My husband and I took out a 30-year mortgage in 2005. Our goal was to pay off our mortgage in half the time. Looking back, it would have been easier to force ourselves into paying our home off early with a 15-year mortgage. However, we are still committed to our goal of paying off our home in half the time. We refinanced our home twice in order to take advantage of lower interest rates. We currently have a 15-year fixed rate mortgage with a low interest rate of 2.75 percent. In order to pay off our mortgage by 2020, we have to pay more than the minimum $930 we owe every month. Although it hasn't been easy to keep to the course, we are still on track to reach our goal by 2020.
Becoming a serial refinancer
We aren't exactly serial refinancers, but we did refinance our home twice. We took advantage of a free refinance offered by our bank the first time. The second time, we waited until we had at least 20 percent equity in our home so that we wouldn't have to pay private mortgage insurance or PMI. Being forced to pay PMI would have made it more difficult to pay off our home in half the time since we'd have an extra $50 a month tacked onto our mortgage bill every month. I'm glad we lowered our interest rate since more of our money can go toward paying down the principle instead of paying for interest.
Pretending our mortgage never changed
The key way we have been able to stay on track is by pretending that our monthly mortgage payment never changed. We've always had to pay about $1,500 a month in order to meet our goal of paying off our mortgage in 15 years. Throughout the years, our required mortgage payment has fluctuated depending on our latest refinance as well as property taxes. When we first bought our home, we owed about $1,100 a month. After our first refinance, our payment went up to $1,230 because we switched from a 30-year to a 15-year term. With our second refinance, our payment dropped down to $930, but we still pretend to owe $1,500 each month.
Staying one month ahead
Another trick I use is to pay the extra money one month ahead in case we have an unexpected bill or expense that would prevent us from paying extra on our mortgage. I want to be able to skip a month if I have to without derailing our goal to pay off our mortgage in half the time. If I get a tax refund or unexpected windfall, I use that money to pay down my mortgage so I'm ahead of schedule. I've found it's nearly impossible to catch up if I miss a month of paying that extra $500 to $600.
Although not everyone agrees that it pays to put extra money toward the mortgage, I'm glad we are sticking to our timeline. I can't wait to finally be free of our mortgage. Some experts say a person shouldn't refinance if they want to pay off their home early because the "clock" is basically reset. However, by getting the lower interest rates, it's been actually easier for us to pay down our mortgage.
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