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Courtesy Marisa Palmieri Shugrue
This July, my husband and I sent in our final mortgage payment.
Achieving this goal, which at one time seemed so far out of reach, became a reality in just under 13 years. I remember being 23 years old and looking in horror at a chart showing how much we'd pay the bank over 30 years for our $170,000 home in a suburb of Cleveland.
But here we are, ages 39 and 37, mortgage-free.
Why we decided it made sense to pay off our mortgage early
An early mortgage payoff had been a major financial goal of ours since 2016. At the time, we were both feeling burned out between parenting our two young daughters and managing our careers. We weren't thrilled about the idea of working full time for another 30 years and potentially having little time left to enjoy retirement.
I was an editor for a publishing firm. My husband was a supervisor for a produce company in addition to working one weekend per month and several weeks a year as a member of the Ohio National Guard.
After doing some research and calculations, we realized a combination of investing and paying off our mortgage early would give us the more flexible lifestyle we had in mind. Ridding ourselves of our largest monthly bill would allow me to pursue a freelance writing career, and it would allow my husband to work many fewer hours. And that freedom could come much sooner than the standard timeline that dictates you make house payments for 30 years and work until you're 66 or older.
Though experts debate whether an early mortgage payoff is the right financial move for everyone, and there are some benefits to keeping a mortgage (such as having more money to invest while you're young), we decided it was the right move for us. In 2016, we refinanced our $110,000 balance to a 15-year mortgage with an interest rate just over 3%, and we zeroed in on paying it off as soon as possible.
How living within our means helped us pay off our mortgage early
Reflecting on how we paid off the balance in less than four years with moderate incomes, I realized that most of the credit goes to simple financial lessons we learned from our parents. Chief among them is to live within your means.
Like many things, this is a simple idea, but it's not always easy to execute. Lifestyle creep is a real thing, and so is the pressure to keep up with the Joneses. Our parents did not attend college and often raised their families on one income.
They showed us that living within your means can be done, but you have to delay gratification and make careful choices, like cooking most of your meals at home, being content in a "starter home," and not always having designer clothes or the latest technology.
We buy used cars
One thing my mom and dad always did was choose not to drive new vehicles, which experts say lose 11% of their value the minute you drive them off the lot anyway. We've followed suit. Sure, we could finance new cars to the tune of $554 per car per month, which is the average payment for a new vehicle in the US, according to credit bureau Experian. Instead, we purchase low-mileage vehicles that are a few years old. We either pay for our cars in cash or buy them with low-interest auto loans that don't have an early payoff penalty. Then, we pay off the loans as soon as possible.
We have not had a car payment in five years. Would I like to drive a nicer car? Sometimes. But I realize that driving a new car does not help me meet my goals of being debt-free and retiring early. On the other hand, plunging an extra $1,100 per month from two would-be car payments into our mortgage principal does help us meet our goals.
We have a plan for financial windfalls
A savings strategy we learned from my mother-in-law is to always have a plan for financial windfalls. A windfall could be a tax return, bonus, gift, or additional income.
When she had young children, my mother-in-law strategically saved her annual tax return to pay for summer child care. Other times, she used it to pay for home improvements. Over the course of a few years, she bought new windows for her home a few at a time. She didn't put these expenses on a credit card or spend her tax return frivolously.
Soon after we bought our home, my mother-in-law also encouraged us to find a way to make extra house payments. We started by simply paying an extra $150 on our principal every month. She also explained that people who get paid every two weeks will get an "extra" paycheck twice a year, depending on how many Fridays occur in the month. If you account for your monthly expenses based on two paydays per month, this "extra" paycheck can be treated like a windfall.
We didn't take her advice right away, but eventually we applied our "extra" paychecks and other bonuses to our mortgage payment, chipping away at the principal a few hundred or a few thousand dollars at a time.
Eliminating childcare expenses was a major windfall for us. At one point, this cost was nearly equivalent to our house payment. When my husband's job changed in 2017 and our children grew out of needing before- and after-school care, we snowballed the extra money into our mortgage payment, helping to bring it down to zero this year.
With our mortgage gone and our sights on other financial goals, my husband and I are grateful for our parents and the lessons they taught us about living within our means. It led us to paying off our mortgage early, which has allowed us both to choose more fulfilling work and spend more time with our daughters.
This article was originally published in January 2021.