Many people fulfill their dream of owning their own home with a mortgage – and often pay it off well into old age.
However, author Marisa Palmieri Shugrue and her husband only needed 13 years to pay off the mortgage on their home early.
Financial tips from her parents helped: always only buy a used car, for example. Or have a plan for financial windfall.
In July of this year, my husband and I made our final mortgage payment. Achieving this goal, which once seemed so unattainable, became a reality in just under 13 years. When I was 23, I remember looking in horror at a spreadsheet that showed how much we would pay to the bank over 30 years for our $170,000 house in suburban Cleveland.
But now we’re 39 and 37 and don’t have a mortgage.
Why we decided to pay off our mortgage early
Paying off our mortgage early has been an important financial goal since 2016. At the time, we were both feeling burned out between raising our two young daughters and managing our careers. We weren’t thrilled with the idea of working full-time for another 30 years and potentially having little time left to enjoy retirement.
I was an editor at a publishing company. My husband was a foreman at a food company and also worked one weekend a month and several weeks a year as a member of the Ohio National Guard.
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After some research and calculations, we realized that a combination of investments and paying off our mortgage early would give us the flexible lifestyle we wanted. Relief from our biggest monthly burden would allow me to pursue a career as a freelance writer. And it would allow my husband to work far fewer hours. And that freedom could come much sooner than the usual timeline that calls for making house payments and working for 30 years until you’re 66 or older.
Although experts debate whether paying off your mortgage early is the right financial move for everyone, and there are some benefits to keeping a mortgage (like having more money to invest while you’re young), we’ve decided that it was the right step for us. In 2016, we refinanced our $110,000 (€105,000) into a 15-year mortgage with an interest rate of just over three percent and vowed to pay it off as quickly as possible.
This meant we got by within our means and were able to pay off our mortgage early
When I think about how we paid off the balance in less than four years on a modest income, I realize that most of the earning came from simple financial lessons. Lessons we learned from our parents. Above all, this means that you should live within your means.
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Like many other things, this is a simple idea, but not always easy to implement. The stealthy lifestyle is a real thing, as is the pressure to keep up with the others. Our parents didn’t study and often raised their families on just one income.
They showed us that it is possible to live within your means, but that you have to delay gratification and make careful decisions. For example, cooking most meals at home, settling for a “starter home,” and not always having designer clothes or the latest technology.
We only buy used cars
One thing my mom and dad always did was not drive new cars. According to experts, they lose eleven percent of their value as soon as you drive them off the parking lot. We followed this example.
Of course we could finance new cars for $554 (527 euros) per car per month, what according to credit reporting agency Experian is the average rate for a new vehicle in the US. Instead, we buy low-mileage vehicles that are a few years old. We either pay for our cars in cash or buy them with low-interest car loans that don’t come with a prepayment penalty. Then we pay off the loans as quickly as possible.
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We haven’t paid a single payment on a car in the last five years. Would I like to drive a nicer car? Sometimes yes. But I realize that a new car won’t help me achieve my goals of being debt-free and retiring early. On the other hand, putting the extra $1,100 per month we save from two potential car payments toward paying off our mortgage will help us reach our goals.
We have a plan for financial windfalls
One savings strategy we learned from my mother-in-law is to always have a plan for financial windfalls. A windfall can be a tax return, a bonus, a gift, or additional income.
When she had young children, my mother-in-law strategically saved her annual tax refund to pay for summer childcare. Another time, she used the money to renovate her house. Over the course of a few years, she gradually bought new windows for her house. She did not pay for these expenses with a credit card or spend her tax refund carelessly.
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Shortly after we purchased our home, my mother-in-law also encouraged us to find a way to make additional payments on the home. We started by simply paying an additional $150 on our principal each month.
The elimination of childcare costs was a big win for us. At one point, these costs were almost as high as our house payment. When my husband’s job changed in 2017 and our children no longer required before and after school care, we put the extra money into our mortgage payment, bringing it down to zero that year.
Now that we’ve paid off our mortgage and set our sights on other financial goals, my husband and I are grateful for our parents and the lessons they taught us about living within our means. This led to us paying off our mortgage early, which allowed us both to choose more fulfilling jobs and spend more time with our daughters.
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This article has been translated from English. You can find the original here.
2023-10-05 07:26:43
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