Why We Want To Pay Off Our Mortgage Early

Contributor: Nurse Frugal at Ladies Go First

Paying off the Mortgage early, that’s what we’re doing and here’s why. I vividly remember the day when I came home from work and my husband was sitting behind the computer with a perplexed look on his face.  He looked up at me and asked “I don’t know, do you think we should pay off the house loan too?”
Here Is Some Background…………
A few weeks earlier we had just started listening to Dave Ramsey, a radio host and author that believes that becoming debt free is the key to financial freedom and building wealth.  We had just emptied out our savings accounts to pay off the two brand new cars we had just financed. My heart sank in my chest, was my husband taking crazy pills before I came home?  Did he realize that paying off the mortgage would mean that we would have to work lots of overtime for years and years to ultimately pay off the $233,346.60 owed on our mortgage?!?!  He proceeded to do a mortgage calculation that revealed that if we didn’t pay off the house early we would pay $118,123.78 in interest throughout the life of our mortgage, which is essentially throwing that money away.
$118,123.78!!!!!!!  That can buy me another house somewhere, or 6 cars, or millions of chocolate bars, or lots of mission trips….the list can go on and on. It took me a few days to totally get on board with my husband.  We suddenly became team-mates and partners on our journey to attack this massive burden of a debt.  We began by agreeing to hold each other accountable for our finances: we got on a budget (something I have dreaded my entire life) it has such a terrible connotation.  We decided to live from last months income and jointly decide how our money would be spent the following month by doing a “zero-based budget.”  This means that we decide on paper how every single dollar will be spent the following month.
It took a while to get used to this new frugal way of life; the first two months I wanted to throw my husband out the window when I couldn’t “buy” the things I “needed” (vacations, new clothes, dining out….all things that one can live without.)  I would throw these little whiney pants tantrums because I felt “entitled” to have certain things. But then I started to see progress.  We felt traction as our mortgage debt diminished. The funny thing is that when we first started in February of 2011, we anticipated having the house paid off in April of 2016 because of my “whiney pants” needs and wants.  It’s now a year and a half after we first started, and we are half way done!!
Once you see that traction, you get more motivation and it’s like a freight train you can’t stop.  My husband and I started working more and living off of 40% of our income, putting everything else towards the mortgage, and we have never been happier.  I respect my husband more than ever with the direction he is taking our family. I feel like a partner in our finances because I am treated as an equal member of our “budget committee.”  I like to refer to myself as Vice President.
This experience has been the most enriching in my life: we have freed our souls away from meaningless “stuff” that we can easily live without, and our marriage, teamwork and communication has gotten stronger.  It has taught us the value of hard work. I imagine all the opportunities this will open up for us: the possibility of us retiring early, the possibility of only having to work a day or two when we have children, the possibility of doing more charitable work…this is the “stuff” that truly matters in life. We are hoping to pay off our house in August or September of 2013, and when that day comes we hope to serve as inspiration to other working people that anyone can become financially free.
Would you pay down your mortgage faster or invest the money? Share your comments!
Thanks to Nurse Frugal (Vice President) for sharing their journey to debt freedom with us at Canadian Budget Binder. If you want to guest post for Canadian Budget Binder click HERE.

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Mr. CBB
I’m from the UK and now a recent permanent resident in Canada. I bought my first house at the age of 21 after University then my second at the age of 24. I’ve always been fascinated with personal finance, savings, learning to make money and watch it grow while combating debts along the way. Canadian Budget Binder is a place where I get to share my experiences with personal finance and learn about yours along the way. I hope you stick around and check me out on Twitter, Facebook and Pinterest where I am active on all social media sites. Cheers, Mr.CBB
Mr. CBB
Mr. CBB

Comments

  1. Wow! Congratulations and good for you for being so smart at a young age!!! I wish! We are tackling budgeting right now and paying off our line of credit. I think when that is done we will be increasing our mortgage payment and definitely savings. Thanks for sharing your story :-)

  2. never thought of the interest being that much damm now i want a boat as well as a car when the house is payed off!!

    • Oh Jeff, let me tell you mate it’s astronomical the amount of interest we all pay on our mortgages. Sadly enough though when and if the interest rates go up numbers will get even higher…. Cheers mate.. Mr.CBB

  3. Mary F Campbell says:

    I need to say that somehow we got off track financially. When I talk to my husband’s mother (91 at the moment), they paid cash for everything but their house. They had a small mortgage but as young married couples in their day…every spare red cent went to eliminating that debt so that hey could live debt free for the rest of their lives. Does my mother-in-law have a credit card, you bet! But she pays it off in full every month. Somewhere between her generation and mine…we lost track of the fact that debt costs us money. Somehow it got to easy, too available, too “normal” and look at the state of things. I read the other day that most folks in the United States at retirement age have less than $30,000 on which to retire for what might be close to 50 years! Scary stuff!!

    But, I am still of the mind that while you are reducing debt, you still need to be saving for the future so that you have the advantage of compounding income. You don’t know what’s coming down the pike. What if one of you loses your job…or both of you. What if you don’t find work for a couple of years? If you have savings of some kind to draw from, you survive. Most banks will go to a principal only repayment, if you talk to them & explain the situation. They don’t want to foreclose on you… but without a little cash on hand to weather the storms, you may be forcing their hand.

    Let’s be reasonable folks. Buying a house when you don’t have the money to pay cash is expensive. For the privilege of living there 10 years before you can afford it – there’s a cost. Living beyond your means in fact doesn’t excuse your from financial preparedness, especially if there are little mouths to feed.

    I caution those putting everything they have into debt repayment on their home…can you eat it?

    • Hi Mary! I agree that you shouldn’t put all your eggs in one basket. I think balance is very important. We are still trying to figure out what to do with our cash in the bank. Should we pay off the mortgage or not but at the same time we are investing, mind you not to max but once the mortgage is gone we can but we would have enough stashed around that if we had to eat it, well we could. The other option would be to downsize and eat that! What a life, so full of if’s, and’s and buts… and then there’s risk.

    • MBernardo says:

      I’m also Canadian but listen to the Dave Ramsey Show (minus the religious parts). His “baby steps” address your concern about having enough money to weather a job loss. Step 1 is you save up $1,000 in a “baby emergency fund”. Step 2 is you pay off ALL of your debts except the house. Step 3 is you save up 4 to 6 months worth of emergency money. There are 7 steps. But as you can see, Dave Ramsey’s principle is targeted effort instead of doing 2 or more things at the same time like paying down debt and saving at the same time. I’m on 3 right now.

      • Yes, I can see where Dave is heading with this and especially for those who are struggling and really want to get a foot in front of the other. Trying to do too much at once is not easy.

  4. Wendy LeDrew says:

    That’s amazing..wtg! This is definitely a inspiration to us all!!!

  5. You know I am totally with you on paying off the mortgage. It’s going to be an awesome feeling when we get there. You are doing great- have a great day!

  6. mycanuckbuck says:

    I am very much into repaying the mortgage early – paid off my first one in less then 5 years and it felt great.Is that a picture of you Nurse Frugal? You look like a lovely couple!

  7. callmewhatyouwantevencheap says:

    I paid off my mortgage last year and it was definitely one of the best decisions I’ve made. My next house purchase, I plan to pay cash for it. There is something about not having a mortgage payment, it’s liberating.

  8. Great post! I love the idea of getting rid of a mortgage and owning a house outright.

  9. feelingrichbeingpoor says:

    I like the idea of paying off the mortgage early, and I have made arrangements to do so, but I have heard another side of the issue. A financial adviser I spoke to suggested taking a loan against the equity and invest it in a retirement fund. It is not possible for me to do, but I wonder if it is a solid financial advice?

  10. That’s awesome!!!! You are on the right track and providing inspiration for all of us :)

  11. Sharon J. Gilman says:

    I think that’s totally awesome for you guys. My first home purchase is going to be a duplex so I can rent out one side to help pay off the mortgage early. Hopefully that will allow me to make two mortgage payments each month going towards the principal.

    • That’s a great idea. A friend of ours did that and now it’s paid in full and he has plenty of passive income minus the upkeep but it was worth it for him. Good for you! Do you plan to keep the duplex after it’s paid in full?

  12. In theory paying off your mortgage sounds great. In practice I’m not sure it’s wise to put all your liquid cash into one basket, what if the market crashes even just a little, that free and clear house you paid say $500,000 for is now worth only $400,000. You lose! Also, there are possible penalties involved as well as tax deductions you can no longer claim or worse still taxes you still have to pay. Plus when you need any liquid cash it’s not available, unless you now borrow against your home with a higher interest rate.

    We have recently bought 2 investment rental properties and we have our own primary residence. Our investments are not only paying for themselves, but the residual amount every month in our pocket covers our personal mortgage and pays us an extra $550 or so a month!!!! Seems to me like this is a total win/win/win situation!! I can’t wait to keep buying more, ill be able to retire in 5 yrs at age 43, and be getting paid to enjoy myself!

    I would rather have my money working for me, than just dumping it all into one thing, diversify!

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