Debt | Real Estate and Mortgage

How I Owned A Mortgage Free House By Age 40

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Mortgage free before 40

Owning A Mortgage-Free House Is Possible For Everyone

Hi everyone, I’m a 38 years old CBB reader and own a mortgage-free house which was only possible because of my lifestyle changes.

I don’t choose to share that I own a mortgage-free house to many people but wanted to share my mortgage success story with all of you.

Many people who have a mortgage tend to think that they will never pay it off early or that it will cost them double the amount of the original price.

Well, the reality is that is not far off from the truth which is why being mortgage-free fast should be a goal for all homeowners.

The common assumption when someone finds out you own a mortgage-free house is either you’re made of money, or you’ve won the lottery.

Well, that’s not actually the case, at least for my situation which I hope will motivate others and perhaps inspire you.

Create A Mortgage Free House Plan Before You Buy

My decision to own a mortgage-free house as early as I could come long before I even started looking to buy a home.

Through my job, I work with a lot of people with financial issues and usually it is no fault of their own; they either lost their job and couldn’t find one quickly, or they had a change in health that left them unable to work, or really restricted in what kinds of jobs they could apply for.

Being the control freak that I am, I don’t like the idea of not knowing the future especially when it comes to my finances.

So, what control I can have I make sure to do so and put plenty of effort into the process.

Before starting the home buying process I consulted a few people who had owned a home for a long time, and other first-time home buyers like myself.

I wanted to know if there were options out there to help me save money or things people wished they knew before buying a home.

The number one thing I heard was to pay off your house as fast as you can and be prepared for any type of home renovation from small to large.

Armed with this information I decided to set some rules when it came to house hunting and goal-setting to own a mortgage-free house.

My Mortgage Money Rules

  • Debt-free before I turned 40 had to be achievable
  • Needed the ability to make the monthly payments even if I lost my job and was only able to find a job at minimum wage
  • Monthly payments had to allow me to put money aside both for short term savings (travel, reno’s, etc) and for retirement
  • I wanted to have more than twice the required down payment
  • Took out a mortgage that fit my bdget and not the max amount the bank told me I was eligible for

Related: What happens if I have a late mortgage payment?

It probably sounds like I make a ton of money (or maybe have really unrealistic expectations of how far money can go.

Neither is the case.

Related: How to live like you are paying off a mortgage before you buy a house

Saving For My Downpayment

When I first started saving for a house I was making $15 an hour 37.5 hours a week with no chance of overtime.

I was also paying off a family loan for a car.

It wasn’t easy.

Vacations, eating out, buying clothing (new or used) was out. No concerts, or movies and no cable.

I didn’t even have Netflix and  I budgeted every cent I made.

In terms of money management, I was strict for 2 years before I started to seriously think about what I needed in a house.

Needs vs Wants

  • I didn’t plan to have kids so I wanted a house with no more than 2 extra bedrooms – I could rent them out to students if I got desperate for income

Related: How we earned extra income renting rooms out to international students

  • The house needed to be outside of town for privacy – living in town with neighbours within inches of my house was something I hated – plus living out of town gave me a bit more room in my budget
  • It could be somewhat of a fixer-upper, but a realistic one. Thinking I could turn a dump into a palace is not a skill set I could have or a headache I could take on. I had to figure out what was realistic for me in terms of what I could do myself, or cheaply affordable
  • The property had to be within 20 minutes drive from my work (I live in Atlantic Canada so we don’t really have traffic jams to worry about)!

Searching For A Home With My Realtor

The first house I went to see I got a big reality check from my realtor.

I realized it wasn’t like on tv, where you could knock huge amounts of money off the cost of a home, houses were pretty realistically priced for their area and the ones that were priced well sold within days.

Working with my realtor allowed me to set a realistic amount of $115-125K which would be the max I would pay, even though the bank was willing to lend me more.

It was an up and down journey looking at homes and figuring all this out especially since my goal was to own a mortgage-free house.

One plus was that as I was starting the home buying journey I got a raise to $18.50 an hour.

It took about 6 months of very slowly looking at houses with my realtor before finding the right one.

I would get super excited and see a bunch, then super disappointed and give up for a few months.

I think I saw about 15 houses and put in bids on 2 that I didn’t get.

Maybe that’s a realistic number of houses but it felt so disappointing.

I kept waiting to walk into a house and fall in love where I knew it was the one for me.

I finally gave up on that concept, and low and behold the next house I saw, I fell in love with.

My First Home

My house is 1100 square feet, 3 bedrooms, 1.5 baths and a 5-minute drive from the ocean.

It sits on 2 acres and has neighbours within view, but far enough away that I can have privacy.

It’s not perfect, the home inspector stated that there was an issue with one spot on the roof, there is a dip in one spot of the foundation that needed to be jacked up, the hot water tank was on its last leg, the shed would need to be replaced soon and the kitchen is SO SMALL!, but all in all it was exactly what I dreamed of. Better yet, it was really affordable.

The house was listed at $75,000, and I offered $77,500 because I knew there was one offer already made that day.

My realtor told me not to overbid, but I felt it was a small price to pay for the house I really wanted.

Plus, when I got the home inspection done it gave me wiggle room to offer lower due to the things I would have to fix.

I ended up getting the house for $76,000  – well under the budget, that I set for myself!

Choosing The Right Mortgage

I don’t have all the specific information about interest rates and whatnot in front of me, but what I remember was the bank trying to get me not to put my extra money down (keep it in case you have to renovate), and that they wanted me to do smaller payments once a month over 25 years (your payments will be so small, you’ll be able to buy a boat if you want!).

Related: Types of Mortgages Available in Canada

They did run a lot of scenarios for me, based on how much I put down, different styles of interest rates, and biweekly vs monthly, etc, but I am not good at math and this overwhelmed me.

Because of my inability to effectively do the math, I can’t tell you how much that would have cost me in interest but it would have been a terrible idea.

I decided to do biweekly payments at a higher rate than what they wanted me to, take a mortgage plan that allowed me to make extra payments each year ($8250), and set it up as a 15-year mortgage (knowing it would be paid off way before then).

My Mortgage Payments

What did my mortgage payments look like:

The total price of house                                                            $ 76.000

My extra payment                                                                       $ 19,600

Early inheritance at the insistence of grandparents  $ 1,500

Bank loan total                                                                             $54,900

(I also got a gift for my mom – she paid the gas and food costs for friends and family helping me to move).

Putting down that extra money each year was painful but worth it in the end.

Looking at $8250 I could be doing something fun with, and knowing I was restricting myself more than I had to in order to come up with this lump sum sucked!

But, I always tried to remember my reasoning behind doing this, owning a mortgage-free house and that soon I wouldn’t have to continue to be so frugal.

Increasing Mortgage Payments

After 3 years I went into the bank to get a new interest rate and to up my mortgage payments.

Again they tried to talk me out of it, but I had gotten a raise to $22.50 an hour. 

At that point, I had decided to put the extra money from my raise towards owning a mortgage-free house.

I also did get less strict around how I spent my money, I decided that I would take one vacation a year so that I had something to look forward to.

This way when I handed over that $8250 it wouldn’t hurt so much!

Owning A Mortgage Free House

Last month I realized I only had $4246 left towards having a mortgage-free house.

Like a bullet instead of waiting until October when my normal lump sum payment month I wanted it over and done with.

I decided why should I wait and paid it off and now I am the proud owner of a mortgage-free house!

This is a huge accomplishment for me. I feel like a huge weight has been lifted from my shoulders.

Technically, the bank still owns my house because I have to pay a $350 discharge fee but they gave me options I’m still thinking about.

Options After A Mortgage Free House

  • Not pay the discharge fee and I will have $60K in equity available if I need it
  • Pay the discharge fee and then have to apply for loans in the future if I need them

I’m leaning more towards paying it and applying for a loan in the future if needed, but I am going to give myself some time to think about this.

Putting down extra money on my mortgage loan to own a mortgage-free house was the best thing I think I could have done.

I’m 38 years old and am the owner of a mortgage-free house. I can say that a million times over, I’m that happy.

By the time I’m 40 I will also have paid off a new car that I bought a few years ago (a huge mistake I will never buy new again!!!).

I’m terrible at math, but if I did the calculations right, I saved myself about $21,000 in interest (which was like ‘buy a house get a car-free’ in my mind).

Saving Money Is A Must

  • Make rules and budgets for yourself and stick with them, and if you can’t stick with them be accountable! Write down the real amounts you spent and track those things -see what things work for you, and what you need to change
  • I became an avid couponer. I’d get coupons in stores, I’d sign up for coupon sites online, I’d join coupon trains and local coupon swaps. I’ve also signed up for couponing apps that either provide coupons or give you money back when you take a pic of your receipt. One year I recorded it and I saved $1200 from coupons!
  • Cut out fast food as much as you can, and make meal plans if they work for you. Meal plans never work for me, but I’m aware of what a normal everyday cost is for my favorite groceries, so I know when something is on sale and I stock up
  • Split larger grocery orders with other people. My friends and I would buy bulk grocery orders and split them 3 ways.
  • Learn about reward card apps and use them to your advantage (for example this week Sobeys had to buy Canadian Tire Gift Cards for 10% off, and Canadian Tire had a sale on that if you spent $150 dollars you’d get a gift card for $30 for the following week. I bought $400 of gift cards for $360, then I took those cards to Canadian Tire and I bought 4 winter tires {broken down in 2 purchases} so in the end, I saved $100 on my tires)
  • Ask for help! You never know what someone else’s knowledge can do for you. Someone explained to me recently how to get a ton of Air Miles without really changing my spending. I got $1200 in AM last year and I don’t spend money on things I don’t need in order to do it (and don’t let that become a pitfall for you – I see how much people spend for Air Miles Blue Friday promotions and cringe knowing they are buying things they don’t want, in order to see their Air Miles rack up- keep the money in your pocket)!
  • Find out about efficiency groups that can help upgrade your house. I got a ton of free stuff through our program and received $200 back when I paid for my crawlspace to be insulated.
  • Cut yourself some slack. It’s hard making huge changes in your life if you do mess up own that and get back on track. Ask for help if you need it!

5 Things I Wish I Had Done Differently With My Mortgage

  1. Not going to a bank for a mortgage. I wish I had gone to someone independent to find out all the options. I felt the bank was pushing their personal agenda and their ability to make a sale.
  2. Again, not sitting down with someone financial who could talk to me at my level, and wasn’t just in it for a commission. Maybe I would have been better off being a bit slower in my payments and putting more aside in a retirement fund. I’m happy with my decision, but maybe it wasn’t the best one I could have made?!?!
  3. Trusting my gut. Not mentioned in the above was the horror show I had with my first realtor who lied to me about a lot of things about a house I wanted to buy. I later found out she was under investigation for lying to clients. Everything about my interactions with her felt wrong, but I wanted a house so bad I ignored it. Thankfully I figured it out, and ended up with an amazing realtor after that!
  4. Doing research on companies that do home Renos. I thought some of the home Renos would be easy – it’s a nightmare here trying to find someone who wants to work on existing houses, they all want new builds. When I do find people who do Renos, half the time they don’t show up when they said they would.
  5. Not using a budget sheet. I took generalized notes for the first few years and didn’t start using an actual excel sheet meant for budgeting until a couple of years ago. It’s hard to be accountable when you don’t know if you’re missing anything.

My goal for the future is to continue to put aside the same amount of money as my mortgage was so that I have more short-term and long-term savings.

I’m thinking I’ll put them into short-term savings mostly, but after 6 months I’ll re-evaluate what I have, and put some of that money into the long-term.

Maybe getting a loan in the future would be easier and I should put it all (or most) into long-term savings – I’m open to readers’ suggestions!

What I’d like everyone to know is owning a mortgage-free house is possible.

Your situation may not look like mine, or someone else who has paid off their mortgage, but look into some of the tips and tricks they have, or tips and tricks on sites like Canadian Budget Binder, and find what works for you to help make your financial journey smoother!

Related: How we became mortgage-free in 5 years

Discussion: What lifestyle changes have you made to help speed up the process of owning a mortgage-free house?

Post By a CBB fan who wishes to remain anonymous.

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  1. The lifestyle change I would make is to move to Atlantic Canada where home ownership may still be in reach for a young person. I shared this article with my 23 year old son and he just laughed at the idea of buying a house for under $80K. When we bought our first house 25 years ago, we paid 2 x our combined gross income. To buy our house today we would be paying 6-8 x family gross income. And we have a 40 minute commute to work – each way. Incomes have not increased at nearly the same rate as house prices. In that same time period we have not even doubled our combined gross income. So I tell my kids that they need to get away from the GTA to start their lives. We are staying because 1) one of us doesn’t have much career flexibility and 2) we want to stay near to our parents as they become less able to handle things on their own. But if you’re young, there’s still time to escape.

  2. I excitedly paid off my mortgage when I received an insurance settlement. THEN, I saw a (fee-only, so independent, not selling or earning from my choices) certified financial planner, who had a whole different viewpoint, mostly related to various tax breaks for mortgage-payers. I could have invested some of the money and come out ahead, but my advisor understands the secure feeling that not having any loans gives me. My point is that I should have consulted her before making decisions! Here’s her website that explains this type of planner, and I think there’s a link to finding local fee-only fiduciary financial advisors. Nest Builder Financial

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