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This month marks 8 years since FM and I took the plunge into home ownership – the single largest financial commitment we’ve ever made.
As I’ve noted before, FM and I both extremely debt-averse, so the thought of taking on a mortgage was something we didn’t take lightly.
We worked with a mortgage broker to determine a budget, bought (far) less house than lenders would have liked us to believe we could afford, and signed on to a 5-year fixed rate mortgage that had a 25-year amortization period, a great rate, and offered flexible prepayment options.
Before anyone sends me comments on this, I’m very much aware that we likely could have saved some money by going with a variable rate. But our strategy for our finances is rooted in predictability, automation, and limiting risk, so the fixed rate option was the scenario we were most comfortable with.
At some point along the way, I started reading blog posts by Sean Cooper and found myself inspired by his story. He went on to write a book about it, called Burn Your Mortgage (find it on my Resources page!), which I would highly recommend to anyone looking at purchasing a house for the first time.
Much like Sean, the thought of being burdened by a mortgage until we were into our 50s and paying tens of thousands of dollars in interest over that period became increasingly unpalatable to us.
So we decided to do something about it by taking advantage of the prepayment options our mortgage allowed for and paying off as much in advance as we could afford.
Sean went to much greater lengths to pay off his mortgage as fast as possible than FM and I were willing/able to do, but the core theme of his message resonated with us and has impacted much of our financial planning and decision-making in recent years.
After a couple of years of slowly increasing our payments, I got this idea in my head in early 2015 that it would be amazing to have the mortgage fully paid off by the time we both hit our 40th birthdays.
I took a look at the calendar to figure out how many months we had to work with in order to accomplish that feat and realized that my 40th birthday was exactly 100 months away at that time.
And so began our 100-month mortgage paydown challenge.
As of today, we’ve paid off 37.5% of our mortgage in 49 months since we got more aggressive with our prepayments.
Our bank currently shows May 2028 as our projected payoff date, which would make FM and I 45 at the time we hit mortgage-freedom. That’s still about 8 years ahead of where we would have ended up had we only made the minimum payment for the entire 25-year amortization period, but that calculation only takes into account the regular, topped-up bi-weekly payments that we’re making. What it doesn’t factor in is the additional prepayments we’re making directly on the principal.
We’re currently maxing-out the 25% top-up we’re permitted on the regular bi-weekly payments and we’re now up to $150 bi-weekly payments on the principal. Based on the numbers I’ve run, if we continue to increase those additional prepayments on the principal at the same pace we have been since 2016, we’re on track to be mortgage free in early-2025.
That’s still about two years after the deadline for our 100-month goal, but with some careful planning and by continuing our frugal approach to our spending, it’s a goal that certainly well within reach.
So how do we keep up the prepayment plan now that kids are in the picture?
The same way that we approach frugality in general: it’s a trained behaviour that takes a great deal of repetition, dedication, and foresight.
I basically build our annual cashflow calculations around our debt repayments and our spending habits have adjusted to accommodate them. By planning our spending around our increased debt repayments, we’ve pretty much trained our brains to think that those numbers are the minimum payments.
This also provides us with something of a safety-net if we ever encounter a financial challenge such as a job loss or unexpected home repair. If something like that ever comes up in the future and we need to find some extra money to get by, all we have to do is revert to a lower payment and we can have upwards of a few hundred dollars a month to get us through.
Are you trying to get out from under your mortgage sooner than later as well? Do you have a specific target date in mind? What strategies are you using to put some extra money towards paying down that debt? Let me know by leaving a comment, sending an email to firstname.lastname@example.org, or by connecting on Twitter, Facebook, and Instagram.
Until next week, thanks for reading!
Last week’s recipe: Margherita Penne
This was one of those dishes that was good, but not great. It was fairly easy to prepare, so I wasn’t forced to spend a ton of time being occupied in the kitchen, which is a plus in FM’s books. The end result was a nice, lightly creamy dish, but it didn’t have a particularly strong flavour to it which was disappointing. Another downfall for this recipe was the cost of the fresh parmesan and bocconcini the recipe calls for. They’re not particularly cheap cheeses and the packages I had to buy far exceeded the amount required for the recipe, so it made for a higher upfront cost than most meals I would make. Final verdict: send it to the recycle bin.
This week’s selection: Stout-Soaked Porterhouse with Beer Butter