized. In my case, I was allowed to double my regular payments as well as make an additional 15% of what my original mortgage was, in the calendar year. That seemed a little excessive and I never actually did go in with the big 15% as a lump sum payment...but I did do other things instead! I upped my weekly payment, first by just thirty dollars a week to see if I was comfortable with those payments. After a few months of not even noticing the extra thirty dollars a week, I upped it again to seventy five dollars extra a week. I continually kept an eye on my account balances and made sure this money was good to go out the door and that it wasn't needed elsewhere. Eventually I stretched the weekly mortgage payments to over a hundred dollars more than what they needed to be and the extra money (anything over and above what the original bank set payment was) went directly to my principal. The additional money tacked onto my weekly payments did not count toward my 15% yearly prepayment allowance. Which was key! I did not want to get penalized for paying too much off my mortgage!
Tip #4-Whenever I came into a bit of extra money, I would go into the bank to make lump sum payments or "pre-payments" as they referred to them at the bank. These did count towards my 15% prepayment allowance, so I did have to ask at the bank every now and then how much extra I had already paid for the year because I did not want to go over the 15%. I would save my waitressing tips, extra Christmas money, any time I made sales on Varage Sale or Marketplace...any of that extra money that didn't need to go toward bills or life, would be saved and whenever that savings would reach five hundred or a thousand dollars, I would march into the bank and make a lump sum prepayment....right off the principal. I would get so excited when I saw that balance going down and to see the countdown of how many more weeks of payments I had left on the whole mortgage.
Tip #5-And finally, some of you may not have this as an option, and I am certainly lucky that I did. My Dad very generously helped me out with a gift and I was able to clear my mortgage five months earlier than I would have on my own. I wasn't sure whether to mention that because I didn't want anyone to think that "Daddy bought my house for me..." because that has not been the case at all. I would have paid it off on my own in five months. Many of you reading don't have parents that are able to help you with your finances and that is probably the norm! But if you do ever come into some money, as much fun as it would be to have some real fun with it and spend it all, consider looking at your mortgage and popping it on that instead. You can have a lot of fun once that baby is paid off!
I was not able to completely pay off the mortgage with a lump sum prepayment, so this was the big balance I was left with and the bank needed to withdraw it as a regular payment on my next payment day! I found this both hilarious and ridiculous.
That looks pretty cool! Mortgage balance-Zero!
My daughter took this picture of me on my first official mortgage free day!
I am really proud of this accomplishment. I am proud to share this accomplishment with my kids and share with them what is possible if they work hard and push towards their financial goals. As happy as I felt on the day I paid it off, I also felt really emotional and shed some tears. I don't know why. I am so proud to share this home with the people I love the most and I know this home will take good care of us. It isn't just a house to me. It is so much more than that. This is literally the place my dreams came true.
And hey, now that I don't have those big weekly payments coming out of the bank account, I can finally splurge on a nice new mattress!
-- Deb Stedge
Classed under Red Lips-Home Decor & Lifestyle
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