Housing is something I've had both good and bad luck with over the years. While we're quite happy with our current living situation, our last home brought a lot of frustration and lost money as the housing market collapsed. Even with home values falling around us, we didn't let this stop us from paying down our mortgage though. And in the process, when we sold our first home, we were able to buy our second, downsized home outright.
Here are three things that we did in an effort to get our mortgage on that first home paid off faster and allow us to eventually own a home outright in less than five years.
Bi-weekly Mortgage Payments
While I consider the bi-weekly mortgage we signed up for with our first home a mistake now, at the time, it did help us pay down our mortgage faster. I realize now that by making the extra payments ourselves rather than paying an application fee, and then bi-weekly transfer fees per transaction, we could have saved ourselves a couple hundred bucks. However, it was a valuable learning process, and as I said, it did help cut a couple extra payments off our mortgage timeline during the three years we were in our home.
Our Own Extra Payments
As I mentioned, we could have avoided the bi-weekly mortgage payments with additional payments of our own, since in effect, our bi-weekly plan was the equivalent of adding an extra full mortgage payment a year. However, since we had already paid the nearly $200 application fee and got everything set up for our bi-weekly payments, I figured we might as well continue them.
This didn't however stop us from making extra payments of our own whenever possible. Whether we got our tax returns, holiday money, or just had some extra cash saved up, we often made transfers from our bank accounts to our home mortgage to pay it down faster. By the end of the three-year stint in our home, we had shaved an additional two years time off our 15-year mortgage through our efforts in this area.
When we sold our first home, we took a substantial financial hit. I'm talking close to the six figure range here. However, amazingly we still had some equity to pull out of that home due to our large downpayment and all our extra payments.
As we started to look for a new home, we realized that our first home was much more space than we needed or frankly, wanted. Therefore, we considered a downsized living environment. Doing so allowed us to consider options and property ranges that we hadn't with our first home experience. In the process, we looked at condominiums, one of which we purchased for close to $140,000 -- less than half the price of our first home. While it was also less than half the size, we were willing to make the sacrifice in order to be able to purchase the property outright and be free from mortgage payments -- and all the associated interest -- in the process.
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The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
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