I am a 29 year old single father of two kids. I just purchased my home June 29th of this year. I have a goal of paying off my mortgage early. If you play your cards right, you can pay your mortgage off early and still have money in your bank account. Here is my strategy, I took a look at my finances and realized that I could save $160.00 a month just by being honest with myself and cutting my spending. I cook my lunch now, disconnected my home phone since I have a cell phone, switched my cable package and other little changes that equal up to $160.00. I called my mortgage company and got on a bi weekly plan. That cut off seven years on my mortgage. I then requested that the $160.00 a month that I was paying on other bills be “applied to principal” every month. I was spending the money anyway so, I figured… why not use it to pay off my mortgage. This took off another six years off my 30 year term. I have only had my loan for 5 months now and it should be paid off in 17 years. Simply by putting money that I would have been spending anyway towards my mortgage. As far as money in the bank goes I use my tax refund to my advantage. I opened up a charls schwab high yeild checking account, brokerage account and Roth IRA account all at the same time. It only cost me $25 to open all three accounts. When I get my tax refund I now have the option to put money into my new Roth IRA for my retirement, I can spent a little in my new brokerage account if I want to test the stock market or I can just leave the money in the high yeild checking account and collect the interest. If you use this strategy you will get the best of both worlds. You pay off your mortgage early, saving you tens of thousand is interest and you get to collect a little interest money by having money in the bank that you can touch if times get hard. I have learned to let money work hard for me instead of me working hard for the money. I am currently writing a book this topic and hoping to have the book completed in the middle of next year. If you like the strategies that I have given you and you would like for me to sent you a email when the book is finished, send me a email at 4254watkins@comcast.net. Remember, you can do both if you “play your cards right”.

We used a number of techniques to pay down our mortgage.

First, as you mentioned, we lived frugally and paid most of one of our salaries into the mortgage as principal payments along with our regular monthly mortgage payments.

Second, each year we took our entire Federal and State income tax returns and put the whole lump some toward our principal.

Third, we took advantage of refinancing opportunities as rates were coming down. Our original Mortgage was 30years at around 7 percent. As we paid down the principal, we eventually refinanced the 30 year down to a 15 but instead of taking money out, we lump summed the income tax return and borrowed less than what we currently owed. We did this again and finally had a 10 year loan at 4.5% which was a very good rate at the time. We were fortunate that our Mortgage company did not charge us any pre payment penalties nor did they charge as any money at all to refi down to the lower amounts and terms. The benefit of doing this was that our regular monthly payments were working harder for us by having more principal and less interest being paid out of each payment.

It’s very important, if you are really trying to prepay, to pay as mush as you can as soon as you can. On 30, 15 and even 10 year loans, the bank takes a huge percentage of the total interest up front. Look at your amortization schedule and play with the numbers. Paying down as a big a chunk as you can up front saves you tremendously in how much of your monthly payment goes to interest. The time to start paying down is with in your first year. Do not wait until you are 3 or 5 or 10 years into your mortgage. The bank has already run away with their profits by then. Mortgages are a dirty business.

For all the nay sayers, the bottom line is this, at say 6% my original loan if paid over 30 years, would have cost me over 300k in interest of which I would only have gotten a fraction back. In the end as I recall, we paid about 40k in interest over the first 3years and then we were done. Total savings, $260k. In the time since we’ve lived with no payment we’ve saved nearly $150k in cash, contributed to our 401ks and have lived a wonderful care free life raising two wonderful children. We have no debt, credit card or other wise and we do not shudder every time there is another lay off in our industry. As someone pointed out, you never truly own your house in the US, but at least we’re not selling our souls to the bank, just to the tax man.

My motto and advice that I give to people is this, Always know how much money you are paying out in interest every month. This is how much the bank is screwing you out of. This goes for credit cards, student loans, car loans and your mortgage. Never ever pay interest if you can help it.

“Once you’ve paid off your mortgage debt, you truly own your home”

In most states, you never “own” your home. If you pay off your mortgage you have earned the right to live their at a very low rent (the rent being the state property tax). Do not believe me……pay off your mortgage and then stop paying your taxes for a few years. Tell me then how much you “own” your home as the sheriff escorts you off the property.