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Friday, November 28, 2014

Mortgage Free at 34

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.

Any questions?

Comments

28 Responses to “Mortgage Free at 34”
  1. SavingMentor says:

    Congrats Tim! We did something very similar to you having paid off our mortgage when I turned 30. We paid it off in just under 5 years by doing 3 things: maxing our lump sum payment of 10% once a year, doubling our mortgage payments (RBC allows this), and then increase our base mortgage payments by 10% annually. We didn’t max all of these things every year but we did some or all of that every year.

    Of course, we live in a semi-detached and our mortgage was much smaller than yours at the start so that helped. We’ll eventually want much more house and be saddled with a new mortgage but right now its nice to enjoy being mortgage free!

  2. jon_snow says:

    Way to go! My wife and I paid ours off a year ago at age 39… could have do it earlier, but I have been building up a sizable portfolio AND trying to pay the mortgage off early. So now we are mortgage free and have a 450k porfolio that is really growing and spinning off dividend income as well.

  3. Sweet! Congratulations! We’re aiming for 29… so far we’re mostly on track, but only time will tell.

  4. bk says:

    congrats to you guys.

    i’d like to hear more stories about this from people in the GTA region.

  5. Melissa says:

    We are less than 6 months away! I look forward to hearing how you keep up the momentum to early retirement. Once the house is paid off, it seems like the next hill is huge.

  6. Devin says:

    Awesome Tim. This is what it is all about. Freeing ourselves from the debts we owe to others. Being debt free means every penny you earn is yours and is your choice to put it where you see fit. We use to live in Regina and were mortgage free when we were 27. Had a nice house on Sherwood Drive, busy street but great neighborhood and access to amenities. Moved to Edmonton. Talk about a mortgage jump. Almost identical house right down to the number of square feet, floor plan, lot size and age. Only difference was a 2 car garage and the additional $110,000 in market difference. Mortgage free 5.5 years later, 2 kids and enough of a portfolio for 11 years without any income. The freedom that comes with being mortgage free is awesome. Your options really start to open up. You can take risks without having to worry about not being able to pay the mortgage. With those risks come both rewards and valuable experience. One of the best benefits for my wife and I was that my wife can stay at home with our 2 kids without sacrificing any of our previous lifestyle. Our lifestyle is by no means extravagant, but it is comfortable, sustainable and most of all enjoyable. Keep writing and keep enjoying life, it feels like it just gets better from here on.

  7. Mike Holman says:

    Congrats Tim – a great accomplishment. I was 43 when our mortgage disappeared, so you are way ahead of me.

    Now the challenge is not to buy a bigger house….

    @bk – I live in the GTA. I see your point – it’s much harder to pay off a mortgage at a young age here.

  8. Alison ph says:

    Congratulations! What a terrific accomplishment. Thanks for your blog and your inspiration. I bought your book and hope to be following in your footsteps to be mortgage free in 5 years.

  9. Executioner says:

    Well done! I love reading about others who paid off their mortgages extremely early.

    Coincidentally I was also 34 when my wife and I killed our mortgage last year. She’s a few years younger than me — lucky lady.

    It took us less than 4 years, but since the rules are a little different in the US from Canada, we didn’t have any restriction on the maximum prepayment amount each year.

    Do you have plans to increase saving after your spending spree is done?

  10. CF says:

    Wow congrats! Our mortgage is quite larger here in Vancouver but we are still looking to increase payments wherever we can.

  11. Kevin says:

    What a great feeling…Congrats Tim!

    We bought our house in 2001 for $389,000(in the Calgary area) with a $150,000 mortgage and was able to pay in off in 3 years at age 37 and my wife was 34.

    I remember that day very well, we opened up a bottle of champagne and celebrated.

    Since then we have had the freedom to do a lot of traveling. I’m semi retire only working at contract jobs (in the oil and gas indusrty) and my wife manages our rentals.

  12. mike crosby says:

    Way to go Tim. Been mortgage free for years and never regretted it for one day. I’m perplexed when financial gurus say it’s not good to pay off one’s mortgage.

    As time has gone by, I’ve become more frugal and my wife not so much. So we live in an expensive house that’s paid, but our taxes are over $7000 and we pay $5000 for the housekeeper. And of course there are association fees and other incendiary expenses.

    By the way, I find it odd that you get penalized for paying off a loan early. Can’t you get a loan where you stipulate there will be no pre payment penalties?

    Again, super congratulations Tim.

  13. Congrats – you are living the dream. Very well done!

  14. Poor Student says:

    That is awesome. Once I get a mortgage that is where all my extra cash is going. I plan to look around for mortgages that have the most flexible prepayment options.

    Plus it is awesome that when your wife buys herself a gift she buys grey Cup tickets. That’s a keeper right there.

  15. Tim Stobbs says:

    @Mike Crosby,

    Yes you can get an open mortgage with unlimited payback, but they tend to charge higher rates. I decided on my last renewal to accept the limits on paying it back in exchange for the cheaper rate. It was slightly annoying, but not a big deal.

    Tim

  16. Tim Stobbs says:

    @Executioner

    Yes I’ve got some plans post spending spree. I’ll outline those in more details next week as I’m still making a few decisions right now that will influence the numbers.

    Tim

  17. deegee says:

    Congrats, Tim. You beat me by only a few days, as I paid mine off in 1998, a few days after I turned 35. This was a key step toward my being able to retire in 2008. But it was also a key step toward my being able to semi-retire (work part time) starting in 2001. My expenses had dropped so much without the mortgage that a paycheck at about 60% of its former level was more than enough to cover them. Similarly, a further decrease in my weekly work hours in 2007 also had no big impact on being able to cover my expenses. These options opened up in large part to paying off the mortgage and decreasing my expenses. Take heed, Tim.

  18. Mad says:

    Congrats Tim. I’ve been following you for a while and our paths are very similar, except I’m 42. We bought our house in August 2006 with a $271000 mortgage. We paid it off totally 2 weeks ago on Octboer 16th. It is an excitement hard to explain until you’ve done it. We are figuring out what to do now with the extra funds but for the short term a small amount is going to be used to enjoy ourselves a bit as it’s been a rough road to get here. We are both 18+ years into pretty good pensions so an enormous amount does not need to be saved for retirement at the moment.
    Congratulations again!!

  19. Jacq says:

    Congratulations! Check out flooring auctions – those cork floors might be obtainable for the cost of only one mortgage payment. :-P

  20. Robb says:

    Congrats, Tim! We just built a house last year and took on a big mortgage, but we’re on track to pay it off before I turn 40 (I’m 33).

  21. Rob says:

    Nice job Tim. We were 40, but we came from very financially irresponsible families. It took time to change our upbringing. If I was 20 and could start again, my goal would be to pay off a house above all else. Financial independence really starts with free housing. Except for the taxes. ha ha

  22. Canuckguy says:

    I also paid off a mortgage in 1986 after 6 years. Then my wife took the house when we divorced 4 years later. In 1991, I bought another house and paid that mortgage in 5 years when I turned 47. Anyway, what I want to suggest concerning your plans for the excess cash you will be having. Start buying dividend paying stock, those that pay at least a 3.5% rate

  23. Louise says:

    Congratulations on paying off the mortgage! It’s good motivation to keep paying extra. well done!

  24. Dee says:

    That is exciting and excellent, Tim — Congratulations to you and your wife!

    It is also extraordinary. This might be less obvious than it otherwise would be given that so many of the other commenters have achieved a similarly extraordinary feat. But it really is unusual and remarkable. Way to go!!!

  25. Buzz says:

    Way to Go! My wife and I paid off our second mortgage this June in just under six years. It is such a great feeling that is difficult to describe.

    I kept a spreadsheet that extrapolated all the payments I would be making over the lifetime of the mortgage(s). It was fun every second week to knock off the bottom line. Then I started to play with it – “if I increased my payments by x” or “if I lump summed” it was astounding to see how much came off the bottom. I would recommend this.

    When you start doing the simple things like increasing payments every year or lump summing – it makes a profound difference.

    Well done! No Grey Cup tickets for me – just one heck of a hangover…

  26. GirlAlone says:

    I am envious … my first mortgage in Canada was in 2002 at age 36 after the break up of my marriage.

    I was also in school full time training for a new career and therefore no inocme. I didn’t enter the workforce until 2005 at age 39.

    Since then I have worked hard towards my goal, I have been using the Smith Manoeuvre since 2009 and am on track for having the mortgage paid off in 5 years from now … all told, 12 years of mortgage in total … not bad for a single woman who had to rebuild her life from scratch at an age when you will be enjoying your returns ;)

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