We Chose The Pay Off House Option First As The Rewards Of Debt Freedom Outweighed Investment Risks
The thousands of dollars in savings alone is a good reason to choose a pay off house option first.
However, there are other perks that come with this financial freedom which homeowners should at least consider.
Sometimes I think we played a game of how fast can we pay off our house from the time our mortgage timeclock hit go.
There is never a reason to stay in debt as you don’t gain anything from it other than more interest debt on top of debt.
Pay off the biggest debt you will ever owe vs. gambling the money on investments.
Which do you choose?
This is why we decided to get out of the mortgage rat race as fast as possible.
How To Pay Off House Early
Even though we put a 25% downpayment on the house it was looking at the amortization schedule that set bells off.
Who really wants to pay for a mortgage for 15, 20 or even 30 years?
That’s a hell of a long time for any homeowner but a reality for many although there are ways to shave time if you really want to.
Read your mortgage agreement to see if there are ways they permit you to pay your mortgage faster.
Ideally, understanding all of this BEFORE you sign for a mortgage is the right way to go about homeownership.
- Increasing the amount you pay
- Extra Mortgage Payments
- Lump-sum Mortgage Payments
- Weekly or Bi-weekly Mortgage Payments
Frugal Living All The Way
I’m still in awe that we paid it off our $265,000 mortgage in only 5 years even with the ups and downs we faced.
That took some financial dedication as well as relationship goals in order to win the debt freedom race on both of our parts.
I never really set out to own a mortgage-free house by the time I was 40 but it happened.
The harder part begins but is not impossible when you become parents as expenses seem to creep up that you never had before.
It all adds up and is definitely an extra budget expense that should be expected when you become parents.
Even so, we kept on being frugal buying second-hand for our son and picking up free items that were being donated.
Oh, and let’s not forget the $208.33 we pay each month for 1 child to max out his Registered Education Savings Plan.
Pay Off House Or Invest
Life after the mortgage is paid off drastically changes for the average family who relies on a financial advisor to invest and monitor retirement savings.
We are part of that family of investors since we don’t risk investing our Registered Retirement Savings Plan, Tax-Free Savings Account and other non-registered investment accounts on our own.
There’s that fine line of being confident with investing and understanding the benefits of paying off debt.
We lean more towards frugal living and understanding that debt freedom goes a long way for families who simply want it all to go away.
Ever since I moved to Canada and was allowed to start contributing to my RRSP and TFSA I jumped but still had to educate myself.
I never did max out my retirement savings until we had a paid off house only because my wife lost her job months into buying the house.
That didn’t scare us too much as we made sure to purchase our home on one income.
However, it was our investments that suffered as we had to scale back until I got a raise and then a second career opportunity.
Even today I am limited in terms of retirement investing as I have a defined benefits plan with my employer.
Invest instead of pay off house first
Others may have a different view and would rather invest their money instead of getting mortgage freedom party invites ready for their friends and family.
We didn’t have a bonfire with our beloved mortgage documents but we did breathe a sigh of relief which is something we won’t do with investing.
Why? Well, anything could happen as we all know investing comes with risk even if historic data dictate otherwise.
Remember the 2008/2009 market crash?
I think that was enough for Mrs CBB to put her investing mindset on reserve all the while still investing as she lost quite a bit in her RRSP.
It has since recouped but she lost years of investment opportunity trying to climb back up to the top.
It can be painful for someone without a high-risk tolerance for a potentially volatile market even if it will rebound.
Not everyone handles it well especially if you are not a confident investor.
6 Key Benefits To Pay Off House Early
Below are the key benefits that we felt encouraged us to keep saving money, earning extra money (all those $100 cash focus groups mattered) and invest in our future retirement and healthcare.
1. Debt Freedom
We did NOT want to retire with debt nor did we want to suffer at the hands of the Canadian government if we needed long-term care or healthcare above what is offered.
We now strive for the best possible scenario for retirement only because we have been forced at a young age to see what happens when you can no longer live alone.
Debt freedom also allows us to do more with our son in terms of sports, holidays and not worrying about if we miss a day of work.
2. Financial Freedom
In our eyes, if we wanted financial freedom we needed to retire all debt and save cash for the things we needed, so that’s what we did.
The last thing you want is to carry debt especially mortgage debt into your retirement years when income levels are at their lowest.
Even if you do pay your house off in full there are expenses a homeowner must continue to pay for such as property taxes, utilities, groceries and so forth.
Having the financial flexibility without a large mortgage payment looming over your shoulders can break down barriers for anyone at any age.
3. Stress Relief
Anyone who tells you that they have debt and no stress is full of it.
Owing money with the potential that you could lose your job, become injured or need round the clock care is nothing to put on the back-burner.
One by one as you rid of the debt that you have you’ll feel the weight of owing someone money fall away from you.
There’s nothing better than waking up in the morning knowing that you have secured your financial life and own it.
Perhaps you hate your job or you’re not getting on with your supervisors or it’s a toxic work environment.
Having little to no debt because you took the pay off mortgage route offers you a wide range of movement opportunities.
I’m not saying you can’t quit or look for another job but most people stick around especially if they are too scared to find a comparable career and income level.
Also, the more money you get the opportunity to save may open other doors perhaps to freelancing, working from home or starting your own business.
On the other hand, you may want to reduce your working hours from full-time to part-time and with no debt, you may have this opportunity.
The fact of the matter is that having debt digs a hole in front of you and often time prevents people from jumping.
5. Budget Flexibility
I know we have become relaxed with our monthly budget since we paid off our mortgage especially in our miscellaneous category.
But, we’re ok with that even though I’ve had a couple of people question the extra expenses.
Having debt freedom means we can add adult allowances to our budget and save for family holidays every month.
For example, if you feel you have all of your budget categories covered to your maximum capacity and are debt-free then perhaps you can increase your food budget.
Over the years we had a tight grocery budget but it has been just the past two years we’ve increased it so we can afford to spend more on what we want to enjoy.
There’s no way we would have done that had we still needed to pay off debt.
6. Increased Savings Power
When your mortgage is paid in full and as you age you may want to downsize which will free up cash for your savings.
Both Mrs CBB and I talked about getting a bigger house once after we paid our mortgage but changed our minds.
Although we are nowhere near retirement age buying a bigger home makes no sense to us as we only have one child.
As soon as he leaves for college or university (if he leaves, haha) a big house will be too much for us and we don’t want that responsibility.
Since we are younger and mortgage-free it allows us increased savings power to use towards boosting retirement savings or doing things we want to do, such as travel.
We even managed to pay $48,000 cash for a new truck in 2017 without even going to the bank for a loan.
What You Do Today Affects Your Tomorrow
Although today we are aggressive investors we weren’t always that way however since we chose the pay off house first option we’ve taken a different route.
I’m not sure if it is because we have that sense of ownership control over our home but we have actively been investing more money ever since.
If getting retirement ready early means you take the pay off house option, invest first or do both at the same time, then so be it.
Again, do what’s right for you and not what others feel is right for you.
Discussion: What perks do you feel you’d get if you took the pay off house option first? Leave me your comment below and I’ll be sure to respond.
CBB Posts You May Have Missed
Below is a recap of the blog posts I’ve published over the past two weeks so you can catch up on your reading.
- How To Return To School As A Parent Earning A Minimum Wage Income
- 8 Good Money Habits That Will Change Your Life + Net Worth Update Sept 2019
- Slow Cooker Keto Vegetable Beef Soup
- 8 Couple Money Management Success Tips
- How To Stop Living For Your Next Paycheque
Mr CBB’s Motivational Corner
This quote that I created yesterday came about because the blog had an issue that I found in the morning.
After I accidentally wiped out the blog I put this motivational quote to good use.
I panicked a bit but I had faith that I could get the blog restored because I pay money to back-up the blog, just not in real-time which is why I’m re-writing this blog post.
My apologies to everyone who wasn’t able to read my post yesterday before I pulled that magic trick.
I learned that by staying calm I was able to email the people I needed to find the help that was required to get CBB back up and running.
Fan Deal Of The Week
This is Jen’s last garage sale deal of the 2019 season so I encourage all of you to send me a photo of your shopping deals along with a cost breakdown.
Every submission will be entered into a yearly draw to win a PC Grocery Store Gift Card!!
Here are all of my garage sale deals of the week:
- 3 Snooztime pillows $3
- Bag clips $.50
- BNIP candy cane lights
- Large roll of gift tissue paper
- Penny roll holders
- Sanding block
- Magnetic fidget toy
- Carabiner clip Christmas plates and napkins $11 altogether.
- Total spent $14.50
Thanks, Jen 🙂
Frugal Recipe Find
Perhaps I’ve been living under a rock but I had never thought of or tried Chicken Gnocchi Soup before.
It’s a copy-cat version from the popular Olive Garden restaurant in the U.S.A which we don’t have in Canada.
Anyways, we make homemade keto gnocchi and I am going to make this recipe keto-style and I look forward to trying it.
Have you ever had gnocchi soup before?
Home and Blog Update
As I mentioned above under my motivational quote I was the cause of the major disaster on the blog yesterday which I apologize for.
I have no idea what I am doing which is why I pay for backup and have Sara as my girl in the background fixing stuff.
That’s just another good point to bring up when you try to invest money and have no idea what you are doing.
Just put the extra cash on the mortgage and leave the investing to the pros.
Sometimes when I see a problem I attempt to fix it myself to save money but as you can see, it wasn’t worth it.
Not only did I lose my entire blog post I did not have it backed up so I had to spend 5 hours re-writing it today.
I wasn’t going to let it slip away especially since so many of you messaged me that you tried to read the blog post but the link was broken.
Other than me getting banned from my Cpanel haha we are still working on organizing a few CBB pages on the blog and adding a freebie for new subscribers.
We’re gearing up for Halloween in the CBB home as we finished decorating yesterday apart from adding the black and orange streamers and caution tape.
It rained all last night so it was a good thing that we waited and it won’t matter until Halloween day anyways.
This year we have one pumpkin that our son bought at the pumpkin patch.
Typically we carve our pumpkin on Halloween night and Mrs CBB uses the seeds for roasting. I’m not a fan but she loves them.
I have 4 ferns that I still need to bin but with all the nice weather we have had, they are still thriving and look great.
We did manage to get rid of the parsley but it grew back just as fast so we chopped it and made a parsley puree with garlic, ginger, salt and olive oil in the food processor.
The back garden decor has been brought in for the winter and I’ve put a tarp over the A/C machine to protect it.
I’m not looking forward to the cold weather but until we see the white stuff I want to get all of this work done.
That’s all, for now, CBB friends.
Saturday Search Term Giggles
Every week I get tens of thousands of people who visit Canadian Budget Binder because they searched online and found my blog.
Yes, I can see your search terms and sometimes they are funny.
- How to retire on a shoestring: Haha, that’s not where I planned to retire.
- Staples for a keto diet: I read that wrong but it’s still funny. No staples are not part of a keto diet. haha!
- Proper budget to save for a mortgage: There isn’t a proper budget as long as you use a budget.
- Where in Streetsville can I buy a bag of milk and pay for it in a week?: Hmm, that’s a tough one. I don’t think you can get milk donations as part of the food bank. I know some small shop owners may be able to accommodate someone in need like this.
- Cinomon Buns– Haha, why am I hearing Pokemon.
If you see the acronym (SIC) next to a word that means I’ve copied the text exactly as it was typed in Google and it has spelling errors
That’s all for this week my friends, see you again in 2 weeks for the next Saturday Weekend Review!