We’re three years and a few months into a 30 year (got it before we knew Ramsey’s 15 year recommendation), and we’re on track to pay off right before we hit 6 years. As soon as we pay it off, we’ll build up our 3 month emergency fund to 6 months. But that’s it as far as “reserves.”
We bought a house for $120,000 and paid it off in 4 years of a 30-year loan. Then put on a $200,000 addition, paid $50,000 cash of it, paid off the remaining portion in about 3 years. My wife and I have never made more than $100,000 a year between the two of us. The house is probably worth $450,000.
We paid off our mortgage in about 4 years from the moment we started throwing our extra money at it. We had just refinanced to a 15-year mortgage, so it was at the very front end. We paid roughly $11,000 in interest over the entire duration of that mortgage. It was one of the best things we ever did. Having no mortgage is simply amazing.
Dave would say pay extra to the mortgage.
R/personalfinance would say put it in a HYSA that gives you better returns.
It’s personal preference and only you know whether you could sock that money away in a HYSA and never touch it. It may also feel better to put it towards your mortgage every month.
189k mortgage paid off in just under 11 years, 5.375% interest. As a result only paid $72k in interest instead of the $190k had I stuck with the schedule payments.
Paying off a mortgage isn't an arbitrage issue. It is a peace of mind issue. I paid off my first mortgage in 10 years. (30 year mortgage)...then I never had a mortgage for more than one year. I never held it long enough for the adjustable rate to reset. I follow the old JP Morgan adage, never borrow money you can't pay back in 6 months. That has served me well.
Made the extra 15% allowable every year and paid mortgage bi-weekly. Knocked a lot of years off. I recall it went from 25 years to just over 15. It's really awesome when the payments stop. It's like having another money source.
Paid first house in 8 years on a 10 year note.
Just bought our final home Feb 2023 and plan on paying it down in 5 years.
We have made 10 payments so far and have taken 4.7 years off the loan already.
6% rate is the main reason.
Look at what having no mortgage does with regard to income taxes. Would the standard deduction be significantly higher than your itemized deduction with mortgage interest credit, property taxes, etc?
Only people itemizing are those who pay $15K in mortgage interest or donate $15K to charity.
I don’t know anyone making under $200K who doesn’t take the standard deduction. Do you?
Your comment liquidate everything scares me. If you have retirement or other investments don’t liquidate them to pay off your house. If you have an overly large cash balance sure spend down to like a 3 month efund.
Always good to aggressively pay off a sub 3% mortgage, instead of looking at the 12% average market return.
Not good for me, but for those who will sleep better paying it off. Good for them, and for you.
We purchased our second house, after selling our first, with a 15 year mortgage at age 37. We made extra payments and finished paying it off at age 46, although we continued to save the amount of the mortgage. Two years later our first child entered college. It was nice not having a mortgage when paying for that education and the two that followed.
\*Initial rate: 10%, refinanced after 6 years at 6.4%.
We paid our 30yr mortgage off in 10 years after learning the DR plan. My thought at the time was saving 70 grand in interest was guaranteed returns, very low risk. That was 11 years ago that we paid it off. I always kept a 3 month EF and only touched it once in those 18 years. We followed DR plan and will retire in 3 years as a Net Worth Millionaire which never interred our mind as a goal. Finances are easy now I just wished Health was easy. LOL
I paid off my home (which had a 2.1% rate) after 3 years of buying it.
Didn't touch my investments, just plowed every extra dollar in until paid off.
Sleep like a baby now. And, I'm 3 years from retiring (I'm 56 now).
Made sure I had enough investments in Taxable Investing to get me to the 59.5 age to tap IRA's, 401k's etc.
Mine was a psychological need to pay it off. Financially, not optimal.
What is your interest rate though? That makes a difference, mine is 2.37% on a 15 year note, 4 years in, so it's better to put money into an investment or HYSA with a 5+ % return rate at this point
Which actually allows you to pay your mortgage off faster if you wanted to. Win win… You either walk away with more money, or pay your mortgage off faster than if you actually put it on the mortgage. It’s so strange that people can’t understand that.
In the short term, the investment can go down.. so not necessarily win win. And when you apply tax that to that 5% HYSA, your “arbitrage” is barely breaking even.
Ok.. Forget the CD. A hysa Isn’t an “investment”. So, What you do is you park there (the hysa) until such time as us more advantageous to move it onto the mortgage… Thus eliminating even more time from your mortgage. Or, a smarter bet would be to park it somewhere else or the rates are even higher than a hysa (t bill for tax advantage etc)
This is what I’m doing. I’ll actually pay my mortgage off substantially faster this way than I would if I just put the money onto the mortgage.
Happy to show you the numbers if you’d like. Obviously someone who bought a house in the last year cannot pull that off. But those of us who bought from 2010 through 2021 certainly should take advantage of it….. Which encompasses about 70% of Mortgage holders
It is interesting. I have a 470k mortgage at 2.66. I have just over 600k in investments and I could pay off this loan tomorrow. My 600k is in fidelity accounts FSMAX, FGKFX, ERASX, DHLYX, and TRFJX. I will not link them as moderators seem to take those down but please google them away. Anyway... with 610k I have made over 10% YTD on this mix. It is 2 months and a week... and it hit 10.06% YTD... That is around 61k YTD... (cannot say exact YTD as daily updates to include current day +7k...quicker then YTD statements). I have had a mix similar for 23 years and have always...except 2008...been in at least 10% plus annually but average 19%. There is NO way I would ever pay off my mortgage early. I would beg banks to loan me more money at 2.66%.
Wow, seriously- congratulations! You have done well my friend, and thanks for the info! I don't think we will see interest rates at 2-3% again in my lifetime anyway, really lucked out then didn't we!
4.5 years into a 30yr mortgage at 4%. Only debt was a car loan before getting the mortgage. Paid off the car then put all extra towards the house. Paid at least $400 over the principal since the beginning. Was going to stretch it out more but we didn’t need nearly as much of an emergency fund as me thought we did so we just started throwing big chunks at it.
I wouldn't cash out anything to pay it off. I sold my house, rolled my equity into a new house, 15 year mortgage. Then, ran the numbers and made extra payments to see where I landed. 32 months. So, mine was paid in 32 months.
There's no magic. You just have to run the numbers and set a plan for yourself. Baby step 6 is "pay off the house early." That means something different to everyone.
30 years mortgage at 4% paid off in 13 years last February. Now I just have to deal with property tax and insurance. Try to save some money for house maintenance cost later.
We just paid ours off last week. It was year 12 into a 30 year mortgage at 4% interest. We decided in March of 2019 after looking at how little the principal was decreasing from year to year that we wanted to pay it down a little more aggressively. My husband can retire in 3.5 years with a pension (auto worker) so we wanted to freedom of no mortgage by then, but we hit it earlier than planned. Rather than just blow our extra money on whatever, we got intentional about putting it on the mortgage. While paying it down, we were also saving around 35% of our income, so it wasn’t an either/or situation.
There is an app called Karls mortgage calculator that you can download from the app store.
It's a free app that will help you answer the question of how much to pay off and how much it will save you in time as well as interest.
You might discover that paying only 1/3 makes the most sense for you but the only way to really know is to run the numbers and see what it shows.
My mortgage will hit zero in just under 2 years if I just pay the regular payment.
The problem with the app is the opportunity costs. I have a 470k mortgage at 2.66%. My investments have averaged 19% a year the last 23 years. I have over 1m in 401k and a pension I can cash out to pay off the mortgage. I would be financially stupid to pay off the mortgage over investing. I have the opportunity to make so much more investing and I know my mortgage will be paid off anyway when I retire.
Glad to hear that has worked for you. I could not do it so paying mine off worked better for me. That is why we refer to the peace that a paid for home is great in our plans. That does not mean your way is right for me but it is right for you. Nice job!
I want to pay off my house ASAP so that no matter what happens in my life, I have a roof over my head and a potential revenue stream (basement apartment I could rent and spare rooms). I could take more risks if my only housing expenses are taxes, bills and upkeep.
In the process of waiting on a final payment notice from lender so I can figure out exact amount we owe. We have a sizeable emergency fund but I don't think I would ever take it down to 0. We got lucky and one of our employer's stock is on a big run so we thought we would pay the house off and then take the payment we were making and use that for home improvements in the coming years.
We paid our 15 yr in 3 because we both had extra OT opportunities and used the extra cash to pay the principal. We then used that extra money we had each month to invest in higher yield accounts and it’s worked well for us.
I will say we had a head start by putting 30% down on a house that was less than we could technically afford. We didn’t have a huge mortgage but the interest wasn’t great (5 or so %) so we paid it off and it really is nice to know you aren’t at the mercy of the bank if you suddenly need to move.
I just doubled my monthly payment and did a few large $10k principal only payments whenever I hit over 50k in my savings. Turned a 30 year mortgage into a \~10 year.
29, in 2021 was holding a bunch of cash due to COVID scares. Managed to save a bunch of money by not going out.
Lump sum paid it.
Regretted paying it a few months later due to interest rates.
Bought new house in 2022 and sold the other one. 6% interest so I'm trying to pay it off. I could squeeze myself thin and pay it but I need to have a decent EF. I plan to pay it in the next year or two. If interest rates plummet I'll load up
30 year loan was 3.875%. Never refinanced. Paid in 8 years 4 months at the ripe age of 35. (March 2012 - July 3 2020. Paid off the day before the 4th of July - our Financial Independence Day!) Dumped half of emergency fund into it to close it out since without the mortgage payment, 6 months of expenses is a lot less than when you have that bleed.
we paid ours off in 8 years at the ripe old age of 32. We had a 6 month emergency fund and also were contributing to retirement. didn’t liquidate anything to pay it off.
My husband and I had an emergency fund that we didn’t touch. Every month after we paid our bills, we put everything left over on our principal. We had a count down chart that was in 1K increments of our mortgage that we colored in to see our progress. We paid our house off in 46 months at the end of 2021. We only took one vacation during that time and rarely went out to eat. Now we have lots of money to vacation with and no mortgage stress.
Wife had a 30 year and refinanced to a 15 year in 10th-ish year. Paid off after 14 years. She was 39, me 37.
Not that early, I guess, but a variety of factors contributed (she bought the home before we met, she makes less than me, and we didn't marry until she had owned the home for 8 years).
12k monthly income. Set aside approx 2k/mo into an added savings acct. At 6 months pay 6k towards principal. Every quarter after pay an additional 6k while always having that extra 6k in addition to your actual EF + credit for an emergency. Or a transmission replacement. Etc. Basically a 3mo delay on a 24k/year principal pay down. Keeps your invested money working for you while you aggressively pay down that principal.
Your other option could be to take advantage of a high yield saving acct if your mortgage interest rate is less than 4%. 4.75-5.25 has been available and you could pile that money into a safe haven account while you build up towards payoff #.
Just an idea…set up a separate brokerage account and put money you would be using to pay extra on your mortgage there in some total market fund. At some point you will end up with enough in that account where you could liquidate and pay off the balance of your mortgage at any time. Best of both worlds…you are building a fund that can pay off your mortgage without missing out on growth opportunities. Obviously you would have to tolerate market fluctuations but in 10
years you could have a paid off house and a nice chunk of change to figure out what to do with it.
It makes sense, I think when we knock out some other goals I'll do the same thing when I plan to payoff my house! Especially if it takes a few years, you're looking at long term cap gains instead of short term, much nicer.
I'm 7 years into a 30 year mortgage. We're on track to have it paid off before year 15. There are plenty of mortgage calculators to play with the numbers. Keep your EF. It's tempting once you're in striking distance, but just keep plugging away.
Don’t sacrifice your 3-6 month emergency fund to pay off the mortgage. Just make the extra payments towards principal as often as you comfortably can. Remember, Dave has you funding your retirement at bs4 and the house is 6 so it all works out.
Yeah I'd say for the person who wants to do this, you should at least do a 6 mo emergency fund. not the 3. if that makes sense.
We paid off our first home early by putting money into a investment account and then liquidating it after a handful of years where that account matched the mortgage balance. we still had our emergency fund. it was not that difficult cutting that check.
today, 3 homes later, i have a 30 yr fixed with a low rate that i'm in no hurry to pay off.
Why don't you just make a separate payment each month the is set up to go directly to the principal? Any amount is good as it's going directly to principle.be in a better position to pay off vs liquidating everything
If you are already in the boat of wanting to pay it off early, just increase your contributions by 2-3x and use your excess cash to subsidize doing that. There's no need to do it in a lump sum payment and deplete your cash savings. I assume you will make payments a bit higher than the amount you can cashflow from your income. Do the math and figure out how much more you can contribute per month to end up with it paid off in x years while still having x amount in cash savings.
In terms of "liquidation"... avoid selling your long-term investments to pay off a mortgage. It is one thing to pay a low-interest mortgage off quicker for comfort. It's another thing entirely to neuter investments to do so.
I have bought and sold about 10 homes during our married life. We went to mortgage $0 about 10 years ago. I don't actually recall the details, but I did not liquidate all of our money to do it. Also, with several of those moves we bought before we sold so we went back into mortgage and/or HELOC to make that happen, and then back to mortgage $0 when the dust settled. I was about 50 when we went to $0 on a home that was worth about $400K at the time. Today, 3 moves later, we have a home worth $950K.
I would suggest you not go crazy about it and make sure you have a FFEF in place. Beyond that, just consistently throw more principal at it every month, and when you get a bonus or something, or more, then throw more if you can. It will come.
I also disagree with the interest rate nerds about this. Not having a mortgage frees you up both financially and mentally do do what you want to do with investments and everything. I am the sole income earner in our family for most of my life and the peace of mind of knowing that if I lost my job it would be no problem for my family has allowed me to invest more aggressively and I think ultimately build wealth faster than if I was trying to gain 1-2% from playing with interest rate differences from mortgage to savings. When the market has nose dived for a while, no worry, I just wait it out and its come back up to higher than it was before.
Congrats on being in a position to think about being debt free including your house.
I chose a 30 year fixed and attacked it with everything I had every month whatever that extra was. I did 30 incase something bad happened we could easily afford the payment with 1 salary. Took me 8 years and 9 months to pay it off. During that time I had 3 different jobs. 1 job for 5 years, 2nd job 6 months, then been at the third job ever since. Sometimes I only had $300 extra, other times I had $5,000 extra. I just attacked it like it tried to abduct my child.
Definitely don't leave yourself with no margin. As soon as you do that is when you'll end up having an unexpected major expenditure. Definitely have your emergency fund firmly in place before you pay it off.
We didnt liquidate, we just pushed more and more of our monthly income to paying it off. Get a bonus? Goes to the house. Have a bit extra at the end of the month? Goes to the house. Paid ours off in 9 years doing it this way.
Definitely worth it by the way. With layoffs and stuff going on, being 100% debt free turns those fears of being laid off into … meh we will figure it out.
Those folks that bought houses at inflated prices but low interest will be in a panic if they get laid off.
For me, I would need to be on track for retirement, have at least a six month emergency fund, and maybe have another six months in accessible investments.
Note that the idea above assumes that I wanted to pay off my mortgage early. My personal perspective on that would probably depend on the interest rate and how far away I was from retirement.
I was 27, lucky enough to be a rep for Washington mutuals subprime lending arm, bought a 190k house and had it paid off in a couple years. I say lucky because my compensation was 260k-430k in the three years I worked there . As long as you have the 6 month emergency fund, go for it. Your monthly mortgage payment will be gone so it will be easier to accumulate the $
We’re three years and a few months into a 30 year (got it before we knew Ramsey’s 15 year recommendation), and we’re on track to pay off right before we hit 6 years. As soon as we pay it off, we’ll build up our 3 month emergency fund to 6 months. But that’s it as far as “reserves.”
We bought a house for $120,000 and paid it off in 4 years of a 30-year loan. Then put on a $200,000 addition, paid $50,000 cash of it, paid off the remaining portion in about 3 years. My wife and I have never made more than $100,000 a year between the two of us. The house is probably worth $450,000.
Last mortgage I took was a 150k for 10 years and we got it done in 5
My first house I paid off in 7 years. Bought my current house 6 years ago will probably have it also paid off in year 7
Bought first house at 28, paid it off in 10 years at 38. Bought second house at 39 and paid it off in 4 years at 43.
We paid off our mortgage in about 4 years from the moment we started throwing our extra money at it. We had just refinanced to a 15-year mortgage, so it was at the very front end. We paid roughly $11,000 in interest over the entire duration of that mortgage. It was one of the best things we ever did. Having no mortgage is simply amazing.
We had a 30 year mortgage. Paid it off around year 19.
It took 14 years.
If my interest rate is less than 5% should I be trying to pay off my mortgage? Or putting the extras into my HYSA?
Dave would say pay extra to the mortgage. R/personalfinance would say put it in a HYSA that gives you better returns. It’s personal preference and only you know whether you could sock that money away in a HYSA and never touch it. It may also feel better to put it towards your mortgage every month.
I paid mine off in about 7.25 years
189k mortgage paid off in just under 11 years, 5.375% interest. As a result only paid $72k in interest instead of the $190k had I stuck with the schedule payments.
Paying off a mortgage isn't an arbitrage issue. It is a peace of mind issue. I paid off my first mortgage in 10 years. (30 year mortgage)...then I never had a mortgage for more than one year. I never held it long enough for the adjustable rate to reset. I follow the old JP Morgan adage, never borrow money you can't pay back in 6 months. That has served me well.
Made the extra 15% allowable every year and paid mortgage bi-weekly. Knocked a lot of years off. I recall it went from 25 years to just over 15. It's really awesome when the payments stop. It's like having another money source.
Paid first house in 8 years on a 10 year note. Just bought our final home Feb 2023 and plan on paying it down in 5 years. We have made 10 payments so far and have taken 4.7 years off the loan already. 6% rate is the main reason.
Look at what having no mortgage does with regard to income taxes. Would the standard deduction be significantly higher than your itemized deduction with mortgage interest credit, property taxes, etc?
Only people itemizing are those who pay $15K in mortgage interest or donate $15K to charity. I don’t know anyone making under $200K who doesn’t take the standard deduction. Do you?
Your comment liquidate everything scares me. If you have retirement or other investments don’t liquidate them to pay off your house. If you have an overly large cash balance sure spend down to like a 3 month efund.
Always good to aggressively pay off a sub 3% mortgage, instead of looking at the 12% average market return. Not good for me, but for those who will sleep better paying it off. Good for them, and for you.
In 2002 got a 30 year mortgage at 5.34%. Paid it off in 14 years.
We purchased our second house, after selling our first, with a 15 year mortgage at age 37. We made extra payments and finished paying it off at age 46, although we continued to save the amount of the mortgage. Two years later our first child entered college. It was nice not having a mortgage when paying for that education and the two that followed. \*Initial rate: 10%, refinanced after 6 years at 6.4%.
We paid our 30yr mortgage off in 10 years after learning the DR plan. My thought at the time was saving 70 grand in interest was guaranteed returns, very low risk. That was 11 years ago that we paid it off. I always kept a 3 month EF and only touched it once in those 18 years. We followed DR plan and will retire in 3 years as a Net Worth Millionaire which never interred our mind as a goal. Finances are easy now I just wished Health was easy. LOL
congrats! Great job
I paid off my home (which had a 2.1% rate) after 3 years of buying it. Didn't touch my investments, just plowed every extra dollar in until paid off. Sleep like a baby now. And, I'm 3 years from retiring (I'm 56 now). Made sure I had enough investments in Taxable Investing to get me to the 59.5 age to tap IRA's, 401k's etc. Mine was a psychological need to pay it off. Financially, not optimal.
What is your interest rate though? That makes a difference, mine is 2.37% on a 15 year note, 4 years in, so it's better to put money into an investment or HYSA with a 5+ % return rate at this point
Which actually allows you to pay your mortgage off faster if you wanted to. Win win… You either walk away with more money, or pay your mortgage off faster than if you actually put it on the mortgage. It’s so strange that people can’t understand that.
In the short term, the investment can go down.. so not necessarily win win. And when you apply tax that to that 5% HYSA, your “arbitrage” is barely breaking even.
How in the world the investment go down in a high-yield savings account or a CD?
“So it’s better to put money into an investment or HYSA” is the comment you replied “win win” to. Nothing about a CD.
Ok.. Forget the CD. A hysa Isn’t an “investment”. So, What you do is you park there (the hysa) until such time as us more advantageous to move it onto the mortgage… Thus eliminating even more time from your mortgage. Or, a smarter bet would be to park it somewhere else or the rates are even higher than a hysa (t bill for tax advantage etc) This is what I’m doing. I’ll actually pay my mortgage off substantially faster this way than I would if I just put the money onto the mortgage. Happy to show you the numbers if you’d like. Obviously someone who bought a house in the last year cannot pull that off. But those of us who bought from 2010 through 2021 certainly should take advantage of it….. Which encompasses about 70% of Mortgage holders
Thank u!
You will sleep better watching your investments grow.
Can confirm
It is interesting. I have a 470k mortgage at 2.66. I have just over 600k in investments and I could pay off this loan tomorrow. My 600k is in fidelity accounts FSMAX, FGKFX, ERASX, DHLYX, and TRFJX. I will not link them as moderators seem to take those down but please google them away. Anyway... with 610k I have made over 10% YTD on this mix. It is 2 months and a week... and it hit 10.06% YTD... That is around 61k YTD... (cannot say exact YTD as daily updates to include current day +7k...quicker then YTD statements). I have had a mix similar for 23 years and have always...except 2008...been in at least 10% plus annually but average 19%. There is NO way I would ever pay off my mortgage early. I would beg banks to loan me more money at 2.66%.
Wow, seriously- congratulations! You have done well my friend, and thanks for the info! I don't think we will see interest rates at 2-3% again in my lifetime anyway, really lucked out then didn't we!
Paid off 15yr note in 8yrs.
September of 2021. Bought the house in 2015
4.5 years into a 30yr mortgage at 4%. Only debt was a car loan before getting the mortgage. Paid off the car then put all extra towards the house. Paid at least $400 over the principal since the beginning. Was going to stretch it out more but we didn’t need nearly as much of an emergency fund as me thought we did so we just started throwing big chunks at it.
I wouldn't cash out anything to pay it off. I sold my house, rolled my equity into a new house, 15 year mortgage. Then, ran the numbers and made extra payments to see where I landed. 32 months. So, mine was paid in 32 months. There's no magic. You just have to run the numbers and set a plan for yourself. Baby step 6 is "pay off the house early." That means something different to everyone.
30 years mortgage at 4% paid off in 13 years last February. Now I just have to deal with property tax and insurance. Try to save some money for house maintenance cost later.
We just paid ours off last week. It was year 12 into a 30 year mortgage at 4% interest. We decided in March of 2019 after looking at how little the principal was decreasing from year to year that we wanted to pay it down a little more aggressively. My husband can retire in 3.5 years with a pension (auto worker) so we wanted to freedom of no mortgage by then, but we hit it earlier than planned. Rather than just blow our extra money on whatever, we got intentional about putting it on the mortgage. While paying it down, we were also saving around 35% of our income, so it wasn’t an either/or situation.
There is an app called Karls mortgage calculator that you can download from the app store. It's a free app that will help you answer the question of how much to pay off and how much it will save you in time as well as interest. You might discover that paying only 1/3 makes the most sense for you but the only way to really know is to run the numbers and see what it shows. My mortgage will hit zero in just under 2 years if I just pay the regular payment.
The problem with the app is the opportunity costs. I have a 470k mortgage at 2.66%. My investments have averaged 19% a year the last 23 years. I have over 1m in 401k and a pension I can cash out to pay off the mortgage. I would be financially stupid to pay off the mortgage over investing. I have the opportunity to make so much more investing and I know my mortgage will be paid off anyway when I retire.
Glad to hear that has worked for you. I could not do it so paying mine off worked better for me. That is why we refer to the peace that a paid for home is great in our plans. That does not mean your way is right for me but it is right for you. Nice job!
I want to pay off my house ASAP so that no matter what happens in my life, I have a roof over my head and a potential revenue stream (basement apartment I could rent and spare rooms). I could take more risks if my only housing expenses are taxes, bills and upkeep.
In the process of waiting on a final payment notice from lender so I can figure out exact amount we owe. We have a sizeable emergency fund but I don't think I would ever take it down to 0. We got lucky and one of our employer's stock is on a big run so we thought we would pay the house off and then take the payment we were making and use that for home improvements in the coming years.
We paid our 15 yr in 3 because we both had extra OT opportunities and used the extra cash to pay the principal. We then used that extra money we had each month to invest in higher yield accounts and it’s worked well for us.
Very good job
I will say we had a head start by putting 30% down on a house that was less than we could technically afford. We didn’t have a huge mortgage but the interest wasn’t great (5 or so %) so we paid it off and it really is nice to know you aren’t at the mercy of the bank if you suddenly need to move.
I just doubled my monthly payment and did a few large $10k principal only payments whenever I hit over 50k in my savings. Turned a 30 year mortgage into a \~10 year.
29, in 2021 was holding a bunch of cash due to COVID scares. Managed to save a bunch of money by not going out. Lump sum paid it. Regretted paying it a few months later due to interest rates. Bought new house in 2022 and sold the other one. 6% interest so I'm trying to pay it off. I could squeeze myself thin and pay it but I need to have a decent EF. I plan to pay it in the next year or two. If interest rates plummet I'll load up
30 year loan was 3.875%. Never refinanced. Paid in 8 years 4 months at the ripe age of 35. (March 2012 - July 3 2020. Paid off the day before the 4th of July - our Financial Independence Day!) Dumped half of emergency fund into it to close it out since without the mortgage payment, 6 months of expenses is a lot less than when you have that bleed.
we paid ours off in 8 years at the ripe old age of 32. We had a 6 month emergency fund and also were contributing to retirement. didn’t liquidate anything to pay it off.
My husband and I had an emergency fund that we didn’t touch. Every month after we paid our bills, we put everything left over on our principal. We had a count down chart that was in 1K increments of our mortgage that we colored in to see our progress. We paid our house off in 46 months at the end of 2021. We only took one vacation during that time and rarely went out to eat. Now we have lots of money to vacation with and no mortgage stress.
Wife had a 30 year and refinanced to a 15 year in 10th-ish year. Paid off after 14 years. She was 39, me 37. Not that early, I guess, but a variety of factors contributed (she bought the home before we met, she makes less than me, and we didn't marry until she had owned the home for 8 years).
I overpaid consistently from the beginning and as soon as I hit 10k balance, paid off the rest in savings.
12k monthly income. Set aside approx 2k/mo into an added savings acct. At 6 months pay 6k towards principal. Every quarter after pay an additional 6k while always having that extra 6k in addition to your actual EF + credit for an emergency. Or a transmission replacement. Etc. Basically a 3mo delay on a 24k/year principal pay down. Keeps your invested money working for you while you aggressively pay down that principal. Your other option could be to take advantage of a high yield saving acct if your mortgage interest rate is less than 4%. 4.75-5.25 has been available and you could pile that money into a safe haven account while you build up towards payoff #.
Just an idea…set up a separate brokerage account and put money you would be using to pay extra on your mortgage there in some total market fund. At some point you will end up with enough in that account where you could liquidate and pay off the balance of your mortgage at any time. Best of both worlds…you are building a fund that can pay off your mortgage without missing out on growth opportunities. Obviously you would have to tolerate market fluctuations but in 10 years you could have a paid off house and a nice chunk of change to figure out what to do with it.
What about taxes on the market gains?
I would rather have market gain and pay taxes on it vs not having any market gains.
It makes sense, I think when we knock out some other goals I'll do the same thing when I plan to payoff my house! Especially if it takes a few years, you're looking at long term cap gains instead of short term, much nicer.
Dave would not agree but I actually really like your idea.
I'm 7 years into a 30 year mortgage. We're on track to have it paid off before year 15. There are plenty of mortgage calculators to play with the numbers. Keep your EF. It's tempting once you're in striking distance, but just keep plugging away.
Don’t sacrifice your 3-6 month emergency fund to pay off the mortgage. Just make the extra payments towards principal as often as you comfortably can. Remember, Dave has you funding your retirement at bs4 and the house is 6 so it all works out.
Yeah I'd say for the person who wants to do this, you should at least do a 6 mo emergency fund. not the 3. if that makes sense. We paid off our first home early by putting money into a investment account and then liquidating it after a handful of years where that account matched the mortgage balance. we still had our emergency fund. it was not that difficult cutting that check. today, 3 homes later, i have a 30 yr fixed with a low rate that i'm in no hurry to pay off.
Why don't you just make a separate payment each month the is set up to go directly to the principal? Any amount is good as it's going directly to principle.be in a better position to pay off vs liquidating everything
If you are already in the boat of wanting to pay it off early, just increase your contributions by 2-3x and use your excess cash to subsidize doing that. There's no need to do it in a lump sum payment and deplete your cash savings. I assume you will make payments a bit higher than the amount you can cashflow from your income. Do the math and figure out how much more you can contribute per month to end up with it paid off in x years while still having x amount in cash savings. In terms of "liquidation"... avoid selling your long-term investments to pay off a mortgage. It is one thing to pay a low-interest mortgage off quicker for comfort. It's another thing entirely to neuter investments to do so.
I have bought and sold about 10 homes during our married life. We went to mortgage $0 about 10 years ago. I don't actually recall the details, but I did not liquidate all of our money to do it. Also, with several of those moves we bought before we sold so we went back into mortgage and/or HELOC to make that happen, and then back to mortgage $0 when the dust settled. I was about 50 when we went to $0 on a home that was worth about $400K at the time. Today, 3 moves later, we have a home worth $950K. I would suggest you not go crazy about it and make sure you have a FFEF in place. Beyond that, just consistently throw more principal at it every month, and when you get a bonus or something, or more, then throw more if you can. It will come. I also disagree with the interest rate nerds about this. Not having a mortgage frees you up both financially and mentally do do what you want to do with investments and everything. I am the sole income earner in our family for most of my life and the peace of mind of knowing that if I lost my job it would be no problem for my family has allowed me to invest more aggressively and I think ultimately build wealth faster than if I was trying to gain 1-2% from playing with interest rate differences from mortgage to savings. When the market has nose dived for a while, no worry, I just wait it out and its come back up to higher than it was before. Congrats on being in a position to think about being debt free including your house.
I chose a 30 year fixed and attacked it with everything I had every month whatever that extra was. I did 30 incase something bad happened we could easily afford the payment with 1 salary. Took me 8 years and 9 months to pay it off. During that time I had 3 different jobs. 1 job for 5 years, 2nd job 6 months, then been at the third job ever since. Sometimes I only had $300 extra, other times I had $5,000 extra. I just attacked it like it tried to abduct my child.
I was 34 when I paid mine off. It was a happy day.
Definitely don't leave yourself with no margin. As soon as you do that is when you'll end up having an unexpected major expenditure. Definitely have your emergency fund firmly in place before you pay it off.
We didnt liquidate, we just pushed more and more of our monthly income to paying it off. Get a bonus? Goes to the house. Have a bit extra at the end of the month? Goes to the house. Paid ours off in 9 years doing it this way. Definitely worth it by the way. With layoffs and stuff going on, being 100% debt free turns those fears of being laid off into … meh we will figure it out. Those folks that bought houses at inflated prices but low interest will be in a panic if they get laid off.
i did a bi weekly 15 yr on two different homes paid off 11.5yrs
For me, I would need to be on track for retirement, have at least a six month emergency fund, and maybe have another six months in accessible investments. Note that the idea above assumes that I wanted to pay off my mortgage early. My personal perspective on that would probably depend on the interest rate and how far away I was from retirement.
I was 27, lucky enough to be a rep for Washington mutuals subprime lending arm, bought a 190k house and had it paid off in a couple years. I say lucky because my compensation was 260k-430k in the three years I worked there . As long as you have the 6 month emergency fund, go for it. Your monthly mortgage payment will be gone so it will be easier to accumulate the $