My Journey Out of Debt Step #7: Pay Off Your Mortgage Early

Did you know that the vast majority of self-employed millionaire businesswoman (98%) are home owners? Not only that, but about one in three (34 percent) has a ZERO mortgage balance! One in five has a balance under $100,000, and only 4 percent has a balance of $500,000 or more. (SOURCE: Stanley, Thomas J., Millionaire Women Next Door, p 9).

While some may argue that it’s more “tax-savvy” to maintain a mortgage on your primary residence, I perceive the benefits of a zero mortgage balance to outweigh the cons:

1. One of the biggest benefits of paying off your mortgage is having financial security over the long-term. Paying off your home can give you a strong sense of financial stability and  protection against an unstable housing market.

2. Once you pay off your mortgage you will have extra breathing room in your monthly budget. With the added flexibility, you can dedicate those funds to help build a solid nest egg for retirement.

3. An additional advantage to paying off your home early is having the financial freedom to pursue other ventures that require financial backing. Imagine being able to support a long-term missionary, loan funds to a female entrepreneur, or simply give a gift of a sizeable amount to a worthy endeavor.

So how do you do it? I have a few suggestions, as I’m wading through Step #7 as we speak.

The first–and easiest–step you can take is to “round up” and pay extra on your monthly mortgage. If your payment is $1120 a month, for example, go ahead and round up that payment to an even $1200. To determine how long an extra payment of X amount will take you, use any one of the free online mortage calculators below:

Another alternative is the “biweekly mortgage payment.” You make half of your mortgage payment every two weeks. That results in 26 half-payments, which equals 13 full monthly payments each year. That one extra payment can knock eight years off a 30-year mortgage, depending on the loan’s interest rate! The only caveat here is that not all lenders accept biweekly mortgage payments. Be sure to first check with your lender to see if they will process two payments at no extra charge.

A third way to pay off your home early is to do some quick back-of-the-napkin math to guarantee an extra payment. Dave Ramsey offers the following: “If you divide your monthly payment by 12 and add that amount to each month’s payment, you’ll end up making one extra payment a year. You’ll increase your $1,500 payment to $1,625, for example, but you won’t have to jump through a bunch of hoops with your lender to make it happen.”

A fourth option deals with “PMI,” or private mortgage insurance. If you’re paying PMI each month, check the equity in your home. If it’s at 20% or greater, you can request that the mortgage lender remove the PMI while you continue to make the same payment each month. Before you know it, you’ll amass an additional payment without any additional effort!

Today’s Bite-Size To-Do:

Contact your mortgage lender and inquire about biweekly mortgage payments. Whatever you do, do not pay a fee to initiate a biweekly mortgage plan.

Investigate your options for a refinance. (I recently completed a 15-year refi and cut my interest in half!) BONUS: If your home loan is with your local credit union, they may make an exception and allow you to lower your interest rate without having to undergo a typical refinance. Most only charge about $100 for a filing fee . . . well worth it!

Take advantage of the online mortgage calculators mentioned above. Play around with the numbers, and be encouraged that you can pay off your home sooner than you think!

Don’t forget to review the first six posts in the series…

Step 1: How I paid off $93,000 in less than 3 years

Step 2: Budgeting

Step 3: Save $1000

Step 4: Debt Snowball

Step 5: Your Emergency Fund

Step 6: Invest

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2 thoughts on “My Journey Out of Debt Step #7: Pay Off Your Mortgage Early

  1. Great information and absolutely the reason I want to pay off my mortgage is to have the financial freedom.
    The tax write off does not begin to provide the security of having a paid for home.
    One other recommendation could be a shorter term mortgage 15 or 20 year term.
    Some people never ck the numbers to see if they can do this.
    I crunched the numbers, took a year old 30 year mortgage and refinanced when the rates went down a little fmore to a 15 year term.
    Granted the payment is a little higher… surprisingly not by much!.
    The interest savings over the life of the mortgage are HUGE.
    As I had income increase, I have set a monthly amount to apply to the principle and have calculated about 9 years to pay off a house in San Diego CA…not an inexpensive place to live 🙂
    I can’t begin to tell you how freeing it is to have a plan for this.

    Thank you for adding this information and making us look at ll sides of this topic

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