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How I paid off my $86,000 mortgage in 2 years

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How I paid off my $86,000 mortgage in 2 years
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All year long, Clark.com’s Michael Timmermann is sharing quick and easy ways to save money as part of our Michael Saves series. Check in every Monday as he puts new and familiar savings strategies to the test. Sign up for our newsletter to have these stories delivered to your inbox! 

Take a moment and think about how your life would be different if you never had to make another mortgage payment again. What would you do with that money every month? 

Read more: Best and worst home insurance companies

Paying off a mortgage early: Here’s my story

My mortgage payoff story began in October 2010, during the height of the housing crisis, when I purchased a one-bedroom condo in Atlanta for a little more than $100,000.

But even before all of my boxes were unpacked, I set a goal to pay off my mortgage by my 30th birthday, less than five years later. To my surprise, I ended up eliminating the loan in just two years and two months.

Various pictures of my mortgage-free condo

So why even bother paying off the mortgage early? It’s the number one question so many homeowners ask.

I got started down this path when I received an amortization schedule in the mail from my loan provider. I was shocked to find out how much of my monthly payment was going to interest, not the principal.

This sample amortization schedule shows how those first payments are barely making a dent:

Sample amortization schedule

Read more: Should both your names be on the mortgage?

The amortization schedule covers the life of the loan, which in my case was a 15-year fixed mortgage at 3.75%, a very low rate. Even so, I was determined to apply extra money to the principal to reduce the interest I paid. 

Using my $86,000 mortgage as an example, notice how an additional monthly payment of just $100 reduces the loan term by two years and seven months, and saves nearly $5,000.

Sample mortgage payment calculator from Bankrate.com

Image credit: Bankrate.com

5 steps I took to pay off my mortgage faster

Once I confirmed with my mortgage provider that I wouldn’t be charged a prepayment penalty, I began researching ways to pay off my mortgage faster. Here are five things I did to get rid of the loan sooner than I ever imagined:

1. Increased my income

Working on a journalist’s salary at the time, I knew that I needed to make more money to reach my goal. Several of my friends were lawyers or accountants, working 60 hours a week or more. So I figured that I could work an extra 10 hours a week on top of my 9-to-5 job. I primarily took advantage of freelance and overtime opportunities that were offered by my former employer. I was also a banquet server during the busy wedding season and took care of pets over the holidays.

In addition, any extra money that came in went to prepaying the mortgage. By that I mean tax refunds, birthday checks, work bonuses and even credit card rewards that I redeemed for cash.

I also increased my income by selling things that I no longer used on eBay and Craigslist. This was more of a one-time purge that took about a month to complete. For example, I made several hundred dollars by getting rid of books that were just collecting dust around the condo. Items that I couldn’t sell were donated to Goodwill for the tax deduction.

Read more: 49 ways to sell your old stuff for the most cash

2. Slashed spending

Since Uncle Sam takes his cut of any additional income, I realized that I would reach my goal sooner if I focused on reducing my expenses. Using Mint’s budgeting tools, I went through my spending categories individually and looked for ways to trim the fat. Here are just a few ways I saved:

  • Cut cable service: Saved $600/year

  • Switched car insurance providers: Saved $480/year

  • Packed my lunch: Saved $1,000/year

  • Made coffee at home: Saved $500/year

  • Stopped buying new clothes: Saved $1,200/year

Although I cut my expenses to the bone, it didn’t reduce my quality of life. That’s because I’ve learned over the years to put value on my long-term financial life and experiences, not materialistic possessions.

To this day, I watch free over-the-air TV, get my caffeine fix using a $15 Mr. Coffee machine and rarely shop at the mall for anything.

Read more: 14 things Americans are wasting money on

3. Told close family and friends

I knew that it was going to take the help of my family and friends to stay motivated about prepaying the mortgage. You know how people who are trying to lose weight often announce it on Facebook and update their progress on Instagram? It’s all about finding the strength to keep going. Once my family and friends learned about what I was up to, I never lost focus of my goal because someone was always checking in to ask how I was doing.

4. Set short-term goals

Let me remind you that my original plan was to pay off the mortgage by my 30th birthday, less than five years from the day I bought the place. But five years is a long time. To remain focused, I set short-term goals to stay pumped about what I was doing. For instance, I remember living off the income from my side gigs for one month and putting all of my regular salary toward the mortgage. I also would challenge myself to spend nothing at the grocery store for a week, relying only on what was already in my refrigerator and pantry. And I set a goal to pay for an entire vacation using only credit card rewards, which included a generous sign-up bonus.

Read more: 7 things debt-free people never do

5. Rewarded my success

As I’ve explained, motivation was key to reaching my goal. I think I had a pretty good attitude throughout my journey, but I will admit that there were times when I wondered if all of my hard work would be worth the effort. Periodically rewarding my success kept me going. For every $5,000 that I paid off the mortgage, I gave myself $100 to spend on whatever I wanted. But since I developed such minimalist habits, I sometimes couldn’t think of anything to spend it on and just put it toward the mortgage payoff instead.

Read more: 6 steps to pay off your mortgage early

Final thought

There are a lot of people who say that paying off a mortgage early just doesn’t make sense because you could probably do better investing, especially given the low mortgage interest rates.

But prepaying a loan doesn’t mean you stop saving for retirement or emergencies. You can do it all.

When people challenge the decision I made, I think about this letter I received from Wells Fargo in December 2012, two years and two months after I bought my condo. This document is confirmation that I had reached my goal of becoming 100% debt-free.

Mortgage loan payoff letter

Even if you don’t have a mortgage, the savings strategies I’ve outlined can be used to tackle other types of debt. Maybe you want to pay off your car loan, eliminate credit card debt or ditch your student loans. 

Whatever you want to accomplish in life, just set a goal, make a plan and never give up on yourself.

Check out more from our Michael Saves series:

 5 basic money rules you can live by forever

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Mike Timmermann About the author:
Michael Timmermann paid off his mortgage in two years. Now, he shares his money-saving tips on his blog, Save on Almost Everything.
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