Posted by Tim Stobbs on November 1, 2012
You know those days, when everything goes right. You wake up just before your alarm, your coffee is perfect, your drive to work is easy and the day is productive and challenging. Well take the feeling, multiply by 100 and add a good deal of excitement and satisfaction: today I’m mortgage free and I really do OWN my house. Oh, by the way, I’m only 34.
I had originally wanted to do this by Oct 31, but that didn’t happen. You know the phrase: a day late and a $1 short? That is exactly what happened. I went to pay my last lump sum payment over the weekend and I ran into a problem. My lump sum payment privilege for the year had $1978 left, meanwhile my mortgage balance was $1979. Yes I was exactly a $1 short. So rather than trigger penalties I sucked it up and waited for my regular payment on Nov 1, 2012 to kick in and pay off that last dollar.
So how on earth do you become mortgage free this young? Simple, you really hate having a mortgage payment. While that is the easy answer, but in fact the basis of how we did it in just over 6 years.
We initially bought our home in Regina for $190,000 with a $40,000 down payment, so we took out a mortgage for the remaining $150,000 back in July of 2006. The key here was we bought a reasonable amount of house for us. I could afford a lot more, but I didn’t want to be tied down to house payments for it. Then for the first few years I didn’t do much at all to pay it back. Really, I was likely just like most people on I made my payments and I believe I did manage at least one extra lump sum payment of $1000.
Then we started to having a long conversation with my wife on where we wanted to go in life and I realize being mortgage free would add a lot of flexibility to our lives. I could down shift to part time work if the mortgage was gone, my wife could change careers or we continue to save and leave work early. Regardless of the exact scenario, the idea of never having a mortgage payment again was highly appealing to us. Besides, with such low interest rates right now it is easy to pay off debt and I won’t be punished for saving cash in crappy low interest paying saving accounts or bonds.
So I scaled back on all other discretionary savings and poured everything we could at the mortgage for the next three years. Oh boy did that every work, for a change of pace I was actually looking up my limits of lump sum payments on the mortgage because for two years in a row I maxed those out (15% of the original mortgage balance). We also took advantage of the option to increase our regular payments by 15% a year, so ever time I got a raise I poured that money back into paying off the mortgage even faster.
The end result of this change to our lives won’t be know in full for a few months. After all when you pay off the mortgage you still go to work the next day. In the meanwhile, our monthly spending just fell off a cliff since our largest bill (after tax) will now be our monthly spending cash at $400 a month. On the other side my regular mortgage payment of $1940/month is now available for saving.
To celebrate we have having a party this weekend with family and friends. In addition, both my wife and I bought ourselves little gifts. My wife bought 2013 Grey Cup tickets and I bought a Nexus 7 tablet. Now I just have to start saving up for my wife’s cork floors in the kitchen…after all when your promise is put on national TV there is a bit of pressure to do it.