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How I Paid off my $64,000 Mortgage in 15 Months

August 20, 2017

In the summer of 2012, I decided to divert all my financial energy toward one goal: paying off my mortgage. With some careful planning and discipline, I was able to pay off the $64,000 balance in just 15 months. Why and how did I do it?

Why I Did It

For every financial expert who states that a mortgage is a “good” investment – after all, the interest is tax deductible – there are an equal number of experts who stress the fact that a mortgage is, after all, debt. And eliminating debt is one of the fastest ways to reach financial independence. Ultimately, it’s a personal decision based on your own priorities and values. Three reasons led me to prioritize paying off my mortgage.

Reason 1: It was a sure 4.25% savings rate

The interest rate on my mortgage was 4.25% for the 15-year loan- a rate that could be exceeded by most conservative investments not too long ago. But the recession of 2007-2009 was a harsh reminder of how precarious our finances can be. Many of my stock investments plummeted in value during that time and the days of 5% interest on money market accounts now sounds ludicrous. The 4.25% mortgage rate was a sure bet. I really liked the idea of paying off the mortgage early, which effectively earned a return rate that exceeded what I was earning through some of my  personal investments.

Reason 2: I could afford to pay off debt

The recession underscored one ugly truth: there is no guarantee of employment. For many of us, myself included, salaries are precarious. My income is based on my ability to bring in government and private grants. As the economy suffered, how would that affect my ability to bring in grants? Indeed, I recall a colleague losing grant funding because the Foundation folded after investing in Bernie Madoff’s Ponzi scheme. My employment is not secure, and my biggest expense was my house.  At the moment, I could afford to pay off the mortgage, and that would leave me with very low expenses that do not require a large salary.

Reason 3: I love challenges

Truthfully, I get a little thrill undertaking challenges! My goal sounded foolhardy when I first said it aloud. Sure, pay off $64,000 in just over a year! I wanted to test my ability to stay disciplined and motivated. If I knocked this out of the ballpark, then I had full confidence that I could live frugally and gain financial freedom.

How I Did It

Good execution requires planning, experimenting, and having fall-back options. Four key strategies led the way to my success.

Newfound Tools to Test and Refine my Plan

Before I really launched into the plan, I had a three-month preparatory stage. I built my emergency savings account and experimented with frugal budgets. Here are the tools that helped me the most:

  1. The electronic checkbook register was my most essential tool. It allowed me to enter my expected income and expenses into an Excel spreadsheet and forecast into the future.
  2. I estimated how variations of my payment plan would impact the length of my mortgage by using the downloadable loan amortization schedule spreadsheet.
  3. The money diet  – spending money only on necessities – made me more conscious of my spending habits and got me on track to a frugal lifestyle.
  4. I opened a “Fun Account.” Thanks to the money diet, I concluded that life can’t be all about deprivation. Fun had to go into my plan. I opened a Capital One 360 account and put a little money aside each month for restaurant meals, movies, or travel.

Once I ran the calculations, I felt that I could hit my goal in 18 months. That was a goal I ended up beating by three months thanks to additional strategies.

Unexpected Bills and 0% Interest Payment Plans

Murphy’s law hit early in the program. I had built a healthy and fit lifestyle, but in month 4 of the program, I experienced health problems that led to visits to the emergency room and a hospitalization. In month 14, back surgery added to the list of unexpected major expenses. Those large bills could have easily derailed my plan. Instead, I was able to stretch out my payments through a combination of the hospital’s 0% interest payment plan and securing a new credit card that offered an introductory rate of 0% for the first six months.  And was I ever thankful that I had a good employer-sponsored health insurance plan that capped annual out-of-pocket expenses at $2,500. As a result, I was able to keep my mortgage-free goal on track.

Aligning Money with my Values

Financial experts would frown at this next move! I stayed in the market after the recession and I was feeling pretty good about the balance in my retirement accounts. In fact, I felt comfortable enough to take a hiatus from regular retirement contributions and divert those funds into mortgage payments. I also began to review other investment accounts, especially a new car fund and a supplementary college account for my daughter. Over the course of the program, I closed out both funds and diverted them into the mortgage. Again, I’m sure some would think this unwise. But the truth is, my old Honda was running just fine and my daughter’s school performance was not going to transpire into admittance to a four-year university. Once I made these moves, I was able to pay off my mortgage in record time.

I Worked at it One Month at a Time

Some days I felt downright discouraged looking at the giant balance that was still due. But by focusing on each month and meeting challenges imposed by an unexpected bill, I was able to take actions that minimized the damage. Additionally, I was fortunate enough to have built up a savings account to dip into when things got tough. Not everything worked out as planned. For instance, I attempted to bring in some extra income through the publication of an e-book (Healthy Cruising: Leave Your Elastic Pants at Home). I’m still waiting for the proceeds on that one! When it comes right down to it, I accomplished the outrageous $64,000 goal the old-fashioned way: trimming expenses and diverting funds. I’m fortunate – you might have to bring in a second income, whether it be a part-time job or selling goods and services. For me, being mortgage-free is a major step toward financial independence and was well worth fifteen months of delayed gratification.

For Those who Love Details

Beginning Mortgage Balance (July 2012): $64,108

Final Payment: September 2013

Estimated Monthly Mortgage Payments to Meet Original Goal: $3,700

Actual Monthly Payments: $1,900 bi-weekly (plus additional payments after sale of investments)

Net Income (after taxes and insurance deductions): $86,251

Strategy 1: Lower Expenses

I live frugally, but I have a respectable income and never felt like I was making major sacrifices. My original mortgage payment was about $1,300 per month. I increased that to $800 bi-weekly, with the difference made up by spending less. (I actually paid $1,900 bi-weekly when adding in savings from strategies 2 and 3.)

  • Annual savings: $800 x 26 = $20,800

Strategy 2: Increase Take-Home Pay

I was getting a hefty federal tax refund every year. It was time to put that money to work, so I increased the number of federal tax exemptions, for bi-weekly savings of $150.

  • Annual savings: $150 x 26 = $3,900

Strategy 3: Divert Funds

The biggest source of funds came from a diversion of funds from retirement contributions and emergency savings.  I halted my retirement contributions, which allowed me to divert $500 every other week toward the mortgage, and since my emergency savings goal had been reached, that freed up an additional $750 per month.

  • Annual savings: ($500 x 26) + ($750 x 12) = $22,000

Strategy 4: Delay Purchases and Sell Investments

The final strategy involved delaying purchases, especially a new car. My car investment fund of about $11,000 that I had saved in a DRiP (Dividend Reinvestment Plan) went toward the mortgage, as did the $100/month that I had been investing.

  • Annual savings: $11,000 + ($100 x 12) = $12,200

That’s really all there was to it! Altogether, those strategies freed up $58,900 in one year!

Fast Forward to Today

Since then, I’ve reaped the benefits of being mortgage-free. I am maxing out my retirement contributions, tucking money into savings, and making regular investments into my Betterment account for home improvement projects. But it hasn’t been all work! For instance, I’ve dipped into my travel account to enjoy fabulous tript to Peru, Germany, and Ukraine. And the old Honda is now a new Honda – I finally traded in my 12-1/2 year old CRV for a sleek HRV. I’m still frugal, but the dreams I used to have about being a homeless old “bag lady” have stopped .  Life is good!

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Dr. Brenda

Dr. Brenda is a sociologist, financial coach, and full-time RVer. Her offerings include the Gutsy Women Finance community, the Financial Freedom Academy, and Financial Freedom for Women Workshops.

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