People can debate all day about whether it’s smarter to rent or to own a home. All I have to do is observe the difference between those who bought a home in his or her 20s versus a person who waited until they were much older. Inevitably, the younger homeowners end up having more equity and more money compared to the people I know who were late starters in the real estate game. According to a recent article by Yahoo Homes, there are four tricks for paying off a mortgage early. I am testing out all of the early mortgage payoff strategies so that I can be completely free of debt before my 50th birthday in about 8 years. At this time, we owe about $90,000 on our loan with 12 years remaining. We have owned our home now for almost 10 years.
Tapping our retirement savings
I like the idea of tapping my retirement savings to pay off my mortgage in my 40s. The reality is, I want to own my home outright in retirement. I would rather have no mortgage than have a larger nest egg that could crack due to a stock market meltdown. According to the Yahoo Homes article, it’s not smart to tap retirement accounts unless a person is older than 59 and a half due to early withdrawal penalties. I would take out my contributions from a Roth IRA without having to pay any taxes or owe any penalties. As long as I don’t touch my earnings, I will be fine. My plan is wait until I owe just $10,000 to $20,000 on my mortgage and then I’ll tap my Roth to pay off the remaining balance.
Asking for cash gifts
Another mortgage trick is to ask for cash instead of gifts from family and friends. I know some of my loved ones don’t like to give cash gifts unless they see evidence the money was used to buy clothes or things as opposed to paying bills. However, I can apply this strategy with my most immediate family members. My husband knows I rather be able to put $100 toward our mortgage rather than receive a gift for Christmas. I prefer he spends time creating thoughtful homemade cards. I rather have the gift of being mortgage free when I’m in my 50s.
Refinancing while rates are low
I already too advantage of the lowest rates I’ve ever seen in history. My husband and I locked in on a 2.75 percent interest rate a little more than one year ago. We were careful to choose the 15-year mortgage instead of the 30-year mortgage so we wouldn’t be tempted to take longer to pay off our home mortgage. I don’t regret getting the 15-year mortgage when I refinanced although I wish I had started with a 15-year mortgage right off the bat.
Rounding my mortgage payment up
I have made a lot of progress by rounding my mortgage payment up the nearest $100 because I owe $925 a month. If my mortgage payment was $975 a month or higher, I obviously would not make as much progress with this strategy. According to the Yahoo Homes article, a person with a $200,000 loan at 4 percent and a payment of about $950 a month would save $13,606 in interest by rounding up to $1,000 a month.
I don’t listen to naysayers who think it’s pointless to pay down a mortgage, especially at low interest rates. If I didn’t pay down my mortgage, I’d waste the extra money instead of saving and investing. It’s too easy to spend money. Instead of spending it on frivolous things for my house, I just spend my money on my house itself.
More from this contributor:
Paying off My Mortgage Isn’t Stupid
Even Good Debt Has Been Bad For Me
3 Stupid Moves I Made to Get out of Debt