Not having a mortgage payment sounds like a dream, but is that a realistic goal for a family with young kids?
Andrew shares how his family ‘found’ money to pay their mortgage off early and still have fun together!
Paying Off Your Mortgage Early
How did you feel when you bought your home?
After you moved in, got all your stuff inside and arranged, what did you feel?
Were you thrilled? Exited about having a place to call your own? Or did you feel like Andrew- suddenly aware of the long road ahead before you actually own your house free and clear?
Did you know that right now in the U.S. around 37% of homes didn’t have a mortgage on them?
Many homeowners are those who are approaching retirement, but there is a chunk of millennial homeowners – almost 16% – who are mortgage-free now.
Let’s just think about that for a bit – how would you feel if you had paid off your house early? How would you feel if you had no mortgage to pay?
Today we’re going to look at that option – paying your mortgage off early.
Is it, one – a realistic goal? And if so, how do you set yourself up to knock it out faster?
Today I’m talking with Andrew Daniels. He’s the co-creator of Millennial Homeowner and one of the founders of Thriving Families about how he and his wife paid off their mortgage early.
And if you’re thinking of buying a home soon, you’ll want to hear what Karen Ashley, who’s the Mortgage Sales Manager from Coastal Credit Union about how you can buy a home you love and can afford.
In this episode, we’ll get into:
- Why he and his wife decided to pay off the mortgage early
- The strategies they used to make it happen
- Options you should weigh before you start your debt-free plan
Let’s get started!
Resources to Help You Pay Your Mortgage Off Faster
Looking to see if paying off your mortgage is the right way to go? Would you like to set up your finances to make it work?
Here are some handy resources to try out and use!
- Best Budget and Money Apps: Personal Capital, Tiller, Mint, Honeyfi, Zeta
- Free 401(k) Analysis: Blooom
- Grow Your Stash Faster: High Yield Savings with CiT Bank
- Jumpstart Your Marriage and Your Money
- Mortgage Masterplan
Thank You to Our Sponsor Coastal
Support for this podcast comes from Coastal Credit Union!
If you’d like someone to work with you on your goals, Coastal has the people, accounts, and services to help you hit your goals.
Why Would You Pay Your Mortgage Off Early?
Elle Martinez: Paying off the mortgage – this is one of these areas of personal finance were definitely your feelings have a huge and significant impact on this decision.
Typically, when people are thinking about paying off the mortgage early, they’ve paid off like the high-interest debt, like their credit cards and other loans like car and student loans.
This is the last big debt left.
And it’s kind of different. Lower rate spread out over decades.
You don’t feel like, well, I don’t know your experience, but it doesn’t feel like a fire like it is with credit cards or carrying a car loan.
But you decided, you and your wife, that you were going to pay it off sooner.
What motivated you to put this as a priority to pay off that mortgage faster?
Andrew Daniels: So the how this all started for us was about 10 years ago, we moved into our dream home and we built it, picked every little thing, flooring, paint, all that stuff.
And I remember the day we moved in like it was yesterday. It was a rainy day in August. And we had family and friends helping us move in. And, you know, it’s just a whirlwind.
You’re going back and forth from the old place and a couple of moving vans doing all that fun stuff. And I remember getting to the end of the day, sitting down.
We’re doing the whole drinks and pizza thing to thank everybody because that’s just what you do. It’s always fun.
I remember sitting there and it’s like somebody walked by and just punched me in the gut.
It was that feeling of. Oh, my gosh, I’ve got 30 years to pay this off now.
It’s you know, it’s it wasn’t a shock, like it’s not like somebody just came up to me, goes, hey, here’s your debt. I knew this was coming. But until we’re in the house, it’s not really real.
Then we went to the house and we’re…and it just it it really sunk in. And it was like. Right. This is my reality now. And this is our reality.
We have one child with another one on the way shortly. We’re in this amazing house that we love and, you know, are super excited with, but…I got this debt. And I don’t like it.
I remember in the spring we bought some trees to plant. And I was digging these trees. I had to a couple of our neighbors, we all kind of went in and bought these trees that were all in a new development.
So everybody’s got to do landscaping, which I did not know was a thing you had to do with the house. I just figured you the grass would come up and that would be it. But it doesn’t happen like that.
So we’re planting these trees and it’s like day three in the sun. And I have had a lot of time to think about this. And I’m thinking like this is what it’s going to be like for me.
If I don’t change, I’m going to have to be digging holes. I’m going to have to be figuring out how to make things work. I don’t like this.
I really, really don’t like this. And that’s when the idea kind of sunk into my mind, like something, needs to change and I need to be the one that does that. Otherwise, it’s going to stay the same.
Understanding Your Feelings About Money
Elle Martinez: And something I’ve noticed with couples who have paid off their mortgage early. There was this feeling that carrying this debt, even though was a, quote, responsible dad, it was a low-interest debt and they could afford it. It was something that nagged at them and it bothered them enough that they were willing to go ahead and pay it off sooner. And so I asked Andrew, if he could dig in a little bit deeper and kind of talk about why he was uncomfortable carrying around debt, it was something I was raised with.
Andrew Daniels: One thing I don’t know if I’ve shared on the blog, but my sister has autism and very severe autism, so my mother had to stay home with her. So we were a single income family and I didn’t really get that. You don’t get that growing up. You know, your life is normal, just as everybody lives in their own lives and thinks that they’re under percent like everyone else’s. And I would find out later that the reason why my mom could do that was that my parents paid off their house extremely fast, too. And I think knowing that you don’t borrow from today to pay for tomorrow. Really kind of stuck with me, and I always kind of had that like almost maybe inherent guilt that, okay, I’m really boring. From tomorrow to pay for this house today and, you know, and just kind of went like that, so. But I just don’t like the idea of owing someone because in my head, when you owe someone money, you are beholden to them. And that is just not a good feeling. It’s not a good feeling. Knowing that you could wake up tomorrow or something can happen the world. That’s completely outside your control. And the bank could call you and say, you know what we’re calling the loan. I know that’s not likely to happen. But those are the kind of fears that I would build up in my head. And it’s like, you know what? I don’t I don’t really like this. I I don’t like owning people. And it’s kind of what move me forward.
Should You Pay Your Mortgage Off Early
Elle Martinez: Now, whether you agree or disagree with his reasoning, I do think that this is a good point to really talk about, especially when you’re discussing an option like paying off your mortgage early, which is what is your comfort level? What is your quality of life, having your finances a certain way in? For some people carrying a huge amount of debt, even if it’s low interest, debt just does not make them feel comfortable. And the whole point of talking about simplifying and enjoying life is that enjoying life. So if you were looking at your finances solely through the numbers, it only from a financial optimization standpoint, paying off your mortgage does not make sense. But if you are looking at your financial decisions as a way to build a life that you love so you can spend time with the people and projects that matter most to you, then paying off your mortgage early may be a part of your financial plan. And while it might not be the financially optimal decision, there are some benefits to knocking out that debt early.
Andrew Daniels: When I sat down and did that night was I grab a spreadsheet and built a spreadsheet of trying to figure out how much could happen. And what I ended up figuring out was that if I stayed on this course that I was on paying off a mortgage over its lifetime and we were around the 5 percent mark. I was super cautious. And I want to lock into a 10 year rate at the time because I was just one of that cost certainty. Then I realized like I was going to pay almost the same amount of interest as I was paying for the house. So yeah. So if you’re paying off $100000 mortgage, you might be paying 80 to 90 thousand dollars extra in interest over your life. And that kind of got the snap me awake and it made me realize that I have to stop thinking about everything as week to week, month to month. I need to start thinking of things as my lifetime earnings and as a lifetime earnings. Do I really want to buy a second house that’s just interest or is there something else I can do? And all these things kind of merged in my head.
Elle Martinez: If you haven’t already looked at the numbers, it may surprise you.
Even with the low-interest rate, how much you’re going to be paying at the end if your mortgage if you pay on schedule. And that’s because of how this mortgage loan is structured as Karen explains.
How Extra Mortgage Payments Make a Huge Difference
Karen Ashley: Your mortgage is amortized over a term whether or not you pick a 30 year at 15 year, 10 year term, and it’s amortized to where a portion of the payment goes for its principal. And in the portion goes towards interest.
Now, in the beginning of the loan, the majority of your payment does go to interest. And then over the life of the loan, that ratio will reverse to where more we’ll start going towards principal. And then you’re actually going to build more equity. You know, we do suggest people make extra principal reductions.
Elle Martinez: Now, if you’re in the first seven years of your loan and you have a 30 year loan, you are paying a significant amount toward your interest. But the good news is, even if you start off small, you can have a big impact on dramatically shortening your mortgage payment by making extras now.
Karen Ashley: And initially, if you would just make an extra payment, say you take you make 13 payments in a 12 month payment period. Yeah. I mean, you can actually start cutting off years of that mortgage. So it is really easy to turn a 30 year mortgage into a 15 year mortgage without having your payment doubled. And I think sometimes that’s a misconception. Yeah. When people want to pay their mortgage off early or rather than doing a 30 year, they would love to do a fifteen. But in their mind, I think they think that their payment is going to double. Well, you can still take that 30 year mortgage and into a 15 year despite making those extra principal reductions. And then on the the mats that you don’t have that extra money, then you are only making your contractual payment for the 30 year mortgage. But on the other months that you do have that extra, just pay it towards the principal and you will see that balance from shaving off there.
Finding Money to Pay Off Your Mortgage
Elle Martinez: Of course, to make those extra payments, you need to have some extra money within your budget. So where do you find it? For Andrew, his family looked at their entire budget and optimize it with their goal in mind.
Andrew Daniels: We were lucky in that my wife and I loved to travel. You know, we liked like nicer things. And when we had our kids that they were so young and we kind of just looked at each other and said, let’s just not go anywhere. Like, let’s cut out travel. We don’t the kids aren’t. It’s not going to matter. Traveling with young kids, I don’t know if you’ve done it before, but it’s not all it’s cracked up to be. And they don’t remember it. You remember is taking them somewhere, but you’re not really having the greatest time. So we kind of we took a little maybe a harsh reality, look at that and say, OK, we can put off travel, which is I think for us that was one of the hardest things because we bonded the first night we met. We bonded over travel. And we’ve you know, we did months in Europe and we’d like our conversations always go to like, where do we want to go next? So that was hard. But at the same time, our life had just drastically changed. We had, you know, two kids that we had to look after and everything else is getting changed. So we figured let’s just change all the everything. So, you know, everything else is up in the air. Why not put our money up in the air and figure it out? So we we looked at cutting a lot of our food.
We eat out a lot. And we just we started to figure out how to make better food, like we like pizza. So we got Papa John’s recipe for sauce and, you know, figured out how to make better pizza. We figured out how to cook steaks. We figured out how to make mashed potatoes, like all these things that we didn’t really care about when we was just my wife and myself. We just kind of started looking. It’s like, OK, well, how can we kind of hack our life to still feel like we’re not giving up, but we’re not spending that money either on the things that we like. Another thing, another big one was cars. I just retired my 2004 Toyota minivan. There should be a round of applause for that. That was I said I would drive it till it died. And it it literally I drove it into the dealership and it pretty much died. Yeah. Yeah. It got to the point where. Couldn’t put any more money justified going any more money into it, so anyway. But that was like, you know, I would say in the time that we were paying off our house. The people around us on average had three new cars. And that’s a huge that’s a huge expense, right?
It’s a new cars are a lot of money. So, yeah, I would say travel and food were travel, food, vehicles, you know, like it it might sound a little fashion, but we just learned to kind of enjoy being as a family and spending time together, and that’s easier. You know, like a lot of little things got cut, like go to the movies. We you know, like we like everything became an option to be cut because everything we looked at, we were doubling or tripling the cost. Right. Because if you have if you can put a thousand dollars down on your mortgage today extra, well, you’re saving that money over time. And the interest that you save on that is almost the same amount that that thousand dollars is. So when you look at the newest iPhone. That’s a thousand dollars, give or take. You put that on your mortgage, you’re saving another thousand dollars in interest roughly. And we kind of did that. That was another one. And I totally forgot we for the first, I think three or four years, the first couple of years, my wife and I shared a flip phone. That was our plan was a $10 a month plan.
And, you know, I couldn’t text area, but that was like when texting was just start. Everybody, like all the adults, were starting to text. So. And I’d sit there at my friend’s house where everybody’s texting and I got a flip phone that doesn’t even have snake the game snake on it because it’s just that.
But that’s again, like, you know, I think our cell phones now in Canada are really expensive. They’re like a couple hundred bucks a month. Like they’re. Oh, wow. I think both of our plans together, like if you put a phone like paid for a phone monthly on it. It would be around $200. So. The money’s there, it just depends on what you’re willing to sacrifice.
Paying Off the Mortgage
Elle Martinez: Yeah. Well, I think you’ve done a fantastic job. How long have you paid off the mortgage?
Andrew Daniels: I guess I was just. We when we started, we made a goal of, I thought five years. I wasn’t happening. So I kind of stretch my goal out to 10 years. And then when we started going, we we could see the amounts and it kind of just became this thing. This I’m very goal focused. And it just kind of became this thing like, no, we’re doing this. We’re just gonna keep putting down. It got to the point where when I would call the bank, they would see my number come up and they’re doing another match payment today. Yeah. And that was the conversation. It’s that it wasn’t really all like it was 20 second conversation with the bank a couple weeks. Sometimes it was super funny.
Mortgage Free Masterplan
Elle Martinez: And the two of you are listing now and you’re thinking paying off your mortgage early is something you do want in our account together, but you’re not sure how fast you want to do it or how much you can put in towards it. Andrew has your back. He’s created quite a spreadsheet. It’s more than that. It’s really a guide and a plan that you can run the numbers yourself in. Look at different scenarios to find the right time frame in the right payment plan that fits you and your goals when we’re paying off our mortgage.
Andrew Daniels: We didn’t tell anybody like it was. When you do something that nobody else is doing, you look crazy. And it’s only afterwards that they look back and go, Wow, I wish I could do that. So I started to have people, friends and people online asking, you know, how how can I do this? So I just I had this spreadsheet. I cleaned it up and made it look nice. And then I basically would sit down with people for an hour and say, OK, like, let’s, you know, let’s go over your numbers.
What’s your goal? What are you going to do to to do this? And I would show them the spreadsheet and the system that kind of goes around it. And with the mortgage free master plan is designed to do is just to give you a plan of seeing what could be possible when you pay off your mortgage and.
It walks you through kind of like what are your goals? And you do this. You should be doing this with your spouse like none of this happens without mice. My spouse supporting my crazy ideas once in a while. I try not to have too many crazy ideas because it’s just it’s it’s what it is. Right now, you got to straighten out. We’d have time to breathe sometimes. But with this mortgage free master plan. It’s it’s really designed for.
And it’s like an I would say it takes about an hour to kind of go through it and you can answer the questions as a QuickStart guide to where you can just go through it really fast, or if you’re a spreadsheet person, you jump and you can play with the numbers right away. And what it does is it allows you to see what’s possible with paying down your mortgage faster. You can find out, OK, what happens if I only put down $50 every biweekly or. And how does that change? If I put down two hundred pounds, if I do like the full thousand? Or if I can only do twenty five this week. But what happens if I put down a lump sum of $5000 this month? And what does that do over the lifetime of it? You know what it does?
It kind of gets you thinking about. Becoming mortgage free. What it is and you’re trying it on to see what plan might work for you, and like you said, you guys sat down with it and like 10 years. It’s it’s mindboggling that you’re I mean, we always think that I paid it off so fast. But what we never talk about is the 20 years of freedom you’re gaining after that. We haven’t even touched on that. And that is way, way nicer. My my kids don’t complain that they didn’t get to go to Disney when they were five and 6. They complained a bit when they were 7. But when we went when they were, you know, 8 9. You know, it felt good. I didn’t go to Disney feeling like, oh, my gosh, this is all on credit cards and whatever it was like, OK, we saved up and we’re there and we’re good to go. And now we get to do the traveling that we’ve been longing for and researching for, you know, all those years. So I kind of jumped the track there on on this. But you know what? What it does is that the plan is really allowing you to. I would say come together as a couple and see if this is what you’re ready to do. And if you’re not ready to do, you don’t have to do it right away. But you will see what small amounts can add up to over time. And they know, I’m sure, you know, from your own experience, they add up very, very quickly.
Buying a House Your Love and Can Comfortably Afford
Elle Martinez: Hope that helps the two of you really to sit down and understand whether or not paying off the mortgage early makes sense for you. But what if the two of you haven’t bought your house, but, you know, down the line, you would like to do that. How do you find a house that you can afford? And if you do decide to pay it off early, it wouldn’t be a burden. Karen was kind enough to share her take of how she processes those mortgage applications and explains to couples how to get a mortgage that they can comfortably afford.
Karen Ashley: When a couple or a member is shopping for a house, one of the main things that they need to consider first and foremost is affordability. Whereas their comfort level, we get the question so many times, what do I qualify for? Well, we can run the numbers and tell you you qualify for, you know, four or five hundred thousand dollar house. But I never like to tell a buyer exactly what they qualify for. My question to them is, where’s your comfort level? Where is your your comfort level with that payment? Where’s the payment that, you know, where do you not want to go over it? So then I back in to that payment, because the last thing you want to do is put someone in a home where that’s all that they’re working for. It’s just that house payment because you are going to need some money for the incidentals, the maintenance, the the care of the home. So I always want to know where is your comfort level? And then from there, we just we back into what that sales price looks like. And then we would talk about do they want to do the hundred percent financing? Do they qualify as a first time home buyer? Does it make more sense to maybe keep your money in the bank? With rates being so low right now? So we would just run some scenarios for them to just kind of show them. It makes more sense to do the hundred percent if they qualify or put 3 percent down with mortgage insurance versus 5 percent. And then we just kind of back into what fits that member best financially, both money out of pocket downpayment and for their comfort level is it cost coastal. We’re more concerned about your financial well-being going forward, not just the here and now. Okay. So you qualify for this amount. I want to put you in that house. It’s more about your financial roadmap, making sure that you’re stable going forward. Not just putting you in a house.
Elle Martinez: I hope you enjoyed this episode and found it helpful. What do you decide to pay off your mortgage early or not? That’s up to you. But I want you to feel comfortable with your decision. Remember, personal finances is not just about the numbers, but creating a life that you love and enjoy!
Next Week on the Podcast…
Since we’re on the topic of setting yourself up for big financial wins, have you ever thought about how you can capitalize on your taxes?
Next week we’ll look at some big tax deductions and credits to look into and how to set up things this year to make next year’s taxes less stressful!
So if you haven’t already, make sure you’re subscribed. You don’t want to miss that episode.
We’re on iTunes and wherever you get your podcast from!
Our music today was from Lee Rosevere.
Finally and most importantly, thank you for your support!
If you have any questions or ideas for the show, please email me or join our free and private Facebook group Thriving Families.
We’re all about encouraging one another with our goals. I hope you have a wonderful week, take care!
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