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Tuesday, February 25, 2020

How We Paid Off Our House in Less Than 5 Years

If you're looking for the #1 best tip ever for paying off your mortgage quickly, this is how we did it:

Make your mortgage the #1 priority. 

We made our mortgage payment our number one. Every month deciding what we can pay on the mortgage was our biggest budget decision. It was NEVER just another payment.
When we sat down to create a budget, the mortgage payment was everything leftover after bills, food, etc.
Every single dollar over what we needed to survive, we put toward the mortgage.


We bought our house in May of 2015 and got married one month later. We had zero debt before we moved in together and we both lived at home with our parents. 

We didn't have a big wedding. It definitely cost us less than $500, but I can't remember exactly what it came out to. We got married at the courthouse, I ordered my wedding dress on Ebay for like $30 after finding the dress I liked at the mall and trying it on. We held the reception in my parents' beautiful, big backyard. My parents gifted us the food, we had a buffet and a table full of my mom's homemade pies! My mom helped me with decorations, it was a rustic theme with like mason jars and burlap, etc. My husband borrowed the chairs and tables from his work. We got a couple kegs, that was actually the biggest expense haha. And we wouldn't have changed a thing, it was perfect. My only regret is that we didn't film it! 

The house we bought was a foreclosure, and we got a great deal on it at $103k, and we put $1,000 as our downpayment. We got a 15 year mortgage, and our monthly payment was about $1,000. We also live in the rural midwest, so things are cheap here. Just 10 miles east and the house would have cost us an extra $50k, but lucky for us my husband's parents already lived in this town and my parents owned property here too where they planned to move in the coming years anyway. So living in this town wasn't a big sacrifice for us, even though my husband works 50 miles away in the city. 

My dad gave us this tip: buy a house you can afford on one income, that way if either of us were to lose our job, we'd still be able to afford it. That's how we were able to more than double our monthly payments and pay it off so quickly. 

We did some work on the house before moving in too. We got new flooring in some places, painted everything, graded and seeded the yard, and other little things here and there. We got our appliances on Craigslist. And since we got married soon after we moved in together, we waited on a lot of the small kitchen appliances and dishes, etc. because we knew we'd get a lot of those as wedding gifts. We literally owned two plates and two bowls from the dollar store for that first month of our marriage. Justin actually got me a pots and pans set for Christmas the year before we knew we'd be moving out, our parents and grandparents got us glasses and silverware, etc that Christmas before so we had been slowly getting ready to move out for awhile. We had also been accumulating random furniture during our years still living with our parents too. 

We made some bigger purchases, but nothing too crazy. We did need a lawnmower when we first moved out, so we got one with 0% interest and had it paid for in three months. We bought an entertainment center for the living room in that first year, and a new couch in 2018 right before Eren was born. We replaced our Craigslist washer and dryer when the Craigslist dryer went out, but got a big discount on them because they were returns. 

So we had been preparing to move out for awhile. 

These are all the things we did to pay off our house in under 5 years:
  • Budget - we recorded everything - we stuck to a general budget every month for essentials. We went through strict phases, and lenient phases, but I definitely still find value in simply recording what we're spending money on. It keeps my husband and myself accountable to one another, and it helps us at least be able to see if we are in the ball park. Since we use credit cards, it helps us see what the following month is going to look like in our bank account. We stuck to a monthly total budget. It's not like we were only allowed X amount in particular categories, we just didn't go over our monthly allowance overall. If it was the last weekend of the month and we wanted to go out for dinner, we didn't do it if we were getting close on the monthly budget total. More info below. 
  • No cable - with cheap streaming services like Netflix, paying for cable just doesn't make sense for our family. We have an antenna for the basic TV channels, plus a couple streaming services, and that's all for TV.
  • No gym membership - we own weights, a yoga mat, and have shoes for walking.
  • Packing lunches - that's a no-brainer for us. Yeah, it's nice to eat out, but it's not worth it to us. My husband keeps a loaf of bread, peanut butter, and jelly at work. And we both take leftovers occasionally. 
  • Limited monthly subscription boxes - when we both lived at home, we had several subscriptions. Over time, we realized those were mostly junk, so we got rid or them. 
  • No other debt - no student loans, no credit card debt. I was fortunate enough for my parents to pay for my education and my husband bought his car before we got married. 
  • Speaking of credit card debt - Credit cards are good for rewards points and they are more convenient than carrying cash - that's why we use them. I actually save up all of my credit card points to use in January after Christmas time, I usually have about $100 to use on the next credit card statement to help ease the extra cost of Christmas presents. When I got my very first credit card at 16, my dad made it very clear that credit cards are only for convenience. You simply do not put something on your card that you can't pay for right now. Credit cards are short term loans. And by short term, I mean one month until your statement comes. 
  • No car payments - Yes, my car is old (2002), but it still works and I don't drive very far. My husband bought his car new before we got married, borrowed the money from my dad, and paid it off in a few months with interest. We don't think it's necessary to have a new car every couple years like so many average, everyday Americans. A new (to us) car for me is the next big purchase we have planned though. 
  • Meal planning and limited grocery trips, plus sticking to the shopping list. When you go to the grocery store with a list in hand, you're just less likely to buy a bunch of junk that's bad for your body and your budget. 
  • Cook from scratch - I like to think we have a very nice balance of home-cooked stuff and not. We eat out maybe every other week. We eat totally made from scratch dinners, or frozen pizza, and everything in between. 
  • Home improvement budget always came from our tax refunds. We have finished our basement, poured a new patio, built a shed, done some flooring, and landscaped at our home, but we always waited to use our tax refunds to pay for those home improvements. My husband is also really handy and we were fortunate enough to have a lot of help from relatives to do our home improvement projects too. Remember to help out your friends and family whenever they need you and they'll be more likely to help you out one day too.
  • My husband's Christmas bonus = Christmas present fund 
  • Large amounts of extra money go to the mortgage: any leftover tax refund money or other bonuses from work go straight to the house. 
  • No vacations - this hasn't exactly been intentional, we just didn't want to take trips with tiny babies these last few years. 
  • We did make one stock investment that helped us. We invested a little over $13k, which grew to $28k in a couple of years.
  • We had two kids. That might not sound like a budget friendly thing to do, but I personally attribute a lot of our progress to having to grow up and worry about more than just ourselves. I stopped spending so much money on myself, I didn't buy a new outfit every week, or all the latest makeup palettes. I realized life was now bigger than myself. Plus, we just had less time for fun shopping or going out. Ha! We also were very fortunate to have a TON of hand-me-downs for the kids. 
  • We never had an emergency fund. Our extra payments were our "savings." For example, if we needed a new water heater, we would put it on a credit card, then pay less on the next month's mortgage payment, and pay off the water heater on the card. We had this extra money already built into our mortgage payments. And if we needed something even bigger, the way we saw it, we could borrow it from either of our parents. It never came to that and of course, that's not feasible for everyone, but that was our philosophy. Sometimes we may have had a few hundred dollars saved, but an emergency fund was not constant in our household.
The Nitty Gritty:
Our income has varied a lot.
My husband does work on salary, but when I was working, I ranged from full time (4 days/wk, 9 hr days) to super part time (3-4 days per month).
Our income together (when I worked full time May 2015-Nov 2018): $3750-4500/month
Our income together (when I worked part time Nov 2018-Oct 2019): $3100-3375/month

$2500 mortgage 66%
$400 groceries 11%
$250 gas 7%
$460 utilities and subscriptions (everything from car insurance and water, to internet and Netflix) 12%
$140 other (gifts, entertainment) 4%
Total spending before mortgage: $1250
Percentages based on $3750/month average.

So I knew we needed $1250 just to survive the month (without accounting for the mortgage). So at the beginning of the month when the mortgage was due, we'd just account for that $1250, and everything else went straight to the mortgage. 
Our average mortgage payment was around $2,000-$2,500 every month. 

And all of this is the reason why I'm now able to stay home with my kids. We made these sacrifices so I could be a stay at home mom without having financial worries. 

This was our goal: I would work while we had two kiddos, then I'd be able to stay home with the two next babies (we've always wanted four kids). And we even got to accomplish that early because we won't be having baby #3 for another year or more. 

I'm not here to tell you this is what you need to do to pay off your mortgage quickly, I'm just telling you these are the steps we took. This is just what we implemented to make it our priority. Every family is unique. I do hope this was helpful in some way.