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  • Great post James! I have been paying back as much as I possibly can afford for the past 5 years and if we continue at our current pace our debt will be gone in less than 15 months.

    I’m pretty sure our pace is going to slow over the coming year with only me working, but still it’s good to see how quickly your debts can be paid off by paying extra.

  • I personally am not in favor of paying off mortgages faster than you need to, at least if you have a “rock bottom” rate. The interest rate on my loan is so low that I honestly think inflation will be higher long-term, therefore giving me a huge incentive to only pay the minimum. Different people have different goals, though, so I can understand why some do decide to pay it off faster.

    • Yeah, I definitely counted on some resistance from US based people where you have ridiculously low interest rates – in some situations it isn’t all together as beneficial as I’ve outlined. If you have a rate at 5% or more, it’s definitely worthy of consideration.

  • Pauline says:

    I am aiming for early retirement too and not repaying my 2.29% mortgage. I think if you take inflation off it is almost a free mortgage! I looked into offset mortgage but the rates were higher, so I am offsetting a bit of mine in a 3% savings account and investing the rest to try to be financially independent faster. Yes it is risky and yes being indebted sucks but it is a mean to an end. Great post!

    • A 2.29% mortgage should be paid as slowly as possible in my view! Any time you have a debt lower than CPI/inflation, it’s pretty hard to justify a fast repayment. Having said that, there is a lot of merit in doing so for psychological reasons rather than financial ones.

  • Michelle says:

    We aren’t doing well with our current house, only because we know that we want to move by 2014. However, we do plan on saving as much as we can and paying for a lot of the new house with cash.

    • Remember Michelle, that the more you put into the mortgage now before the sale, the more equity you’ll have in the proceeds of the sale of your house – it’s worth looking at, but it might be more beneficial to pay down the mortgage (and reduce the interest paid) than save money in a really low interest cash account – worth a look!

  • Catherine says:

    Great Post! Being mortgage free is far from our primary concern but we will likely shift to larger mortgage payments in 5 or so years when most of our other debts are paid.

  • We are paying ours off as soon as humanly possible. I think we are about 34 months away and I can almost taste the freeom!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    Good post, James! I totally understand how you feel.

  • Veronica @ Pelican on Money says:

    Wow, that’s a lot of money to be saved with higher payments! I still rent, but only out of circumstance. As soon as I can get out of here, I’ll buy something affordable (hopefully with some extra side income at that time).

  • K.K. @ Living Debt Free Rocks! says:

    Good post. Once we purchase our home it would be our intent to pay off the mortgage as soon as possible regardless of how low the mortgage rates would be at that time. As another poster suggested one needs to do what feels right for them.

  • It all sounds pretty good. I know, personally, my wife and I recently refinanced, but after htat, there’s not much we can do to pay $500 extra a month! THat’s a TON of money! Can’t bike to work because I have tools and go to job sites all around the city every day… it’s tough. But we get by and do the best we can!

  • I have thought about paying more toward my mortgage, but I have aspirations to move to another home in the next 2 years. It won’t make sense to pay more than I need to because I need to save for a down payment on my next house. I will be using these techniques once I get into the other home, so I can cut the interest paid. Nice post James!

  • It’s pretty crazy to see the calculations between a 15-year mortgage and a 30-year mortgage. It’ll make somebody sick when they realize just how much money they’re throwing away.

    Frankly, I’ve never thought about putting my savings into my house and then having the ability to take it back out. What are the drawbacks to these types of loans (higher interest rates or origination fees)?

    • My particular mortgage has one of the lowest interest rates, no annual fees, or account opening fees, it’s almost a fee-free loan. The draw back was needing a larger than normal deposit, which lowers the risk for the bank, allowing them to offer more generous features knowing we’re less likely to default.

      Some of the banks will offer these features for a trade off in other areas. It’s also surprising how many banks will let you negotiate these sorts of terms if they don’t already offer them.

  • Melissa says:

    Great tips, and you are right, when you want it bad enough, it is easy to come up with the motivation! We don’t have a house yet, but plan to offset some of the mortgage expense by having a hefty down payment.

  • Mackenzie says:

    These are great tips! I am renting right now, but in a few years, we want to buy. I’ll have to earmark this post so I know what to look for when that time comes.

  • After muh though, we are going to try and knock our mortgage out in the next few years. We’ve been agressively paying other debts that are gone, so might as well keep on rolling. The freedom of owning a home outright is just too good and that will free up all kinds of room for other investments. Good luck. It sounds like you are well on your way.

  • My wife and I are all about slashing years off of our mortgage. So much so, that we are planning to have it paid off in 5 years! How crazy would that be for us to be in our mid-30’s and be completely debt-free? Great post!

  • It almost reminded me of the Manulife One account in Canada where you put all your money into one account which is a savings account and your mortgage. We were going to do that but decided not to since we knew we would have the money to pay the mortgage 3 years after we took out our first mortgage. We put extra on our mortgage each month but for the most part we just saved the money in a high interest (rubbish) account. Probably a million better ways to get better money back on interest but we took the easy route. We have saved enough in 3 years to pay off our first house by living below our means. You are right, if you want it bad enough you will grab it. It’s all personal choice and what we value as individuals. Great post Mr.CBB

    • Thanks Mr CBB – that’s the hard thing about personal finance. There is rarely The Right Way To Do Things in all circumstances. Everyone’s situation is different and it’s important to be happy with your choices. I just raised this method because it’s working for us and will save us a ton.

  • Boris says:

    I always knew paying extra for your mortgage helps you save money, but sometimes you don’t realize how much. Thank you for putting it into perspective. Interest sucks!. I also think a good way to save is by refinancing into a 10 year ARM loan with a much lower interest rate. After you do that, then start prepaying aggressively. This way you can have a win-win situation in both rate and total cost you’ll end up paying.

  • Savvy Scot says:

    Even thought I have written about this many times, it never fails to amaze me the difference you can make to the amortization of a mortgage! :)

  • Great post! Even if you can’t afford to increase your payments each month, you can always try to save up so you can pay a 13th payment at the end of the year. Even a little commitment like that can help to decrease the amount of interest you pay over time!

  • Justin@TheFrugalPath says:

    Aside from the financial benefits of paying off a mortgage early there is also the freedom. Imagine the emotional and psychological benefits of knowing that you own your home free and clear. Sure you’ll have to pay upkeep, insurance and taxes, but not sending in a payment every month surely must be a freeing experience.

  • Don’t forget about inflation. The future dollars you spend paying it down are worth a lot less than today’s dollars so keep that in mind. In addition to that paying down the mortgage locks your money in illiquid equity. Just some thoughts to keep in mind.

  • That’s a pretty nifty idea to be able to later withdraw money you paid off already. Kind of like having a HELOC built into the mortgage.

  • I love the thought of paying off our (future) mortgage way earlier than the amortization period and being able to kick it to the curb. And we don’t even have a mortgage yet!

    There are so many benefits to this, it’s not even funny. Although, living in a place where average home prices are far, far above the $250 and income to housing prices ratio is much higher than average, it sounds a bit harder to do. Not impossible! But hard.

  • Buck Inspire says:

    Excellent post and very timely as I’m trying to get into a new home. Great point about using your mortgage as a savings account. 3.5% is better than the 1% anywhere on the planet. Will follow your savings plan when my mortgage kicks off. Thanks!

  • They certainly exist – it might be a good idea to talk to a mortgage broker who offers a free service. They can often list mortgages by features, and then you have a list of mortgages offering this facility.

  • I’m all about slaying the mortgage :-)
    One thought I saw recently at mortgagefreeinthree.com was using a X% increase concept. If you managed to put an extra $100 in the mortgage this month, try to make it $101 next month, $102.01 the next, etc etc. It’s a very manageable increase, but over time it adds up to a LOT of savings.

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