How to Pay Off Your Mortgage in 5 Years or Less!

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“How long have you been living in the area?” asked the dental assistant. “Well, I’m officially making my last mortgage payment this month,” the grinning male patient responded. “Oh! So you’ve been here for 30 years, wow!”

This interaction seriously made me throw up a little. Debt has become such a normalcy in our society that people are starting to mark their live’s events by it!

(FYI, the norm wasn’t always a 30 year mortgage. People used to take out short term loans from the bank to pay for their homes, and then they paid cash for upgrades and increase acreage as they went along.)

I don’t know about you, but when people ask me about my life, I want to tell them about my kids, my travels, my experiences. NOT my long-term debts.

How to Pay Off Your Mortgage in 5 Years or Less

I started paying off my debts back in 2010 when I realized that my expenses were greater than my income. I was essentially going backwards every month… It really freaked me out, and I knew that debt was the problem.

In less than two years, I paid off $42,000 worth of consumer debt, and then I knocked out the $75,000 mortgage in just one more year. In total, it took me three years to pay off everything…including the house!

This is absolutely possible for you. Picture it with me….5 years from now:

Your car and your student loans — they’re gone, paid for. At this moment, you’re sitting at your kitchen table, penning the check to your very last house payment. Once this check clears, ALL your debts will be paid! You don’t owe a single cent to anyone! Close your eyes and feel that weight being lifted off your back. You owe nothing to anyone…

It’s possible, I’m telling you it is! I did it in just three years and you can absolutely do it in five. Here are the exact steps I took:

pay off your mortgage

1) Don’t Skip the Starter House

There are a lot of experts out there that think you should immediately jump into your “forever” house…as if you even know what that is when you’re younger….

The truth is that your forever house is:

  • too expensive
  • probably not in your “forever” area since you’ll move multiple times for your career/life
  • not suitable for your needs once you get married and have kids

Instead of jumping into an expensive house right off the bat (and become house poor), I always recommend that people start with a home that’s smaller, in a good area, and costs no more than 2x your take-home salary. In other words, if your household income (after tax) is $75,000, then your home should cost no more than $150,000.

If you ALREADY live in a house that’s more than 2x your yearly salaries, there’s no shame in downsizing or moving to a little less ritzy area. Sure, it might feel a little bit embarrassing at first, but when you get completely out of debt within just 5 years (and can then do whatever you want) you’ll realize that the move was totally worth it!

2) Dig Your Way Out of Consumer Debt First

Sure, it would be pretty awesome to say that you own your home outright, but if you still have other debts like student loans, credit cards, and car loans, then it just makes absolutely no sense!

Think about it. Your home is appreciating in value 3% each year and costs 4% in interest. Your consumer debt is all going down in value (some of it rapidly…ie. your car!) and costs you 7% or more in interest each year! It only makes sense to take care of all your consumer debt first.

Want to get out of consumer debt fast? Read “The Absolute Best Way to Get Out of Debt“.

Basically, you:

  1. Need to get mad at your debts
  2. Work like a crazy person to earn more money
  3. Cut all the expenses you can
  4. Pay off your consumer debts in 2 years or less

Get mad at all your debts

If you aren’t ticked off about how much your debts are weighing you down, then you’re not ready to get out of debt yet. Sorry, but it’s just not going to work for you…

Let me help you get mad for a second.

What do you most want to do in life?

And why is it that you can’t just go do that?

Oh yeah…because your debts are chaining you to that job you hate, to your hampered lifestyle, and your day-in and day-out drudgery.

What if you had absolutely no debt and started putting thousands of dollars into your investments each month? I’m pretty sure you could start accomplishing those dreams of yours! It’s time to pay off your mortgage in 5 years or less!!

Work like a crazy person

Alright! Now that you’re mad at your debt, it’s time to work like a crazy person to increase your income! Need some ideas? Subscribe to this site and get the free eBook, “101 Ways to Make More Money”! Out of all these ideas, I’m sure you could pick one or two and earn yourself an extra $10,000 a year. I’ve done it many times over with multiple projects. There’s absolutely no reason why you can’t too!

Cut all the expenses you can

You know what helps put extra money in your pocket? Cutting back on all your expenses. If you’re really serious about getting out of debt, I bet you could cut your monthly expenses by $500 almost immediately.

  1. Sell your expensive car that has crazy $400 payments (and buy a beater car)
  2. Cut your $100 cable

Done.

Related: 10 Extreme Tips to Cut Your Spending in Half

Pay off your consumer debts in 2 years or less

And here’s the ticket to pay off your house in 5 years or less. Getting rid of all your consumer debt in just two years!

Even after cutting cable and selling your expensive car, you’re thinking to yourself, “It just isn’t possible. I’ve got too much debt…I’m just going to be in debt forever. That’s just the way it is!”

Shut.

Your.

Mouth.

It’s NOT impossible. All you have to do is make the decision to start and then figure out what it’s going to take.

To do this, you’re going to need the debt snowball tool. Click the link, read the debt snowball article, download the free debt snowball tool, and enter in your debt numbers. With this tool, you’ll immediately see exactly how long it’s going to take to pay off all your debts.

And then here’s the powerful part. You can change your monthly payment number to see what it would take to pay off all your debts in just two years. Instead of an extra $1,500 a month, it might take $2,500! Sure, it might sound scary, but now at least you know what it takes! And it might be time to ask yourself the question, “How could I earn/save an extra $1,000 a month?

…with that question almost always comes powerful results. Instead of saying, “I can’t”, you’re now saying, “How can I?” And that can absolutely make all the difference!

3) Save Up an Emergency Fund

I really wanted to skip this step because it’s not exciting at all! But, it is extremely important. If you go straight from paying off your consumer debts to paying off your house and then have a medical emergency, you could be in some huge financial trouble since all your cash is hung up in your house!

So before you go gung-ho on your house payoff, take the necessary time to build up 3-6 months worth of expenses and put the money into the bank where it’s safe. Sure, it’s boring, but you’ll never regret it. Trust me.

pay off the mortgage in 5 years or less4) Pay Off Your Mortgage!

Finally! The fun stuff! It’s time to pay off the mortgage in the remaining 2.5(ish) years! Sound impossible? Not even close. Once I started tackling my house debt, it took me only 345 days! That’s right, it took me less than a year to pay off my mortgage.

I’ve been completely debt free since 2014, and it’s. been. marvelous. I can’t wait for you to join me!

Ready? Here are your action steps:

a) Continue the snowball

You’ve done such a great job using the debt snowball to get rid of your consumer debts and to build up your emergency fund. It’s now time to take that extra money you’ve got each month and apply it to your mortgage!

So here’s what you do:

  • Continue to pay the regular payments in full (of course)
  • Put the additional money toward the principle balance – this is often a simple selection when you make the payment online. Be sure not to simply pre-pay your mortgage. If you’re doing this, that means that you’re still making the interest payments on the loan. Pay the money toward the principle and you’ll never have to pay money on that portion of the loan…EVER!

Want to know exactly how long it would take you to pay off your house? This online mortgage payoff calculator will get you there.

b) Get rid of your PMI and Stop paying escrow

When you buy a house and put less than 20% of your money toward it, the bank will charge you what’s called “PMI” – Private Mortgage Insurance. As a rule of thumb, they normally charge you $75 a month for ever $100,000 they loan you.

So, if you bought a $200,000 house, instead of your mortgage payment being $1,500 a month, the bank will inflate it to $1,650 a month to cover their own butts in the event that you stop paying on the mortgage over the next few years.

If you think rent is a waste of money, then this whole concept of PMI should infuriate you, because this money is absolutely just going into thin air! There is no benefit for you in this payment at all.

So how do you get rid of it? Pay down your mortgage to 80% of your house value as quickly as possible. Once you achieve this, simply call your bank and tell them that they need to stop charging you the PMI (they almost ALWAYS need this reminder).

There is yet another benefit to getting rid of your PMI. And that’s taking control of your own insurance and property tax bills.

From what I’ve witnessed, the bank is pretty terrible at calculating how much you’ll need to pay your property taxes and insurance (even though they’re roughly the same every…single…year… but whatever, I’m not bitter ;)). So much so that they’ll often pad the account by $500-$1,000 – again, to cover their butts in the event that one of your policies jumps in cost from one year to the next.

This should be enough reason to handle your insurance and property tax on your own, but there’s still another huge reason why this makes sense. If you’re a loyal customer to a particular insurance company, then you’re probably getting screwed. It’s just what happens. Insurance companies want to get the most money out of you as they can (it’s part of their business model), so if you’re not paying attention (which many aren’t because it’s tied up in their escrow payment), then they’ll continue to raise their rates every single year!

Take matters into your own hands and get rid of your PMI. Then you can easily negotiate down your insurance policy as well.

c) Stop giving the government a free loan throughout the year

While we’re on the topic of giving away money… stop giving the government your free handouts throughout the year too.

If you constantly receive $2,000 or more in taxes at the end of the year, you’re screwing yourself over in more ways than one.

  1. You’re giving the government a 0% interest loan, and they’re almost certainly mismanaging it on your behalf
  2. By dishing out the money throughout the year, you’re missing out on paying down your mortgage early and saving on the interest!

For most, the simplest way to stop paying too much in taxes is to increase the number of dependents on your W-4. Are you currently claiming 0 and getting $4,000 back every year? Try claiming 2 instead!

Unfortunately, it’s not an exact science, but at least we have a bit of control in the matter. If I were you, I’d certainly make the adjustment and pay off your mortgage debt that much faster!

d) Invest some, but not heavily

Paying down your mortgage is an awesome thing, but you don’t want to ignore your investments entirely. And you also don’t want to contribute so much that you can’t pay any extra on your mortgage.

So what’s the happy medium? 15%.

Invest 15% of your before-tax income into whatever source you choose. My two favorites are through my:

  1. Company 401(k), and via
  2. Real estate investing

e) Bump up your income

Finally, if you’ve absolutely made it a priority to pay off your mortgage in 5 years or less, then you’re going to want to bump up your income.

The best, most economical way to do this is to start kicking butt and taking names at your day job. 

Here’s the cliff notes version on how to do this:

  • Work more efficiently (Recommended Read: The Power of Full Engagement)
  • Work first on what matters (Think, “What do your bosses care about this year?” before each task)
  • Keep a record of your achievements
  • Be willing to learn and apply your new knowledge
  • Let leadership know that you’re actively trying to advance in your career
  • Be willing to ask for an increase if you’ve earned it (as proven by your record of achievements)

Related: How to Earn More Money at Your Job

If you don’t see any room for advancement at your current company, then maybe it’s time to start looking for a better job somewhere else.

Either that, or you can start earning extra money on the side. I’ve done this and it’s absolutely possible, but it’s certainly not easy. Don’t head this direction just because you think it’s the easy route. Chances are, it’s not.

Related: 12 Legit Ways to Make Money From Home

It’s Time: Let’s Pay Off Your House!!

Alright, so that was a lot of words. But seriously, it’s really not that complicated.

  1. Live as simply as possible
  2. Pay off your consumer debt
  3. Save up an emergency fund
  4. Pay off your house

And that’s it!

Just think about what you could accomplish if all your debt was paid for. You’d have $2,000 or more every single month to do whatever you wanted with! That’s an extra $24,000 a month! Doesn’t that sound crazy!

Let me tell you, it’s not crazy. It’s entirely possible, and I believe that you can make it happen.

Are you ready to pay off your mortgage in 5 years or less? Let’s get started today!

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13 comments to How to Pay Off Your Mortgage in 5 Years or Less!

  • Some great general advice here. I wish houses were 2 x my take home salary! Here a basic below average house is about 550,000 (converted to USD), so with saving 50% of my income the earliest it could be paid off is 11 years if I’m lucky. That’s still much quicker than a lot of people so it isn’t all bad news. I definitely agree with paying off all consumer debt and having a 20% deposit to avoid extra insurances, these certainly help to spend up the process of paying off your mortgage quicker.
    Miss Balance recently posted..$5 dinner party – Why my friends love them and yours will too

    • Sheesh that’s some expensive housing! Aren’t there any houses outside of the city that are cheaper than $550k? I can’t imagine that’s the lowest price you can find within 45 minutes of your work!

      • That is 30 minutes from work, up to an hour in peak hour traffic. You could get an apartment for about 380,000 USD. Property in Sydney is very expensive.

        • So here would be my plan of attack:

          1) Rent a room from some responsible people as cheaply as possible
          2) Plan to take out a loan for only 2X of your take-home pay (let’s say that your take-home is $100k, so you can afford to borrow $200k)
          3) Start saving up like crazy for a fixer-upper apartment that costs $320k. So you’ll need a down-payment of $120k. This should take you under 2 years.
          4) Buy the apartment and pay off the remaining $200k balance in 3 years.
          5) Invest heavily, be wealthy, and give often. 🙂

          • Lol, I enjoy your enthusiasm. Take home pay is closer to 46k. Already renting the cheapest place possible and save a bit more than half my income. I’m not saying it isn’t possible, it just takes a bit longer here.
            Keep spreading your message

  • I think the wisest advice here is to start with the starter home. That sets you up for a budget that actually has room to finish paying off debt, get the emergency fund going, and tackle the mortgage if you wish.

    The only thing I’d add, is to give very high priority to the matched 401(k). I won’t underestimate the good night’s sleep that comes with a paid off mortgage. And I won’t suggest that long term there are good odds the market will beat the mortgage rate, because logically, it’s tough to compare a fixed 4% return (the mortgage % saved) vs a chance, good or bad to beat that.

    The match, however, is usually limited to 5-6% of one’s income, and a dollar-for-dollar match can’t be beat. I’d hate to see that doubled money sacrificed for the sake of saying you are 100% debt free. In the end, given that nearly half the population don’t have $2000 in the bank for an emergency, and 25% of people aren’t depositing to get their match, the early payoff (of the mortgage) is a dream for most.
    JoeTaxpayer recently posted..The 2017 tax plan – A quick look at the impact to a couple

    • Great point, Joe. While I was paying off my home, I was contributing 6% of my income and my company was matching half that to my 401(k) (in addition to the other awesome contributions they have). You should most definitely be investing in your future while paying off your mortgage aggressively. Combined, they will make quite the future!

  • These are all great ideas. You’re right. Living a debt free life is the way to go. My first house was not only a starter house, it was a beater house! 🙂

    I paid a whole $16,000 for it. Then I put in some work…painting, sanding the floors (they were beautiful when I was done) and adding cabinets in the kitchen as there were none when I bought the house. I actually got the cabinets for free from a contractor friend that was bulldozing a house.

    The house was structurally in perfect condition, and as it was in a small town it was even in a good neighborhood. I sold it about three years later for $30,000.

    I also paid my car off, so I really don’t have any debts. It’s a great way to live.
    Beth @ The Money Pixie recently posted..Your Free Credit Score Online – Is it Lying to You?

    • It is an AWESOME way to live! My wife and I don’t have to worry about bills ever, and we’ve got an emergency fund that could last us 3 years (since our bills are so low). It’s low stress for ourselves, plus we can increase our giving tremendously which leaves us feeling great!

  • Nicole

    It sounds so awesome. I love the idea of the mortgage debt being gone. I wanted to hit a mark this month on my debt paydown but it didn’t happen. I will keep going but will be pacing myself a little. Still saving as much as I can but holding it in an online account. I feel better with this decision because there are still issues with my job and I would definitively feel better with a larger emergency fund,car fund since my car is 11 years old (will buy the next one with cash), medical fund and just life.

    I don’t know if I asked you this before but how do you feel about paying off mortgage debt on a house that is hugely underwater? I mean like 50%?

    • Hi Nicole,

      If your job is in jeopardy, then certainly a larger emergency fund is okay. No matter how much a house is under water, I’d still feel obligated to pay it. But, it’s worth talking to the bank to see if they can do anything for you, especially if you’re strapped to pay the mortgage each month. Also, if the house is still appreciating in value, that helps emotionally to keep paying the bill.

      • nicole

        Thanks Derek,
        I am okay with paying the bill every month. Not behind at all thank goodness. I tried 3 times asking for refinancing but I can’t because of the value.

        I am no way a bail out type of person and leave my responsibilities but I do wonder back and forth about the job,EF, paying down mortgage debt scenario.Thanks for your response.

  • […] months — so 5 years — Womp wommmm!! That’s a bad deal. Heck, if you follow my plan, you should have your entire mortgage paid off by then! In almost any business, if the investment […]

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