How To Be Mortgage Free

This blog is, frankly, more oriented toward your personal life, rather than toward real estate appraisal, per se.  So, cut me a little slack here.  And yes, The Appraiser Coach coaches in all aspects of life, not just in the professional lives of appraisers.

Since we like to receive payments when we send out invoices, it should follow that those who send us invoices like it when we pay their invoices to us.  So, while we must pay our bills, we really like it when the total of our monthly bills is as small as possible.  What if we could remove our monthly mortgage payment from the monthly total?

A few years ago, my sister sent me an email to let me know they had paid off their mortgage.  That freed up a lot of money every month for her and her family.  That made me ask myself how I could take the same step?  After some research, I found out a relatively painless process to do just that.  Shall I share it with you?

It is amazingly simple.  Instead of making 12 mortgage payments per year, make thirteen.  What is great about that 13th payment is that, assuming you’ve made all the other 12 payments, 100% of that 13th payment goes toward payment of the outstanding balance of the mortgage (check with your mortgage company to make sure this is true for them).  None of it goes to interest.  There is no reason to go into the math here, but this step could, literally, cut in half the time it takes to pay your mortgage in full.  And, since that extra annual payment goes into the equity in your house, it is a forced savings plan.  It is not money-in-the-bank.  It is even better in that it is money-in-your-home.

Now, here’s another secret.  Are you paying PMI?  If you are, and you have paid your loan down to less than 80% of its original value, you can direct your mortgagee to stop collecting this amount since there is no need to pay for this insurance.  But wait!  Instead of stopping this payment, why not continue paying the same amount to the mortgagee, but direct the cash that once flowed into the PMI premium instead to flow into loan principal reduction?  In other words, without paying even one more dime out of your pocket every month than you already were, you are now paying off your mortgage faster than you were before.  How does that sound?

Typically, at this point in my blogs, I encourage you to go out and create some value.  The same holds true here.  But in this case, go out and create some value for yourself and enjoy the fruits of living mortgage-free!

For more information on this subject, please download and listen to The Appraiser Coach Podcast Episode: 

5 Comments on “How To Be Mortgage Free”

  1. Better yet, split your monthly mortgage in half and pay half twice a month instead of paying all once a month. This will reduce the amount of principle moving forward at an ever so slightly rate and the interest will be calculated on the resulting balance twice per month instead of once per month thus slightly reducing the total interest paid. It adds up over the life of a mortgage. Also, do pay that 13th payment towards interest.

  2. I am not one to toot my own horn and I fly below the radar, but at 38 years of age, we paid off our house.

    We bought the dog in the neighborhood type home and got the property for the value of the underlying land and basically the home for free. How we did this is that I am a licensed real estate agent (much easier to get than an appraisers license) and was able to get into the house within the first few hours. There was 13 showings lined up for the next day.

    We made a cash offer (we didn’t have the cash, but we had equity so we wrote check) with no contingencies (I have been in plenty of homes through appraising to know the ins and outs) and we took 2.5 years to renovate the house. We paid for everything as we went along with pulling up our sleeves and doing the work.

    We will be setting up an equity line of credit on this home for the next deal that comes along, if a good deal presents itself, but we are in no means needing to compete with people willing to pay more for a home than the real value.

    Apply your appraiser knowledge, you can pay the bills appraising but you can’t make a killing unless you apply that knowledge.

  3. I actually was just talking with a coworker about mortgage prepayment yesterday. He financed his home when his credit was not so good. He was asking about investments with some cash he was sitting on. I directed him to use just a small amount of it to pay some outstanding collections that are old and just holding him back. With a refinance, he could probably cut his mortgage term, eliminate his PMI, and LOWER his monthly P&Ipayment at the same time.

    Another way of looking at it. Spend a few thousand dollars now, and recoup a few hundred dollars of interest payments per month for years. There is no better personal investment one can make.

  4. The interest rate that you are paying should be below 5%. Instead of paying off that 5% (or less) loan, why not invest that money in something that makes a higher percentage?

  5. I’ve always been told it is better to have a mortgage and invest money than to not because the interest rate is low and a tax deduction on the interest paid. I don’t listen and I hate owing money on anything. My home is a couple payments from paid.

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