Killing Your Mortgage In 3 Easy Steps

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Killing your mortgage in 3 easy steps

I was honoured when Mr. CBB invited me to share some mortgage tips on CBB.  It’s evident that he really values his readers so this is a real honour. I’m speaking from experience. Derek and I became mortgage free at 28 (we purchased our first home at 23, and built a new, bigger home when we were 25.)  These are the 3 most important actions we took in killing our mortgage early.  In the interest of full disclosure our current home is worth between $280,000 and $300,000.  It’s a lovely home, but the bank would prefer us in something bigger and more expensive.

Pay your mortgage first and last.

We’ve all heard the concept that you should pay yourself first. If you’ve been living under a rock, avoiding any personal financial advice, this means that you should set aside your savings as soon as you’re paid before you spend a dime.  The story goes that if you never have access to the savings you won’t miss it, and you’ll be forced to live within your means. This works unless you’re a credit addict, then cut up your cards and return to step one. Decide how much extra you want to pay on your mortgage and pay that first, then pay your regular payments throughout the month.

At the end of the month we gave our mortgage an extra little kick in the ribs with whatever was left over as well; often we put Christmas and Birthday cash towards the sucker. We hated that mortgage, and wanted it DEAD.

Don’t borrow what the bank is willing to give you

We took a trip to the bank recently because we were interested in investing in real estate and wanted to know how big of a mortgage we could qualify for. We were shell-shocked by the size of the number. I won’t lie; my first thought was “wow, we’re like a big deal or something.” My second thought was “if we borrowed that much we might as well sign over our organs to the bank because they’ll own us, and we’ll be a slave to that payment.”

Banks are in the business of making money.  It’s best for their profit margin if you to pay the greatest amount of interest possible. Therefore, they are going to offer you the maximum amount that you could afford without going bankrupt. You’ll be scrapping by to make the mortgage, and won’t be able to afford any prepayments.

Now, don’t cry foul at the banks. They have shareholders; they are in the business of making profits. You’re in the driver’s seat for how much you borrow.  Act in your best interest, not the banks. There’s little value is owning a nice house, if you have to work 60 hours a week to afford it.

Freeze your budget, especially with pay increases

When we first got married Derek was working as a 3rd year steam-fitting apprentice, and I was finishing my last year of school. Derek took home $600/week and we made sure we lived within our means.

Fast forward to today and Derek is a journeyman steam-fitter, and has received a few further promotions as well. I have a full-time job as a teacher (when I’m not on maternity leave) and we still live on $600/week. Our incomes are higher than what they were when we got married, but we had financial goals that were more important than a higher standard of living. Without a doubt our expenditures have changed.  We have three kids now and they eat every day, multiple times a day. What’s with that? Alternatively, we don’t have to pay for my commute to school, we don’t eat out anymore (it’s not that fun with 3 kids) and our $164.00 weekly mortgage payment is gone as well. Dropping those three expenses let us afford 3 kids on $600/week

When your pay increases, but your expenses don’t you supercharge your savings. As your mortgage principal decreases the ratio of principal payment to interest improves too. Yikes, that was a little complicated.   Think of paying off your mortgage like a game of snap the whip while skating as a kid. The first dollar, or first kid in line isn’t getting much action, but if it wasn’t for the first dollar doing his thing the last dollar wouldn’t swing nearly as far and do as much damage. Keep upping the payments and pretty soon, you’re killing your mortgage faster than ever before.  Oh SNAP, that feels good. Unless you’re the kid who just hit the boards, then you’ll need some ice. Oh wait, he’s already lying on it. I never really liked that game.

One last thought……
Paying off your mortgage early isn’t easy. If it was, everyone would do it. It might not be easy, but it’s definitely worthwhile. Sure it will be tough, meaningful goals usually are.

Beware of negative thoughts; they’ll kill your success.  Never say I can’t afford this prepayment, instead ask yourself “How can I afford this payment?”  Rephrasing this as a question makes a world of difference.

How would your life be different if you were mortgage free today? Your answer may be all the inspiration you need.

MoneyMasterMom Mandy

Guest Post By: Hi, I’m Mandy at MoneyMasterMom.  I wake up each day and try to share something with my readers to help them spend their cash, time, and energy in line with their values.  I love to laugh, and I dance at the end of movies during the credits.  I share my life with my hubby Derek, who blogs at Free at 33.  He’s so funny and smart, but then I’m biased.

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Mr. CBB
Mr. CBB was born and raised in the United Kingdom who then moved to Canada where he is a permanent resident. He recently became a father to a very busy toddler who allows him to be a kid at heart. He bought his first house at the age of 21 after University and his second at the age of 24. Both Mr.CBB and his wife are Debt and Mortgage Free and they did it all in under 5 years using a Budget. Canadian Budget Binder is a place where he shares their financial experiences with his readers and hopes to learn about theirs. Welcome to CBB!
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Comments

  1. Great Post, As an ex mortgage advisor I love posts like this. My advice is Overpay as much as you possibly can while interest rates are so low. It might put a dent in your pocket now but you’ll be laughing in a few years time!

  2. MoneyMasterMom says:

    Thanks Money Bulldog! We agree it’s better to sacrifice a little in the beginning and have a lot more freedom sooner 🙂

  3. Mary F Campbell says:

    What an inspiring story! It can be done, if you want it enough!!

    • MoneyMasterMom says:

      Mary, did you know you were the first person to comment on my facebook page. You have a special place in my bloggy heart

  4. Great article, it really is important people start thinking this way…the glory days of super low rates will not last forever. It can be amazing what even $100 extra per month can do to paying down a mortgage faster…but like Mandy says, it isn’t easy…then again, nothing worth doing ever is.

    • MoneyMasterMom says:

      Michael, you’re right, these rates won’t be around forever. The Bank of Canada keeps warning, but are Canadians listening?

  5. Great post, Mandy! Were you just born smart or did you acquire it along the way? I got dumb for a few years, but am back on track and want to kill the mortgage in the next few years. What a feeling of freedom that will be. I’m beginning to see a theme. Slay the grocery dragon, kill the mortgage, maybe you’re a superhero too.

  6. I’m all aboard the mortgage killing train! Well done on living on $600! With three kids, that’s rather impressive.
    I think we’ll be 29 when we make that happen, here’s hoping it’s sooner!

  7. Lots of people regret buying a home too big and now they’re house poor. Your tip about knowing how much mortgage you can take on is really important. It kind of brings up the question of who should be made accountable if lending decisions lead to defaults. If our real estate market goes through a crisis (which is not very likely) is it the banks and financial institutions that need to pay the price, or is it because home buyers over extended themselves. I think it’s a little bit of both.

    • MoneyMasterMom says:

      I have a friend who is house poor and had to go back to work early after having a baby because they needed to income to make the payments. It’s a real shame

  8. Living Debt Free Rocks! says:

    Good post! Once we’re ready to buy a house we’ll be definitely throwing extra payments to pay the mortgage off in a few years. I definitely don’t want to be carrying a mortgage payment into retirement.

  9. Hey thanks for this great post! I don’t have a mortgage yet, but once I get one, I’m going to keep these tips in mind. It’s a lot like getting out of any other kind of debt. It takes patience, persistence, and every dollar seriously does count.

  10. Pre payments are great! When we have a house, I hope we will be putting extra money (even if it’s a little) to the mortgage 🙂

  11. Mandy, you guys are amazing! Good for you! I can’t imagine being debt free, especially mortgage free any time soon! When I go back from Mat leave we plan on continuing to live on my mat leave income, although with the cost of our daycare we won’t be making a ton more but every little but helps!

  12. grownupandstuff says:

    Love the term ‘supercharge’ your savings! Genuinely hadn’t thought to do it like that – thanks for the tip 🙂

    • Mandy @ MoneyMasterMom says:

      please feel free to steal it… my husband probably said it first. He’s always coming up with witty stuff like that.

  13. Very good post.

    I agree with the value of paying off the mortgage for your house, but I take a slightly different approach. I buy more than one house (or several), and after a few years when the houses have increased in equity sufficiently, I can sell one house to pay off the mortgage of another house.

    • MoneyMasterMom says:

      My hubby would no doubt like you’re approach. He’d like to get into real estate investing, I’m a little hesitant.

      • markovidovich says:

        Great idea – just note that it has become much more difficult lately to take equity out of your current home and borrow for a second. The hope of an income stream from a rental property is not enough to substantiate the added mortgage payments in the eyes of financial institutions. To the readers: do yourself a favour and find a good mortgage specialist who is more concerned with giving you impartial advice rather than getting you financing by any means necessary. Just because you CAN get a mortgage doesn’t mean that you SHOULD get one – see how it fits into your budget and see if you can afford holding it if it happens to be vacant for a while.

        • That’s a good point… “just because you can doesn’t mean you should” and that’s where so many people are finding themselves house poor or struggling. I think the same goes with one’s residential mortgage. Could you still sustain the mortgage and bills if something were to happen? What is the plan B? Losing a house is a big deal or losing your investment in it because you have to sell it early or fast or lower just to get out of the deal. Thanks for sharing Marko. Like I mentioned if you are up for elaborating further in a guest post I’d certainly entertain that post on the blog. Cheers Mr.CBB

  14. Christine Weadick says:

    Awesome story!!! We paid our mortgage according to the hubby’s pay schedule which was every week. If the bank sets it up right it works great to pay things down, but I don’t think the woman that set things up this time did that and hubby didn’t question her. I wasn’t happy with the way she treated our account on a number of fronts but ,again hubby let it ride. Now he’s off work sick and we’re scrambling…. we will get through this….one day at a time…

    • MoneyMasterMomMandy @ Money Master Mom says:

      Christine, if you’re not happy with a situation at the bank you should really talk to them. We’ve had countless fees waived, rates reduced, and pay schedules altered because we took the initiative to ask. The worst they can say is no, and you’ll be in the same place. Hope your hubby makes a full recovery.

  15. Great article Mandy! We are on the way to killing the mortgage as well. Less than three years to go, and we will be totally debt free!!!! I can’t Wait!

  16. Very well done Mandy. You and Derek should be very proud.

  17. This a great article Mandy. I am working on killing my mortgage, but it has been tougher than I thought. I will continue to take baby steps. Thanks for the motivation.

    • MoneyMasterMom says:

      You got this Debt Round Up. Every dollar you pay is one less dollar you owe…. baby steps gets you debt free too 🙂 Good job moving in the right direction

  18. markovidovich says:

    Great post Mandy. I’d like to focus on the concept of “paying yourself first” as it is vitally important when setting up your budget. This catchphrase can refer to putting money regularly into your RSP, and emergency fund, or extra payments towards your mortgage. If you have your pay deposited directly into your chequing account, setup these transfers to occur on the same day – you may not even see the money in your chequing account and even have a chance to miss it. This is where another catchphrase comes into play: “Set it and Forget it.” By setting up these extra payments to occur on a regular basis you won’t forget about putting money away or be tempted to skip a payment (another great point that you made in your post).

  19. im so sad im a single mom i bought my first place at 22 somethings changed and had to leave bought my second place but not out right like my first i have a morgage and althoough it sucks im doing everything i can to pay it off im almost 34 and ive done it all on my own proud of myself but will be so happy when its all paid off and will have a little less stress :)and fyi im doing biweekly by the time im 40 will own my truck house and my son will be 18 and important ive done it on my own 🙂

  20. Ahh the easy steps to paying off a mortgage. I think I’ll just leave this link right here… 🙂

    http://www.MutilateTheMortgage.com

    Whilst the above steps are quite good, I go into far greater detail, especially the psychology around it all as well as an official “Mortgage Planning Spreadsheet” that you can use (although it is geared towards Australian taxes etc

  21. Mandy, this is a great guest post! My parents are trying to help pay down their mortgage early. Well, my mom is trying to at least. It’s very important to have both people on board with paying off (or paying down) the mortgage early.

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