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PAY OFF YOUR MORTGAGE EARLY: I'm sharing the simple 6-step strategy that I followed to pay off my $86,000 mortgage in just two years. If you want to be 100% debt-free, follow these steps to pay off your conventional mortgage faster. Mine was a 15-year fixed-rate mortgage with a 3.75% interest rate. LEARN MORE: https://michaelsaves.com/mortgage/pay-off-mortgage-early/
Buying a condo in 2022? Here are 7 mistakes to avoid https://www.youtube.com/watch?v=_M5wnvPRcAk
0:00 Introduction
1:13 Step 1: Buy a home you can afford
2:50 Step 2: Get a 15-year mortgage if you can
3:56 Step 3: Set a target payoff date
5:11 Step 4: Automate additional mortgage payments
5:57 Step 5: Increase income and reduce expenses
8:25 Step 6: Reward your success
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0:00
You know, paying off a mortgage early is a goal for many people, so today I wanted to
0:05
share how I paid off my mortgage in just two years. Hello, my name is Michael and I run the personal finance website michaelsaves.com
0:14
I've been writing about money since 2010, the same year that I purchased a condo and
0:20
began prepaying my mortgage. Initially, I set out to pay off my mortgage in about four and a half to five years by
0:27
my 30th birthday. But I ended up crushing that goal and paid it off a lot sooner. In this video
0:33
I'm going to outline the six steps that got me there. Now this isn't one of those complicated
0:38
HELOC videos. These are just practical ways that I was able to pay off my mortgage early. I'm not
0:44
saying that you're going to be able to pay off your mortgage in two years, five years, seven years
0:48
or even ten years. But I know that these six steps work and you're going to be able to pay off your
0:54
mortgage a lot sooner than you think. So stay tuned for the tips, and if you have any questions
0:59
you can find some of the answers on my blog, michaelsaves.com, and also leave a comment below
1:05
I'll try to answer as many of those as I can. Right now, here are the six steps to paying off
1:10
your mortgage early. Step number one, buy a house that you can afford. When I was going through the
1:17
mortgage pre-approval process, the bank told me that I could afford a property up to $250,000
1:24
That's how much I could get a loan for. So a lot of people will take that number from the bank and then set that as their budget
1:31
But that's not what I did. I set my own budget. And I was able to set my own budget by reviewing my personal finances and thinking about how
1:40
much I wanted to spend on housing costs every month. And really, it's more than just the mortgage payment
1:46
You have to think about taxes, insurance, HOA dues perhaps, and then repair costs, especially
1:52
with older homes. So after I set my own budget, I gave that number to my realtor and we went shopping for homes
1:59
I got really lucky and was able to score a one-bedroom condo in Atlanta, Georgia for $107,000
2:06
and then my mortgage was $86,000 after a 20% down payment. So that $86,000 number is the amount that
2:15
I paid off in two years and two months Now I know you wondering where these properties were This was back in 2010 and the country was going through some really difficult times with the
2:27
economy, and real estate values were depressed. That same property is worth double now. So I think
2:33
if I were to go through the process again, it might take me four or five years to pay off my mortgage
2:38
using the rest of the tips that I'm about to outline. But still, no matter what the economy
2:43
you can set your own budget and not rely so much on that number that you get from the lender
2:50
Step two is to check out a 15-year mortgage. Now when I was going through this process
2:55
it was actually my grandmother who said, try to get a 15-year loan instead of a 30-year loan
3:02
And the reason is the interest rates for 15-year mortgages are lower than 30-year mortgages
3:08
So that means you're going to be paying less money to the bank over the life of the loan
3:13
Now, if you are thinking about this, you have to consider that the monthly payments are higher when you have a 15-year mortgage compared to a 30-year mortgage
3:23
If you bought a home below budget like I did in step one, this may not be too much of a concern for you
3:30
My monthly payment was $625 and the interest rate was 3.75% on my $86,000 mortgage
3:39
Let's say you end up going with a 30-year loan instead of a 15-year loan
3:44
Don't really sweat it. You can still make prepayments as long as you double check with your bank
3:50
Most mortgage providers will allow you to prepay if you have a conventional loan
3:56
Step three is to set a mortgage payoff date. This is your goal setting
4:02
And in my case, I planned to pay off my mortgage by my 30th birthday
4:06
I did it a little bit quicker than that, but my initial goal was by my 30th birthday
4:11
I arrived at that goal by looking at the numbers, and I checked with my budget to see how quickly
4:19
I could realistically pay off my mortgage. Now, you have your normal mortgage payment, but in order to pay off your mortgage rapidly
4:26
in 10, 7, 5, or 2 years like me, you're going to have to be throwing a lot more money at
4:32
that principal. So I looked at the numbers and decided that by my 30th birthday was a realistic goal And in addition to that long goal I also set short goals all along the way Those short goals helped keep me motivated to continue this process
4:50
And speaking of motivation, I told my close family and friends. I posted notes around the house with
4:57
reminders about my payoff date. And I was constantly tracking the numbers and seeing the balance go
5:02
down every month, those are all things that helped me stay pumped about paying off my mortgage
5:08
for that two years. Step four is to automate your extra payments. Chances are you already have your
5:16
mortgage deducted from your checking account automatically on a monthly basis. But what you
5:21
can do is you can go to your lender's website and you can do the same thing for your extra payments
5:27
whether it's $100 a month or $500 a month, whatever you know that you can do to prepay
5:32
that mortgage, you can set up those recurring transfers between your bank and your lender
5:38
Now, I did that, and in addition to that, I did a series of one-time transfers. So when I got a
5:43
big tax refund, I made a one-time transfer from my checking account to my lender, and then I saw
5:51
that mortgage principal balance get closer and closer to zero. Every bit helps
5:57
Number five, increasing income and reducing expenses. This is the most important step of the process
6:04
So let me tell you what I did. In addition to working my full-time job
6:08
I set a goal to work an extra 10 hours a week doing various side hustles
6:13
And I took the money that I earned from those side hustles and applied it towards the mortgage principal balance
6:19
So what did I do? Three things primarily. The first one is I freelanced at my full-time employer
6:25
in a different department. Then I waited tables part-time and mostly did that on the weekends
6:31
There were lots of events such as weddings and other celebrations. And finally, I pet sit. I found
6:38
gigs around the holidays where I could charge a pretty high rate. On top of that, I increased my
6:44
income by maximizing credit card rewards. I took a really close look at how I was spending my money
6:51
and how I could earn more cash back. And speaking of spending money, the second component is reducing
6:56
my expenses I always been a pretty good budgeter so I went through my budget categories one by one and looked for opportunities to save money Now I didn give up everything I remember through this process I had a personal trainer
7:10
who came to my condo twice a week and we would work out so I did spend money on the things that
7:16
mattered to me but I did ask myself line by line through the budget whether things mattered to me
7:22
and the things that didn't I cut out. So what did I cut out? Well first cable television. I cut the
7:27
cord before people were talking about cutting the cord and I reduced the amount that I ate out. I
7:33
set a rule for myself which I still follow to this day and it's that I only like to eat out when it's
7:39
a social experience. In other words I won't go run to the drive-thru to eat alone. When I'm with
7:45
friends sure I'll pay to eat out because then it's an experience. It's something fun and it's something
7:50
that I value but I don't have that same sort of a reaction when I'm just going through a drive-thru
7:57
And another way that I save money is that I started comparing the prices for my services
8:02
whether it's your cell phone, your insurance, or your internet service. You can compare all the different companies and usually find a cheaper rate to switch to
8:11
even if it's just a promotional rate. My whole life is really dedicated to helping people save money, so these are just a few of my tips
8:19
You can find a lot more on my blog, michaelsaves.com. step six is to reward your success look paying off a mortgage is a big long-term goal so you
8:31
can break it up into short-term goals what i did for every five thousand dollars that i paid off
8:36
the mortgage i gave myself a hundred bucks and i could use that to spend on whatever i wanted
8:41
and once i finally eliminated my debt completely i celebrated i went to aruba and had a fantastic
8:48
time the biggest reward though from paying off a mortgage is the sense of freedom that i got
8:53
from being completely debt-free. This has really changed my life for the better in so many ways
8:59
and paying off my mortgage helped me navigate some changes later on in my life
9:04
both good and bad. So it's something that I definitely recommend, and I would love to hear from you if you're in the process of paying off your mortgage
9:10
or if you're already a success story. If you have any questions about my story
9:15
you can leave them in the comments section below or visit my blog, michaelsaves.com
9:20
and please subscribe if you like this video. I'm just getting started here on YouTube. Thanks so much for watching
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