How I Paid Off My $86,000 Mortgage in 2 Years | 6 Steps to Follow

you know paying off a mortgage early is a goal for many people so today I wanted to share how I paid off my mortgage in just two years hello my name is michael and i run the personal finance website michael saves calm i've been writing about money since 2010 the same year that i purchased a condo and began pre paying my mortgage initially I set out to pay off my mortgage in about four and a half to five years by my 30th birthday but I ended up crushing that goal and paid it off a lot sooner in this video I'm gonna outline these six steps that got me there now this isn't one of those complicated HELOC videos these are just practical ways that I was able to pay off my mortgage early I'm not saying that you're gonna be able to pay off your mortgage in two years five years seven years or even ten years but I know that these six steps work and you're going to be able to pay off your mortgage a lot sooner than you think so stay tuned for the tips and if you have any questions you can find some of the answers on my blog Michael saves calm and also leave a comment below I'll try to answer as many of those as I can right now here are the six steps to paying off your mortgage early step number one buy a house that you can afford when I was going through the mortgage pre-approval process the bank told me that I could afford a property up to $250,000 that's how much I could get a loan for so a lot of people will take that number from the bank and then set that as their budget but that's not what I did I set my own budget and I was able to set my own budget by reviewing my personal finances and thinking about how much I wanted to spend on housing costs every month and really it's more than just the mortgage payment you have to think about taxes insurance HOA dues perhaps and then repair costs especially with older homes so after I set my own budget I gave that number to my realtor and we went shopping for homes I got really lucky and was able to score a one-bedroom condo in Atlanta Georgia for one hundred seven thousand dollars and then my mortgage was eighty six thousand dollars after a twenty down payment so that $86,000 number is the amount that I paid off in two years and two months now I know you're wondering where these $107,000 properties were this was back in 2010 and the country was going through some really difficult times of the economy and real estate values were depressed that same property is worth double now so I think if I were to go through the process again it might take me four or five years to pay off my mortgage using the rest of the tips that I'm about to outline but still no matter what the economy you can set your own budget and not rely so much on that number that you get from the lender step two is to check out a 15-year mortgage now when I was going through this process it was actually my grandmother who said try to get a 15-year loan instead of a 30-year loan and the reason is the interest rates for 15-year mortgages are lower than 30-year mortgages so that means you're going to be paying less money to the bank over the life of the loan now if you are thinking about this you have to consider that the monthly payments are higher when you have a 15-year mortgage compared to a 30-year mortgage if you bought a home below budget like I did in step one this may not be too much of a concern for you my monthly payment was 625 dollars and the interest rate was 3.75 percent on my 86 thousand dollar mortgage let's say you end up going with a 30-year loan instead of a 15-year loan don't really sweat it you can still make pre payments as long as you double check with your bank most mortgage providers will allow you to prepay if you have a conventional loan step 3 is to set a mortgage payoff date this is your goal setting and in my case I planned to pay off my mortgage by my 30th birthday I did it a little bit quicker than that but my initial goal was by my 30th birthday I arrived at that goal by looking at the numbers and I checked with my budget to see how quickly I could realistically pay off my mortgage now you have your normal mortgage payment in order to pay off your mortgage rapidly and ten seven five or two years like me you're gonna have to be throwing a lot more money at that principle so I looked at the numbers and decided that by my 30th birthday was a realistic goal and in addition to that long-term goal I also set short-term goals all along the way those short-term goals helped keep me motivated to continue this process and speaking of motivation I told my close family and friends I posted notes around the house with reminders about my payoff date and I was constantly tracking the numbers and seeing the balance go down every month those are all things that helped me stay pumped about paying off my mortgage for that two years step four is to automate your extra payments chances are you already have your mortgage deducted from your checking account automatically on a monthly basis but what you can do is you can go to your lenders website and you can do the same thing for your extra payments whether it's $100 a month or $500 a month whatever you know that you can do to prepay that mortgage you can set up those recurring transfers between your bank and your lender now I did that and in addition to that I did a series of one-time transfers so when I got a big tax refund I made a one-time transfer from my checking account to my lender and then I saw that mortgage principal balance get closer and closer to zero every bit helps number five increasing income and reducing expenses this is the most important step of the process so let me tell you what I did in addition to working my full time job I set a goal to work in extra 10 hours a week doing various side hustles and I took the money that I earned from those side hustles and applied it towards the mortgage principal balance so what did I do three things primarily the first one is I freelanced at my full-time employer in a different department then I waited tables part-time and mostly did that on the weekends there were lots of events such as weddings and celebrations and finally I pets it I found gigs around the holidays where I could charge a pretty high rate on top of that I increased my income by maximizing credit card rewards I took a really close look at how how I was spending my money and how I could earn more cash back and speaking of spending money the second component is reducing my expenses I've always been a pretty good budget er so I went through my budget categories one by one and looked for opportunities to save money now I didn't give up everything I remember through this process I had a personal trainer who came to my condo twice a week and we would work out so I did spend money on the things that matter to me but I did ask myself line by line through the budget whether things mattered to me and the things that didn't I cut out so what did I cut out well first cable television I cut the cord before people were talking about cutting the cord and I reduced the amount that I ate out I set a rule for myself which I still follow to this day and it's that I only like to eat out when it's a social experience in other words I won't go on to the drive-through to eat alone when I'm with friends sure I'll pay to eat out because then it's an experience it's something fun and it's something that I value but I don't have that same sort of a reaction when I'm just going through a drive-through and another way that I save money is that I started comparing the prices for my services whether it's your cell phone your insurance or your internet service you can compare all the different companies and usually find a cheaper rate to switch to even if it's just a promotional rate my whole life is really dedicated to helping people save money so these are just a few of my tips you can find a lot more on my blog Michael saves com step 6 is to reward your success look paying off a mortgage is a big long-term goal so you can break it up into short term goals what I did for every five thousand dollars that I paid off the mortgage I give myself a hundred bucks and I could use that to spend on whatever wanted and once I finally eliminated my debt completely I celebrated I went to Aruba and had a fantastic time the biggest reward though from paying off a mortgage is the sense of freedom that I got from being completely debt-free this has really changed my life for the better in so many ways and paying off my mortgage helped me navigate some changes later on in my life both good and bad so it's something that I definitely recommend and I would love to hear from you if you're in the process of paying off your mortgage or if you're already a success story if you have any questions about my story you can leave them in the comment section below or visit my blog Michael saves calm and please subscribe if you like this video I'm just getting started here on YouTube thanks so much for watching

Channel: Michael Saves

Views: 462,041

Keywords: pay off mortgage 2 years, pay off mortgage early, pay off mortgage faster, pay off mortgage strategy, heloc mortgage strategy, mortgage and loan, mortgage interest, 15-year mortgage, 30-year mortgage, should you pay off mortgage?, how to pay off your mortgage faster, mortgage payoff, mortgage, money, business, michael timmermann, mike timmermann, michael saves, how to payoff your mortgage in 2 years, how to pay off your mortgage in 2 years, how to pay off your mortgage early

Id: vzPZ59CqPs8

Length: 9min 26sec (566 seconds)

Published: Sun Jan 20 2019