With banks offering amortizations up to 35 years, it almost seems impossible to pay off one’s mortgage in 12 years. Yet, my husband and I were able to do so.
Here’s how we did it:
- Back in 2001, a construction company was developing a new area and building brand new homes. We chose to buy our home in that area. When it came time to choose the interior of the house, we were extremely careful not to go overboard with all the upgrades the builder was suggesting. We upgraded a few things, such as adding a 2nd bathroom (and increased the value of the house by doing so) but we always kept in perspective what is REALLY important to us and what is simply “nice to have”. This resulted in us taking a smaller mortgage, than if we had caved in and upgraded many things on the way.
- We chose a shorter amortization than what the bank had suggested. We amortized our mortgage over 20 years, rather than the “normal” 25 years. And we made sure to put the necessary down payment (25% at the time) to avoid all CMHC (Canadian Mortgage and Housing Corporation) insurance fees.
- We NEVER refinanced our mortgage. Every 4-5 years, when it was time to renew it, we simply renewed the remaining balance, without ever increasing it. This entailed keeping a close eye on all our other expenses, to avoid accumulating any kind of debt that would need to be consolidated.
- We took advantage of the prepayment options, such as double-up payments and lump-sum payments. All the annual employment bonuses my husband and I received were used to further decrease our mortgage balance.
- On many many occasions, we used what I call the “save now, buy later” technique. In each of the following cases, we paid for whatever we were buying in full and upfront, rather than financing it:
- Since it was a brand new home, it came with no grass or any kind of landscaping. Everything had to be done from scratch. We spent many summer weekends doing it ourselves instead of hiring a landscaping company.
- It took us 12 years before we finally removed the tiny deck that the builder has installed and built a bigger one.
- And after 15 years of living in the house, we finally installed an automatic irrigation system last summer (the manual sprinklers were the biggest reasons I hated hot summer days!!)
- Again, because it was a new construction and we wanted to keep our initial cost to a minimum, we kept the basement in an unfinished state…for 7 years! After 7 years, we decided it was time to finish building it, and we paid for it in full rather than using our home line of credit to do so.
So how did we manage to pay off our mortgage in 12 years ? By delaying the gratification of having everything since day 1 and financing it all along the way! It was one project at a time, and every time we were ready to tackle a new project, it’s because we had already saved the funds to pay for it.
I hope this post will inspire you to use my favorite “Save Now, Buy Later” technique.