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6 Steps To Mortgage Freedom

I recently revealed the 6-step process I used to pay off my mortgage in an article I wrote for money expert Clark Howard. I’ve written about many of those steps on this website, but I’ll recap in case you don’t want to click on the links:

  1. I bought a home I could afford
  2. I got a 15-year mortgage
  3. I set a target payoff date (goal)
  4. I started automatic biweekly payments
  5. I reduced expenses and increased earnings
  6. I rewarded my success

The article I wrote for Clark Howard got thousands of clicks. It also generated some criticism on social media, which I will address later in this article. First, I want to provide some additional information that I didn’t include in the article. I think it will help shed light on how I was able to pay off my mortgage in two years.

 1) I BOUGHT A HOME I COULD AFFORD

In the article I explained how I ignored the price the lender told me I could afford and instead relied on a personal analysis of my own budget when searching for a home. I ended up with a property that was far less expensive than what I could afford. After a 20% down payment, the mortgage was $86,000. Yes, I sacrificed square footage. My one-bedroom condo was only about 700 square feet. However, it was in a nice part of town. Click here for pictures.

  2) I GOT A 15-YEAR MORTGAGE

Since I bought a home that was well within my budget, I opted for a 15-year mortgage. This meant higher monthly payments compared to a 30-year mortgage, but a lower interest rate. In most cases you can still prepay your mortgage with a 30-year mortgage. Just check with your lender first. The benefit of the 15-year mortgage was primarily the lower interest rate.

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  3) I SET A TARGET PAYOFF DATE

In other words, I set a goal. That’s all this step was about. Shortly after buying my home, I told myself that I wanted to pay it off by March 2015, my 30th birthday. I ended up being mortgage-free ahead of schedule because I focused on making more money and spending less. More on that in a moment…

 4) I STARTED AUTOMATIC BIWEEKLY PAYMENTS

Do you have money automatically taken out of your paycheck and put into a retirement account, such as a 401k? This is the same principle. Automating my payments helped reduce my mortgage balance without a lot of thought. My lender was able to get this started for free. By the way, I also continued to fund my retirement during the mortgage payoff.

5) I REDUCED EXPENSES AND INCREASED EARNINGS

This is where the hard work came into play. As one Facebook commenter pointed out, I had to send $3,500 a month to the mortgage company in order to pay off my mortgage in two years. And that’s EXACTLY what I did. Keep in mind, I’m a member of the middle class. This was a huge challenge.

How did I do it? This goes back to a previous step. I constantly set goals for myself. Sometimes it was to keep my food spending under $200 that month. Other times it was to live off my part-time job.

Despite what some Facebook commenters said, I didn’t deprive myself. Never once did I go to bed hungry, I always had clothes to wear and my lights stayed on. Food, clothing and shelter– my basic needs were met.

Now, let’s get specific. How exactly did I save?

  1. Stopped eating out – I made a rule to never eat out alone. I only went out when it was with friends– a social experience. That meant I had to learn to plan my meals and do my own cooking. It also made the times that I did go out to eat a lot more memorable.
  2. Cut cable TV service – I ditched my cable TV service and switched to a low-cost internet plan. I didn’t miss it one bit. If I really wanted to see something on TV, I would go to a friend’s house.
  3. Switched insurance providers – I started shopping around for a lower insurance rate. Check your rate every six months to see if you can get a better deal elsewhere. Later, I learned of another way to save 15% on car insurance by taking a defensive driver course.
  4. No more shopping – I stopped buying “stuff.” I decided that I was not going to spend my life trying to keep up with everyone else like I had been up until my mid 20s. Rejecting materialism has helped me focus on what really matters in life– my family and friends.
  5. Found free things to do  – I searched online for low or no-cost things to do on my days off. You’ll find many of these things are outdoors, which was great for me.
  6. Stopped driving so much – I have always lived close to work in order to save time and money, but I started combining my errands to reduce my fuel purchases. Living in the middle of a city, so much of what I needed was in walking distance. I took advantage of that.
  7. Maximized credit card rewards – I made sure I was getting the most cash back possible before I swiped my credit card. If you have good credit and don’t keep a balance, you may benefit from opening a couple of cash back rewards credit cards. I keep several credit cards in my wallet, including Discover, which is featured on this site. My credit score has not been adversely affected by having multiple credit cards. My score is 777. I pay off my balances every month.
  8. Paid attention to the small stuff – Your morning coffee and trips to the vending machine add up. I questioned even the smallest of purchases to make sure they wouldn’t stand in the way of my goal over the long run.

The bottom line is that I went through every budget category and did whatever I could to reduce my expenses. You can read more about those strategies in my Get Rich Guide: Save Green in Every Budget Category.

Now, how did I make more money?  I was working 40 hours per week when I set the goal to pay off my mortgage. My job wasn’t particularly stressful and other people around me were working a lot more hours. That’s when I set another goal (see a pattern?) to work an extra 10 hours per week. I was able to pick up extra shifts around the office. In addition, I spent a few months as a banquet server on the weekends during wedding season. I also picked up pet-sitting gigs around the holidays. Every hour of additional work brought me closer to paying off my mortgage.

6) I REWARDED MY SUCCESS

Staying motivated wasn’t much of a challenge because I was seeing great results every month as my mortgage balance decreased. Still, for every $5,000 I paid off, I gave myself $100 in play money. Sometimes I didn’t even spend it. As I saw the finish line in 2012, I allowed myself to spend about $1,000 to go on a trip to Costa Rica with a friend. It was a great trip and something I don’t regret. These rewards helped me keep a positive attitude.

RESPONDING TO THE CRITICS

Since launching this website in January 2014, I’ve received a lot of positive feedback and some negative feedback too. Even though I try not to let the negative Facebook comments get to me, sometimes they do.

For instance, one person said the only reason I was able to do this is because I’m single and don’t have children. I’m not so sure that’s true. Being single, I don’t have a double income household. I could have paid off the home in ONE YEAR if I had a second income. I had to work my butt off to reach this goal, but I know it’s possible for you too! I would hate to think that people who have children think they can’t reach their financial goals. Attitude is everything.

Finally, I want you to know that even if you don’t want to pay off your mortgage, you can apply these same principles. You just have to be organized, disciplined and work hard. Keep your eye on the prize. Once you reach your financial goals, you won’t have to think about money nearly as much. I know you can do it!

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7 comments

  1. I think that’s awesome…hard work, but awesome! I do think that maybe it’s easier to do this when you’re single, only because sometimes it’s hard to convince the other half to go along with the plan. 😉 But, if both people are on the same page, it can be much easier with two incomes!
    Little House recently posted…Fun, Frugal Summer SavingsMy Profile

  2. Can you give me a breakdown of the numbers? Between the $42k you were paying toward your mortgage alone, income tax withholdings, car insurance, health insurance, 401k contributions, food, gas(even if it’s very little), power, water, etc, you had to have been making over $70k per year. If I have this wrong, and you made the same amount of money as the rest of us recent graduates, please give us a breakdown.

  3. Duuuude. Where do you live that a condo is 100k? In my town a 700 sq. ft. place is like 350-400k. Super jealous! You’re apartment looks gorgeous though and I applaud your fiscal sense in paying off your mortgage so quickly. Congrats!
    Taylor Lee recently posted…Am I Ready To Buy A House?My Profile

  4. Rewarding yourself for success is a great way to accomplish large things and small things. I also think that buying a house you could afford is a big deal, and it’s not common. Most people buy too much house. I think 15 should be the maximum length on a mortgage. I know people say they can pay off a 30 year in 15, but statistically, they won’t. Great article, Michael!
    Kalen @ MoneyMiniBlog recently posted…How to Set Up Your Own Home Inspection BusinessMy Profile

  5. I applaud you. I’m 81 and pursued similar goals when I was first married at age 18. My husband was 19. We didn’t pay off our mortgage quite as fast, but, nevertheless, accomplished the payoff in a few years. Meanwhile, we put a down-payment on acreage with two houses. We rented our first home and one of the two houses. We paid off everything in just a few years. I was widowed after 54+ years of marriage and was left “sitting pretty” from all our savings–we bought more acreage, sold a boatload of timber, and, eventually, one of the tracts. We invested and saved on a regular basis, and I still own a 65 acre piece, and two smaller tracts. Incidentally, we also raised 5 children. I’m a “killer” grocery shopper. My kids were never deprived of the latest tech “gadgets” and were all raised to be pretty good shoppers and savers, as well. My late husband retired at age 58. I’ve been remarried for several years, now (met up with another childhood sweetheart who was also widowed) and he shares my philosophies. I’ve traveled pretty much the whole world with both spouses. Saving in the early years can be most rewarding in the later ones.

    • Thank you for writing. This is perhaps the most inspirational thing I have read all week. Sometimes it can be hard for people to see the importance of saving because we are so busy living in the moment. It is awesome to hear how your financial discipline through the years has allowed you to live life on your own terms! THANK YOU FOR SHARING!

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