Any tips from those who have paid off their house early or are on track to do so?

[100AcreWood]

Dh and I have been following Dave Ramsey for 8 years. We are determined to pay off the mortgage early. We have 18 years left and are trying to be done in 10. Any tips from those who have been there/done that?

The thought of having no mortgage payments when our kids go to college is an awesome feeling.

 

[OKW Lover]

Just do something simple like paying an extra $100/month. Figure out what you can afford and set it up to happen automatically.

 

[tvguy]

Paid ours off in 17 years (okay, actually 16 years and 10 months)

We did 2 things.

First, we always added $100 a month to the payment.

Second, we never lowered our payment when we refinanced to a lower interest rate.

We bought our house when mortgage rates had PLUNGED from 16% to 12.25%, refinanced when rates dropped to 9%, and refinanced again when rates fell to 6.25 percent.

Then for the 5 years between the time the house was paid off and our oldest hit college, we kept making our mortgage payment, but to the college fund.

Borrowing against the house was an option if kids tuition ended up more than we saved, but instead with went with parent loans. Just paid the last of those off.

 

[Lynne G]

Pay as much as you can extra, every month, and specify that the extra is to be applied to the principal.

Good luck! Financial freedom is a great goal to have.

 

[kkmcan]

We are on track to pay off early. We refinanced a 30 year loan down to 20 years in 2011. When we did that we set up bi-weekly payments so by the end of the year we have automatically made 2 extra payments plus we added $100 to the principal each payment. I think that puts us on track to pay off in 14-15 rather than 20. DH will be ready to retire in 15 hopefully so it will be perfect timing.

Setting up the automatic payments plus $100 was the key. We haven't felt the pinch at all.

 

[tomi]

We used an amortization table - lots of mortgage calculators on line to use. When making a payment we also paid the principal for the next month. Then when we were able we made a payment plus the next 2 months principal. We were able to pay off our house in 8 years by putting any extra money we could come up with on the principal. This also saves a TON of interest !
Good Luck

 

[PinballFamily]

All great tips so far from previous posters! I'd only add a couple of others - throw chunks of $ from work bonuses, tax refunds, unexpected "pennies from heaven" windfalls, etc. onto the mortgage principal balance. Sometimes it might just be a few bucks, sometimes lots more, but every dollar gets you closer to your goal.

Second - it might sound lame, but we got motivated by getting the dropping principal to change as many numbers as possible. So, (for example) if the balance is 100,615, we would toss an extra $20 on the principal to bring it to 100,595. And then we'd keep chipping away to eventually get the "bigger" numbers to change. Like dropping from just over $50K left to "in the 40s" (even when it was $49,990!) felt wonderful and motivating.

Good luck with your goal! Just make sure you keep saving for retirement, too!

Edited (remembered something else!)
We also tracked how much of each regular mortgage payment went to principal vs interest. We had a blast getting the numbers closer and closer together (the early years of mortgage paying when pretty much is all interest is astonishing) and we celebrated a bit when the numbers actually *finally* crossed and more and more of each regular payment went onto the principal. I suppose we really did turn it into a game and it was fun. But, we also did balance paying extra principal with our other savings goals.

 

[QVCshopper]

We bought our first home for $225k, and we sold it last year (after owning it for 11 years) for $320k. We paid it off in 6 years, so the last five had been mortgage-free. We had to move to a better school district, though, which is also closer to work, cheaper taxes, bigger house, etc. so we once again have a mortgage, although this time it's fairly minimal and we are locked in at 3.5%, so I'm not sure we will bother paying it off incredibly early. We still send an extra $55 or so every month.

Anyway, we paid off our first house by 1) always sending extra money each month. 2) we sent our bonuses to the mortgage. 3) my husband and I both got bonuses equal to 1/3 of our salary back then... It has since changed, but that would be a one time $20k payment right there. 4) we put a small inheritance toward the mortgage... I think it was $15k or less. 5) we bought less than we could "afford". 6) when it got down to $90k or so, we paid it out of savings. 7) we made $30k from selling our condo before moving to the house, so that was a big chunk of the down payment.

We also did it so I could stay home with our kids, they were 2 and 3 at the time, and we were worried we couldn't afford the payment on just my DH's salary. We have no regrets.

 

[Colleen27]

Don't be so aggressive about it that you leave yourself vulnerable. If financial disaster should strike you'll appreciate an oversized emergency fund far more than a lower principal balance on your home. Pay what extra you can afford after fully funding a generous liquid savings, and don't touch that savings to speed up your mortgage payoff unless/until it is enough to pay the remainder in full. I think that's the one of the two big flaws in DR's approach - his savings targets are on the very low side, in my opinion, and not likely to be enough to cover any major setbacks that might arise.

 

[Jedimom]

I don't make a ton of money, but whenever I've gotten a promotion or significant raise, I add a bit more to my mortgage payment. Started at $560/month about 5 years ago and am up to $700/month. Every little bit helps!

 

[lurkernj]

We are set to pay off in May, that's 20 yrs for us, not great, but it coincides with our oldest son starting college this past Sept. We used the college savings for the first year (and still have some left), but will continue making the mortgage payment to the college fund instead.

Even when we were rather poor, we would still put an extra $50 or $75 on the mortgage, and once we were in a better place, an extra $225 was put on with each payment as if it were part of the actual mortgage payment - non negotiable, no excuses (unless there was a job loss, which fortunately there wasn't)

 

[wiigirl]

Pay as much as you can extra, every month, and specify that the extra is to be applied to the principal.

Good luck! Financial freedom is a great goal to have.

 

[lisaross]

We took out a 30 year mortgage in 1997 at 7.625 in 2002 we refinanced to a 15 year mortgage at 5.5% - It is scheduled to be paid off 12/2017 -- we don't pay extra being taxes are always going up etc, but i want to pay it off in full by June 2017 so will put $$ aside!!!

Good Luck

I would look into refinancing depending what your rate is now

 

[clutter]

Don't be so aggressive about it that you leave yourself vulnerable. If financial disaster should strike you'll appreciate an oversized emergency fund far more than a lower principal balance on your home. Pay what extra you can afford after fully funding a generous liquid savings, and don't touch that savings to speed up your mortgage payoff unless/until it is enough to pay the remainder in full. I think that's the one of the two big flaws in DR's approach - his savings targets are on the very low side, in my opinion, and not likely to be enough to cover any major setbacks that might arise.

I have to agree with this. Debt-free is great, as long as a layoff, medical problem, or a car accident doesn't leave you needing to borrow, probably at a higher rate, to live.

 

[Eureka]

We refinanced two or three years ago and took 7.5 years off our mortgage. I think we have 10 years left now, at 3.something percent. Our payment only went up $100. So far we have been concentrating on saving for the kids' college so we haven't been putting more toward the principal but we hope to be able to do that in the future. Even so, with 10 yrs left, one kid will be just out of college and the other just finishing up so that's not too bad.

 

[jennyjinx3]

Great tips...we too are paying basically an extra payment per month applied to principal. But you are right Colleen about the emergency fund. I may reduce that extra payment a bit and put that in another account just for emergencies.

 

[mikehn]

The only bad thing about paying off early is losing a huge chunk of your tax deduction.

 

[Alexle2007]

The biggest thing we did was refinance to a 15 year mortgage at 2.625%. It's amazing how much more of the payment goes towards the principal rather than interest. Also, we don't have an escrow account which we prefer. Why let the bank make money on your hard earned dollars when you could yourself.

 

[Nayan]

The only bad thing about paying off early is losing a huge chunk of your tax deduction.

That and having to pay for your own insurance and taxes instead of having it taken out in small amounts over the year. This year I paid just over $5k out of pocket for both.

 

[bigbabyblues]

We financed ours through our local bank for 25 years and then signed up for the automatic bi-weekly payments. They take half the monthly payment out every two weeks and we don't have to mess with making sure it gets paid. If we didn't pay any extra, the mortgage will be paid off in 18 years. We are now 15 years into that, and I can't wait until it is paid off! We did set up a separate checking account for that loan, and we don't use it for much else. My check is direct deposited into it, and we move the overage out every few months.

(I don't know what the financial gurus say about this plan, and I don't care. My house will be paid off when I am 40 years old).