| I really like your determination to be
out of debt! There is no reason why you can't pay off this
mortgage in 10 years...or less!
We as
Americans have been conditioned to accept mortgage debt (and debt of all
kinds!) as a way of life. We have been conditioned to believe
that debt-free home ownership is something that only happens to people
that have been making faithful payments for 30 years.
However, things weren't always this way!
In the 1930's and 1940's, the typical term of a home mortgage loan was 10
years! (Yes, you heard that right!). In the 1960's, it
was 20 years. Now, in the year 2000, the overwhelming
choice of home buyers is a 30-year mortgage loan.
Why have things progressed to this? Why
do we accept the idea that we have to be saddled with debt our whole
working life, especially mortgage debt? I think that there are
2 reasons. First, as I stated before, we have been
conditioned to accept this, by often well-meaning people within our
society. Second, we seem to want everything now...and more
of it! We often aren't willing to wait or accept the
"compromise" of a smaller home or a home in a slightly less
desirable location. The only problem is, "easy lending" does
helps us get the "house of our dreams"...but this debt
fills our lives with worry and anxiety...all due to having debt
hanging over our shoulders during times that we should be happily
raising our families, contributing to our chosen professions, and...most
important...building up our relationship with God!
So, what is the solution? How do you pay off
your house early? The answers are actually very simple...but
sometimes not easy. The first step is to not buy more
than you think you will need for the next 5-10 years! II say
5-10 years because no one can really predict if they will get
married...or have kids...or have their parents in...support a needy
person...etc. Or, what if you decide to open a business in your
home? Whatever your situation, do some thinking about what
you will really need for the next 5-10 years. The object of
this is to not buy "too much house"! If you already
own your own home, that may mean selling the house that you are in
now! I know these might be hard words to some, but think about
it...is your house payment a burden to you? Is it creating stress
in your marriage? Is it really worth the worth the worry?
Life is just too short!
Second, make the decision to pay off
your mortgage quickly! Too often many of us (including
myself!) have the greatest intentions of doing things that sound good,
but we don't follow it up with any action! However, there is a
powerful effect that happens when you make a decision and start acting
on it...things start to fall in place and align with your decision,
especially if it is a wise one! I had read about the possibility of
paying off my mortgage 6 months before I actually did something about
it. One day, I started just playing around with the numbers...and
was shocked at how quickly I could pay this "monster on my
back" off!
Third, do the math and figure out how quickly
you can really pay your house off! Now, let's examine a
scenario. Let's say that you have a current house debt of $100,000.
You are paying 8% fixed interest. And, according to your
bank, you have 27 years of "minimum payments" left to
pay off this debt. Your minimum payment is $1,000, but that
includes $245.72 in escrow charges (property taxes and
insurance)...so your "real" mortgage payment is $754.28.
You will then need to "play around" with the amount that you
can add to determine how quick you really can pay off the
mortgage. If you have a financial calculator (you can get one for
about $30 or less), the calculating part will be easy. Just
in case you don't, I have included an Excel
spreadsheet to help with this part!. If you don't have Excel, you
will need to get this
file to help you at least view the spreadsheet so that you can see
how I did it and thus create your own with whatever tool you will use.
The final and most important step is to MAIL THE BIGGER
PAYMENT!
I remember when I mailed my first larger check, I added $200 or so
dollars to the "minimum payment." Honestly, it gave
me a sense that I was gaining control over my mortgage debt...that I
was not a slave to it anymore. That feeling alone was enough to
continue the bigger payments! But, it only happened when I
actually mailed it...not before. Then, I reviewed my statement
next month to see the amount...and found out that the mortgage company
had applied it to my next month's minimum payment...instead
of applying it to pay off my current principal! Apparently
they
aren't used to pre-payments either! In fact, I have had trouble
several times with this...and have had to check my balance every
month to make sure they apply it right!
So, what do you need to add to your monthly
payment to pay it off your home mortgage in 20 years? 15 years? What about 10
years...or less? See the very exciting results below for this scenario!
| Current "Minimum" Payment |
Current "Real" Payment (without escrow) |
Additional Amount Per Month |
New "Real" Payment |
New Total Payment (includes escrow) |
Time Left Until Payoff |
| $1,000 |
$604.28 |
$0 |
$604.28 |
$1,000 |
27 years |
| $1,000 |
$604.28 |
$50 |
$804.28 |
$1,050 |
22 years, 1 month |
| $1,000 |
$604.28 |
$100 |
$854.28 |
$1,100 |
19 years |
| $1,000 |
$604.28 |
$200 |
$954.28 |
$1,200 |
15 years |
| $1,000 |
$604.28 |
$400 |
$1,154.28 |
$1,400 |
10 years, 9 months |
| $1,000 |
$604.28 |
$700 |
$1,454.28 |
$1,700 |
7 years, 8 months |
To determine what your "real" payment
is, you must determine what part of your monthly
payment is "escrow" (if that is applicable). (Escrow
payments don't affect your payment on the mortgage.) If your
payment does include escrow, you must take that amount out of
your standard monthly payment to really determine what you are paying
that actually contributes to wiping out your debt. If you don't
have an escrow account, the calculation is much easier.
Again, consult my
spreadsheet for help on that.
So, I hope that helps...let me know what you think! I look
forward to you joining me on the journey to a debt-free life!
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