How We Became Mortgage-Free In Five Years
Estimated reading time: 16 minutes
Becoming mortgage-free is not easy, so I won’t make it out to be something that it’s not.
Many things have led to us becoming mortgage-free in 5 years.
Today, I want to explain why we were adamant about becoming mortgage-free fast and how we achieved this goal.
Freedom From Shelter Debt Is Immeasurable
Becoming mortgage-free is not easy, so I won’t make it out to be something it’s not.
However, it IS possible, although many factors must be considered, beginning with the state of the economy.
Secrets To Mortgage Freedom
Many things have led to us becoming mortgage-free in 5 years, which I want to discuss since it’s a frequently emailed topic.
Since blogging about wanting to pay off our mortgage early, I’ve had readers wanting to know if there were any secrets to share.
It was such a hot topic that we were even featured in the Toronto Star to share how we paid our mortgage off so quickly.
I thought I’d wait until we became mortgage-free to fill you in on just how we did it, and that time is now.
No, we didn’t win the lottery or get money from family or friends.
We earned every last bit of it.
If you read our net worth update for April, we were excited to tell everyone that we were finally saying goodbye to the mortgage payment.
I promised I’d let you know what we did and what problems we met along the way, as it was no easy feat.
Discharge Fees When You Become Mortgage-Free
My friend Michael Anthony Lloyd, a mortgage expert who has blogged here, also discusses mortgage discharge fees.
He also has insight into other tips you should know when you want to become mortgage-free and make that last payment to your bank.
The discharge fee was something that set us back, as we didn’t do enough homework to learn what it was all about,
We also weren’t aware of how long it would take to make the last mortgage payment and the steps involved.
It takes time, and you can’t just make a lump sum payment from your bank account either; you need a bank draft.
What Is A Bank Draft?
Every bank is different in terms of charges for the draft.
RBC Royal Bank® issues bank drafts in domestic and foreign currencies.
Bank drafts can be used to make a payment to a third party in almost any currency, both in Canada and abroad.
Bank drafts offer a convenient and secure means of payment, and are more easily negotiated than postal money orders and are less vulnerable than cash to loss or theft.
Bank drafts are available for a fee of $8.50 each (any currency). And, depending on your banking package, you may be entitled to a number of commission-free bank drafts per year.
Michael shares more information below that you should consider before breaking out the champagne.
Mortgage Freedom Day
We all dream of the day we can finally get rid of that dreaded mortgage from around our necks.
For many, it is still a long way away; for others, it’s coming up due to hard work and the right decisions a long time ago.
So what happens when we finally get there?
The first thing to remember is that more than just your current mortgage holder is involved.
Though your lender is the one you need to talk to, there is always the “property charge” registered with your provincial body that many people forget about.
For example, here in BC, the Land titles office will have a registered charge placed on your property until the lender proceeds with discharging that charge.
Until completed, your property is not “free and clear,” even if you paid off the balance of your mortgage with your lender.
In Ontario and most of Canada, this is a discharge fee paid to the Government /Lender to remove their charge from your property.
Check with your lender for their discharge fees (usually listed on their fee menus), as it’s a necessary step many forget about until years later when selling or refinancing their property.
Our Road To Becoming Mortgage-Free
As many of you might know, I bought my first house at 21, which gave me my kick-start into the real estate market.
After selling that house, I purchased a more prominent home, only to sell that before moving to Canada for a nice profit.
A good chunk of my money came from selling my UK home to help put a down payment on our house in Canada.
Mrs. CBB also built a house when she was 30, although she only lived there briefly.
She went on to sell it for profit just a few years later so she could return to school, travel, and ultimately meet me and get married.
Buying a house right away in Canada was not a step we took advantage of; instead, we rented a room for a few years, saving every penny we could.
We were a frugal couple from the moment we met, and that helped us throughout our relationship as we didn’t have any money fights.
Financially, we knew that we wanted to be mortgage-free early so we did not have the burden of debt looming over our shoulders.
While some couples may have already started a family, we were both in school for the second time, hoping for new employment opportunities.
Paying Cash For Transportation
I purchased my used truck with cash, and Mrs. CBB had a Dodge mini-van she bought many years before meeting me.
At the time of purchase, she paid 0% interest, which would last for five years, and a $7,000 cash down payment.
Following the maintenance schedule, she took good care of her vehicle, which lasted for 15 years.
I was impressed to see the shape of the mini-van with the Canadian winters, but she’s always maintained it.
Vehicles will always depreciate and are money pits, but caring for one encourages a longer life span.
Saving Money To Pay Down Our Mortgage
Grocery shopping has been a battle for us, but we have learned so much about living a frugal life in Canada just by reading and experience.
Using Canadian coupons helped us save thousands of dollars and build a stockpile that we still live from today.
We started the grocery game challenge when I started this blog in 2012.
I can’t express how tracking our grocery shops has helped us save money.
It also taught us what foods we put into our bodies and how we ate too much.
It’s been many years since the lucrative coupon frenzy, and although money is still saved, the train has slowed for us.
It’s OK To Splurge
Using coupons didn’t mean sacrificing nutrition or enjoying life, as we eat a balanced, healthy diet.
Yes, we splurge like everyone, but we don’t go overboard and try to make and prepare as much as possible at home.
Many people will say they don’t have the time to use coupons, and that’s fine.
We weren’t going to turn our backs on free money.
It was like shopping and earning a side income at the same time.
Many super savers would agree couponing can be lucrative if you know how to budget and spend money wisely.
Buying products you “might” use just because you have a coupon isn’t a savings plan.
It’s a waste.
New To Me Clothes
We bought clothes at second-hand shops and enjoyed garage sales, free stuff, online sales, etc., to save us from buying new.
Even though we are debt-free today, nothing stops us from dancing around thrift stores looking for a bargain.
Shockingly, we’ve often purchased items from second-hand shops that still had price tags attached.
There is much to be saved if you take the time to look around.
It’s always easy to find someone who wants to donate items that are practically new or with tags, as long as you aren’t rushing shopping.
Being selective for our frugal lifestyle has helped us see what areas we can be creative in and what areas we need to call in the pros.
Moving Up The Career Ladder
Our careers have slowly but indeed brought us up the ladder with ways to go, but we would both work overtime and never turn down an opportunity to make extra money on the side.
As of 2024, I’m now working full-time in a career that I enjoy, and I still have many years of earning potential ahead of me.
Mrs. CBB became a stay-at-home mom after becoming pregnant in 2014 and was also diagnosed with a lifelong health problem.
Related: How To Ask Your Employer For A Raise (Free Printable Letter)
Earning Cash Money
Over the first five years of owning our home, we also took advantage of hosting international students for cash.
It was one of the best experiences we’ve ever had, and I plan to do it again once I finish renovating our upstairs bathroom.
Focus groups or studies in the Greater Toronto Area always pay good money for a bit of our time.
Who wouldn’t want to chat about insurance for an hour, get free food, and earn $100 cash?
That’s where our entertainment money came from, and sometimes it still does.
Budgeting Our Way To Mortgage Freedom
As we saved over the years, we opted to eat in rather than go out, leaving dining out for special occasions.
We had no problem turning down invites from friends when the money wasn’t in our budget.
We refined our budget over the years as it wasn’t something we used until I began blogging, and now we offer our budget accessible to our fans.
We’ve kept the budget simple, but most people want simple over complicated because budgeting isn’t something people line up for.
Budgeting can be dull unless you are a numbers nerd like me, but it is critical for financial success.
Family Planning
We don’t have any children, but we aim to start a family soon, especially now that we are mortgage-free.
Update 2024– We now have a 10-year-old son.
We didn’t put family planning on hold, as it was much more complicated than that.
Having to start our life over returning to school, illness, and struggling to conceive pushed family planning back.
We opted to wait until we were secure with our careers and finances, but that’s not what everyone should do; it’s what we chose to do.
Why We Wanted To Become Mortgage-Free
Everybody knows about the traditional mortgage that many people enter, including my parents.
The traditional mortgage was always based on a 25-year amortization period and had 12 monthly payments per year.
Over the years, various financial institutions have presented different mortgage options.
They cover anything from 30-year amortization periods to rapid weekly payments that cut your total time to approximately 22 years.
Although the Canadian Government eliminated the 30-year mortgage for a good reason, many choices remain.
Update: It’s Back!!
According to Canadian lending laws, you can only apply for a 30-year mortgage if you’re making a down payment of at least 20%.
There is one exception: On August 1, 2024, first-time home buyers became eligible to take out a 30-year mortgage with less than 20% down when buying a new build.
When we were still looking at houses, we knew we wanted to pay it off quickly so we could be mortgage-free and live a debt-free lifestyle.
Spending Less Than We Could Afford On A Mortgage
We purchased a home well below what the banks said we could afford, but we went with a mortgage that we could pay with one income, including the bills.
This was just in case something happened to one of our jobs or if we became ill.
Thankfully, we took that route as one of us got sick and had to live off one income to pay our mortgage and bills.
We played it safe, but we also got a steal of a deal in a sought-after area in a big city but tucked away from the hectic life.
Price Increase Is Relative
What’s my house worth?
It’s worth as much as someone is willing to pay for it, and unless you plan to downsize, it’s all relative.
Our house is now worth over $100,000 more than the purchase price five years ago.
As of 2019, our house could quickly be listed on Realtor.ca for almost $700,000 once we finish the basement.
Update: As of August 2024, we could sell our home with the basement unfinished for 1 million dollars.
Our home had everything we wanted at the time, although now we wouldn’t mind the extras like a more oversized yard, a pool, and a walk-out basement. (Update 2024– Nah, we’re good.)
Those are wants and NOT needs you must consider when purchasing a home.
Once our son finishes elementary school, we may purchase a new home on a more extensive property, but not necessarily a bigger house.
Mortgage Pay-Off Plan
After searching for the right mortgage, we entered a 5-year open mortgage with a 3.99% interest rate on a quick weekly payment scheme.
We put what we thought was a decent down payment on the home of $80,000 and paid $265,000 for the house, leaving us with a mortgage of $185,000.
That was five years ago, and we have happily finished paying off our mortgage.
We initially started with the required weekly payments that would see us mortgage-free in a projected 22 years, as our incomes were lower than they are today.
As our finances improved due to increases at work and our spending became more controlled, we started to drop extra monthly mortgage payments as and when we could.
Eventually, we took advantage of the 20% mortgage paydown option each year and paid off $32,651 as a lump.
We continued to pay extra payments and then paid off another lump sum at the beginning of year 4, $37,000.
Now that the lump sum payment option was at its maximum, we increased weekly payments to the max.
Making Our Last Mortgage Payment
Our last payment was to clear the final amount owing, including the discharge fee.
This bank draft came to a total of $68,787.19. I had to bring in my remaining funds from the UK as they were destined for that.
We lost some money in the exchange rate as the actual exchange rate and what you get are different figures.
That aside, I thought I would furnish you with the numbers showing why we did what we did through the savings.
25 Year Mortgage
A traditional 25-year mortgage with monthly payments at the same interest rate throughout the entire term, not just the five years, would have cost us $291,657.29, which comprises the $185,000 principal and then $106,657.29 in interest.
Rapid Weekly Mortgage Payment
The rapid weekly mortgage payment option saved us three years of mortgage payments and would have given us the following figures had we stuck to the 22-year plan:
- $275,844.94 is the $185,000 principal and then $90,844.94 in interest.
However, our five years pay it like crazy option worked out like this:
We paid $210,940.17, the same $185,000 principal, but only $25,940.17 in interest.
This saved us $64,904.77 in interest over our full 22-year term, assuming that the interest rate stayed at 3.99% and a colossal $80,717.12 in interest over a more traditional 25-year mortgage.
Invest or Pay Down The Mortgage
People ask me why we didn’t invest more and leave the mortgage chugging away on automated payments for years.
To make $64,904.77 in 5 years, we would have had to invest a monthly total of $972.12 and earn a 4.15% return to come up with the same amount, which would have been easily attainable.
The thing is, we invest roughly that much every month already.
To make $80,717.12 in 5 years, we would have had to invest a monthly total of $972.12 and make a 12.25% return to come up with the same amount.
I haven’t seen a guaranteed 12.25% return, so paying our mortgage worked better for us.
Taking the payments we can now re-direct from paying off the mortgage into investments will lead us to pay $252,751.20 over the next 20 years.
I shall demonstrate the effect by taking the above basic monthly payment of $972.12 and adding to it every month with an interest-earning rate of 3.99% (same as what the mortgage was).
After 20 years, that payment redirection is now worth $357,332.73.
Do the math for yourselves!
I won’t tell you to pay it off now; not everybody can, and not everyone’s financial numbers can support it.
The point is I like to see numbers and determine what the difference will be.
I like to see the advantages and potential pitfalls we need to be aware of.
Not everyone will agree with our path to becoming mortgage-free, and that’s fine. It’s our life and our finances.
I hope you make choices with your finances because you want to and not because someone told you that you should do it their way.
Do What’s Right For You
My Canadian friend Mark at My Own Advisor, who is also paying down his mortgage (Update 2024- Paid in full), said something that I feel is important to hear when paying off the mortgage or investing the money.
I believe there’s no perfect answer to this debate, it depends on the situation, the timing and often some reflection of short and long-term goals. Mark- My Own Advisor
Be in control, do your homework, and don’t gamble with investments, especially if you don’t know what you are doing.
Risk is inevitable, but when you risk your money without knowledge, that could bite you.
I’m sure any savvy investor will tell you that.
We Own Our House Free And Clear
I’m not an investor, but I like to make our money work for us the best way I can/
Now, we can worry less about paying off a mortgage and more about retirement.
Maybe I’ll become an elite investor one day, but I’m still learning that side of the financial coin.
By eliminating a drain on our resources, such as the mortgage, we can now benefit from investing the money instead of the bank benefiting from us.
It’s also been nice to wake up knowing we are debt-free and can make choices that may have been out of reach for us in the past.
Discussion: Are you planning to pay off your mortgage early or use all of your extra money to invest?
Thanks for reading,
Mr. CBB
Related articles
- Should you buy or sell first?
- Best Home Renovations, Money Wasted or Money Invested?
- How To Maximize Your Mortgage
- Why I’m not buying your home for sale?
- Should I buy an investment property?
- Why I’m not buying your house for sale
- How to avoid home-buying mistakes the first time
- Paying rent, Am I wasting money?
- When should you renovate your new home?
Great stuff here Mr. CBB! I’m sure it’s an absolute relief to have paid it off so quickly! Thank you for taking the time to share this with us all!
Hey,
No worries Sean, I’m glad you enjoyed the read.
Thats amazing! First of all congratulations on paying off your mortage. This is really an impressive post and one of the best article that i have read. Keep sharing such articles.
Ha ha, I like the first line there is no secret. I bought my first property at the age of 26 and I paid off quite easily then but my wife is looking to buy a vacation property in Ontario and she doesn’t really understand about the changing rates.
What a fantastic blog, even though it’s not for everyone you have proven that when you put your mind to something it can be accomplished. My hat goes out to you.
Thanks Sabrina.
Can you comment more on the focus groups that is something I wouldn’t mind doing.
Hi Susan,
Sure what would you like to know about them? We’ve participated in many.
Congrats on paying it off in 5 years! After buying my latest primary residence this Spring, I’ve decided to go on overdrive and pay off my rental purchased in 2003. It’s about time, and it’s a fun goal to have.
Thanks… it certainly has opened some doors for us. We’d like to get a rental too. With so many students in our area we’d be silly not to. Although rentals come with the pros and cons as you likely know. Cheers mate.
Wow! Congrats Mr CBB! Paying off my mortgage early was never something I had considered doing before I started following your page. I don’t have a specific plan for paying off my mortgage early but my intention is to finish paying off my debt (which I believe is just over a year away) and then increasing my monthly payments on my mortgage. Of course whether or not I have another baby will determine how I follow through with this. If I don’t have another I will be able to take the $900/month I’m spending on daycare right now and put it towards paying off my debt earlier and then in turn be able to start paying down my mortgage faster.
You know I’m proud of how far you’ve come and you did it all on your own. You can only educate yourself as much as you can and make a plan of action based on your life. You did just that. Keep up the hard work and before you know it, you will be where you want to be financially. 🙂
Congratulations Mr. CBB, being mortgage free is quite the accomplishment these days. I plan on being mortgage free in early 2015 and have followed a similar path to what you outline above – making weekly payments, accelerating those payments and maxing out our lump sum payment option whenever we could. I can’t wait to be done those with those payments so I can build up my investment portfolio.
Yes, that’s the plan of action we are taking now. It sure does feel good to not see anymore mortgage payments leaving the bank. I truly believe that if we want something bad enough we will work hard to get there. We may have bumps along the way but we have to pick right back up and keep going. Good luck and I look forward to reading that mortgage free blog post!! Mr.CBB
Congratulations on hitting the big milestone! I am so proud of you. I am also so happy to hear about plans for kids!! yay! I look forward to your posts from this new perspective.
I am a long time reader (lurker), but first time poster. After reading your post I wanted to share our story as we also took a similar path. After the first year of being a homeowner, we did the math and decided it was best to take the plunge on an aggressive payoff plan. We couldn’t stomach paying so much interest to the bank. It is pretty scary when you really realize how much extra you are paying over a 25 year term (plus our interest rate was over 5%). To us, it was worth skipping expensive vacations, eating out, and expensive clothes. We didn’t feel like we were missing out though. You can find joy and fun in everyday without having to spend lots of money. To keep us feeling excited about the pre-payments, we treated ourselves to a cheap bottle of bubbly each time we took another 10K off the mortgage. A “short” 5 years, six months after buying the house, we were mortgage free in downtown Toronto. It was so worth it. It has now been seven years since we burned the mortgage. We have 2 kids (4 and 7) and feel a deep sense of freedom. And we are now taking some vacations. 🙂
Thank you so much Sue for sharing your story. If you are interested in sharing it further and in detail I’d be thrilled to share your journey on the blog. You can email me if you like. I can’t wait to see where our life takes us from here. It does feel good not to worry any more. 🙂 Mr.CBB. Thanks for commenting and lurking… don’t be shy.. I love chatting to my fans.
Huge accomplishment guys! Enjoy your new life 🙂
Thanks Catherine.. the best is yet to come…. you’ll see! 🙂
Wow, great work!
My wife and I still owe $200k on our house. It should be paid off in another 7.5 years. That’s the plan!
For us, it’s important to build a portfolio while we are working AND to pay off the mortgage using lump sump payments.
Hopefully the portfolio value can reach $500k in a couple of years, outside our pensions.
Great work on the mortgage – very well played 🙂
Mark
That’s awesome Mark.. you are both doing so well. We did both along the way as well although we’ll be putting more into investments now (well as soon as some of the major renos I want to get done are finished) and see where it takes us. Cheers mate.
I honestly may just rent forever. I have rental properties, but their mortgages are at so low an interest rate that it’s tough to justify paying them off early amid other debts and while building up the retirement savings
Yes but how long is that going to last?
We just paid our mortgage off this past February. What a relief! No more interest payments and no more jumping through the hoops of our lender. The best part is the freedom and the choices that come when there is no more debt.
That’s awesome mate, congratulations!!! It’s a great feeling… hard but worth it. Nothing comes easy in life, that is a fact.
Wow! Awesome, guys! You’re right- there really is no magic plan. You just have to DO IT! Well done.
Thanks Holly. Lots of saving, planning and determination went into paying the mortgage off early. Definitely no magic wand.
Congratulations on paying off your mortgage! This is truly an inspirational and motivating post! I’ve been following your blog for quite some time now and absolutely LOVE the new layout – much more reader friendly!
Also, could you share where you find focus groups?
That’s really great! My daughter and SIL have just moved to a new house. I think this is their forever home. I worked out a mortgage amortization for them so that if they pay accelerated biweekly plus put an extra $50 each biweekly payment and an extra $3K annually, they will have it paid off in 15 years. I think that is a good target to strive for. Of course, if they can do it sooner like you did, all the better. They just had their first kid and I think (hope) there may be one more, so knowing how much that costs, sticking with the 15 year plan will be great. Hope they can do it!
Just having a plan is important. If they find they have an extra $50 a month and they want to put it on the mortgage it’s only going to help speed up the process. Good for them sounds like they have lots of exciting times ahead. 🙂
Wow, that’s very ambitious, but also incredibly smart of you two! I cannot believe how much you saved in interest alone, or how it must feel to be mortgage free. I appreciate how you point out that this won’t necessarily work for everyone. Too many people don’t crunch the numbers to see what’s right for them and instead just blindly follow someone else’s advice and end up in bad situations.
Thanks Debt and the Girl!!! We always tell fans to do their own homework and talk to the professionals. Everyone has such different circumstances when it come to life that it’s important to customize a plan that’s right for the budget. I think posts like these are motivational than anything because it does prove that making small change and sticking to them can help to achieve goals.
Congrats on paying off the house. I will do the same in the future, im still renting. It takes cutting and effectively managing many areas of life to achieve a milestone like that.
I agree and that’s why I started the post off saying it’s not easy but it is possible. I don’t want people to get the impression we glided through paying it off. We had our bumps along the way and that is what life is all about. Nothing goes as planned but being prepared for emergencies is half the battle. Taking responsibility for our finances and setting goals and not giving up. Thanks El!
Great stuff here Mr. CBB! Thank you for taking the time to share this with us all!
Thank you for sharing your expertise once again Mike!
Nice work Mr. CBB! We are just getting a new mortgage soon, but I plan on attacking it full force to get it done much earlier than the regular 30 years. Thanks for the inspiration!
Thanks Grayson. I hadn’t realised that a 30 year mortgage in the US was a regular mortgage. I know in Japan that they offer 50 year and even 100 year mortgages, or at least they used to. The mortgage was passed on to the children.
Congratulations on getting that monkey off your back. You did great and hard work. The amount of interest savings is impressive. Better to put that money in your pocket rather than the bank’s. I had not heard of the Canadian government doing away with the 30 year mortgage. Why do you think that is a good thing? Again, congratulations!
Thanks Brad… I think they did away with the 30 year mortgage because people were overextending themselves too much. Spending more because interest rates are low with the mortgage spread out over 30 years.