It might sound odd, but we are paying off our mortgage as quickly as we can so we can move to a better neighborhood. Our response to the housing crisis and its aftermath has been to become mortgage free so we can turn our house into a true real estate asset. After paying off our mortgage in a few years, we will rent out our house. With an estimated income stream of about $1,500, we will be able to quickly play off our new mortgage in 15 years or less. According to an article by Forbes, owning a home that’s available for rent can generate income that may result in a positive cash flow. In contrast, most people’s primary residence is a liability as they pay taxes, interest, mortgage insurance, landscaping, utilities, repairs and other housing costs. With the cost of rent skyrocketing where I live in the Tampa area, it’s no wonder a growing number of homebuyers are planning to turn around and rent out the properties. Instead of having two mortgages, we are working to pay off our mortgage with some techniques I learned from a Yahoo Homes article.
Juggling more than one mortgage
While we are tempted to buy our next home now, we know there are too many potential pitfalls. Our mortgage lender said we would be approved for a second home purchase because of our income and credit score as well as low debt-to-income ratio. However, I know it can take several months to find a renter. If we wanted to sell our home, we can’t be sure we will find a buyer. A surprising number of my neighbors have let their homes fall into foreclosure. Some of them had financial problems that prevented them from paying their mortgages. But some of them bought other homes before letting things slide as far as financial responsibilities to their first homes.
Becoming a serial refinancer
I’m not ashamed to admit I became a bit of a serial refinancer when the interest rates dipped to historic lows. I shortened the length of my loan so I could lock in a lower rate while also forcing myself to pay more each month than I used to pay with a 30-year loan. Because of this strategy, I’ve already knocked 9 years off my original loan. I don’t anticipate refinancing again since I already have a low rate of 2.75 percent. However, with our new mortgage, I’ll be on the lookout for opportunities to save money by refinancing.
Rounding up and doubling up
I used every trick in the book for paying down our mortgage. If I owe $940, I round up to $950 or even $1,000. Even though I only have to pay once a month, I make payments several times a month. When my mortgage payment went down due to a decrease in property taxes and insurance, I acted as though I was hit with an increase to my taxes. If my husband spends $30 at the movies, I send an extra $30 to our mortgage company. By being inconsistent but diligent, I’ve made massive progress toward our goal of being debt free.
Some people may say it makes no sense to become debt free only to take out a new mortgage and start the clock all over again. The difference is, we will be starting the clock with a major real estate asset that generates income for us. If the situation changes and the going rate for rent plummets, we can always sell our first home. We also have the option of selling our second home and moving back to our original house. Either way, we will either have a paid-off retirement home or an extra stream of income when we are living on Social Security.
More from this contributor:
Losing a Job, But Not Our House
Increasing our Home Appraisal
What We Gave up For Our Dream Home