Pay Off the Mortgage Early

Posted by Mrs Money on January 31st, 2011

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Last year I shared how I can’t bring myself to pay extra on the mortgage. Fortunately, since then I’ve been able to bring myself to make a few additional principal payments on our mortgage, and I love seeing them applied directly to principal.  It’s a great feeling.  However, we have many more years to go and many more mortgage payments to make.  So far we’ve eliminated at least one mortgage payment off the life of our loan, and it feels awesome.

When we refinanced our mortgage a couple years ago, instead of going with a 28 year mortgage (the amount of time that we had left on our original mortgage), we stretched it out to a 30 year mortgage to get a lower payment.  One of our goals is for me to be a stay at home mom whenever we do have kids, so that was a huge factor to us.  We figured we can always pay extra on the mortgage if we choose, but we can’t pay less.  It’s worked out well for us so far, and that’s really all that matters.

But since we’re completely debt free now except for the mortgage, I’m thinking about stepping it up a bit and making even more extra payments and hopefully for even more money.  I’ve shared my reservations about paying extra on the mortgage before, but they mainly are these: I don’t know how long we’ll actually own this house, and what if we need the money?

I calculate the amounts for us to pay off the mortgage in so many years versus refinancing.  I don’t want to refinance our mortgage right now because we’d have to pay closing costs, we’ve already got a pretty good rate, and I don’t know how long we’ll be in the house.

-To pay off our house in 26 years (the original amount of time we’d have left if we had kept our original mortgage), we have to pay $22 extra a month.
-To pay off the house in 20 years, we’d have to pay an additional $135 per month.
-To pay off the house in 15 years, we’d have to pay an additional $308 per month.

Since one of our goals for this year is to live on one of our salaries, I’m thinking about taking a portion of my salary and applying it directly to the principal of our mortgage.  I’m thinking that $200 a month is an amount that won’t break the bank if we really needed it, and it will make a nice dent in the mortgage.  If I can continue that amount, we’ll have the mortgage paid off in 18 years.  Wow.  Of course, if I’m unemployed or Mr. Money is, we’ll have to change our plans and probably stop the extra payments.  For now though, I think it will definitely work for us, and I am happy that finally I’ve come up with a plan.

I’m going to keep plugging away at the mortgage and watching the balance go down. I can’t stand to see the thousands of dollars each year we spend in interest for the mortgage.

Do you think it’s a good idea to pay off a mortgage early?

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11 Responses to “Pay Off the Mortgage Early”


  1. Jackie says:

    Speaking for myself, I’m all about getting rid of the mortgage as soon as possible. It will be so freeing to really have all my money be mine. Plus, we don’t get a tax deduction or anything for ours, so I see no benefit to paying a ton of money to the credit union that we have our mortgage through. I’d rather pay a ton of money to myself.

    Regarding your reservations, if you sold it you would be paid for any equity, so unless you think you’re likely to be underwater I don’t see why that is a reservation. Needing the money might be a different story, or it might be an emotional thing. Do you have an adequate emergency fund? (It doesn’t sound like you’d be cutting back on retirement or anything to send extra money to the mortgage.) What do you think you might need the money for? Especially with the lowest amount of $22, do you feel the same “what if I might need the money?” stress when you order a cheap meal?

    [Reply]

    Mrs Money Reply:

    Jackie- Good point about the cheap meal. I’m going to do my best to make as many extra principal payments as we can afford while adding to our emergency fund.

    [Reply]

  2. Jessica07 says:

    “I don’t know how long we’ll actually own this house, and what if we need the money?”

    Chances are you won’t. However, you’ll be wasting a lot of money that will go to towards interest if you keep NOT paying extra, fearing that you might need that extra. I’m not a fan of interest, unless it’s attached to growing stock.

    First, budget out 3 to 4 months of monthly expenses to set aside in an emergency fund, then start chopping away at that mortgage.

    …If you need a lot of money in a hurry, just sell your car. (Kidding… unless you have one to spare. hehe) Maybe we need, er, should have a coversation of needs versus wants. ;)

    [Reply]

    Mrs Money Reply:

    Jessica- Good point. We probably won’t need that money. I don’t like the thought of paying tons of interest. We’re adding to our emergency fund right now. I’ll keep doing that while paying extra on the mortgage!

    [Reply]

  3. krantcents says:

    In my case, I will be mortgage free in retirement (6.5 years). Should everyone? It depends what the interest rate is, because the IRS subsidizes home ownership by making the interest deductible. If you have a 4% mortgage and due to your tax bracket have a net interest of 2-3%. I would rather invest the money than pay it off.

    [Reply]

    Mrs Money Reply:

    krantcents- That’s awesome! Our mortgage rate is about 5.59%, which I think is pretty high. I’m very leery of investing. I probably need to get over that!

    [Reply]

  4. Heck yes pay that baby off! Plug your payment into any mortgage calculator and you’ll see how much $$$ you save in interest. Last week i did an entire post on how 30 year mortgages were for suckers. It’s all in the interest for me. If you really want to see if you can make it on one income, then make the level of extra payments that you’re comfy with and bank the rest. That way you are both saving (just in case) and paying off the mortgage at the same time. Never touch a penny of your salary except for the amount related to your work (commute, work clothes, etc.) and you’ll have a decent idea of whether you can make it on a single salary. G’luck!

    [Reply]

  5. MoneyCone says:

    Every bit helps. Just make sure your lender is applying to the principal and not future interest!

    It seems like a no-brainer, but there are many stories where a bank was applying this to future interest.

    [Reply]


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