Time to Pay Down Mortgage

Well I’ve finally decided to take drastic action to get out of debt.  Every time I turn around there’s another story about how the majority of people are drowning in debt and there’ll be a reckoning of sorts when interest rates start to rise.  So, in the past month, I’ve been focusing on reducing my overall debt burden.  I’ve sold off non-performing rental properties, paid off a Home Equity Line of Credit (HELOC) and with the remaining cash I’m going to make a lump sum payment of nearly $50k on my home mortgage.  That will, in turn, save us years of making payments and save us tens of thousands of dollars in interest.

Now some might say that I could invest that money in the stock market and earn a greater return, but I try to take a balanced approach to my finances.  For example, some of my money is invested in riskier long term growth assets like stocks and real estate, some money is invested in bonds, while some of the money just sits idle in cash.

Making a large lump sum payment on my mortgage is also a very safe and conservative money move that will give me some peace of mind as the housing bubble deflates or interest rates rise.  Either way, reducing my largest monthly expense seems like the right thing to do at this time.

Common Ways to Payoff a Mortgage

For those who don’t know, there are many ways to pay down a mortgage.  The most common ways are: (1) increasing the monthly payment, (2) making one-time lump sum payments, or (3) accelerating your monthly payments.  So far, I’ve already increased our monthly payments a little bit and each month we make it a point to make at least one lump sum payment.

I’m not gonna lie to you guys out there, it’s tough trying to pay off a mortgage.  A little bit of money only goes a little way… at least in the short term.  Unlike payments on a line of credit, the monthly payment on a mortgage remains the same until it’s paid off entirely, the interest rate is lower at renewal or the amortization period is extended.  So the big advantage of paying off a mortgage ahead of schedule is primarily that those dreaded monthly payments finally come to an end.

Becoming Debt-Free is Key to Financial Freedom

Owning a home is the biggest investment/expense of our lives.  So getting it paid off ASAP will give us a lot of financial stability, which is exactly what you want if you have a young family.  Even with a lump sum payment of $50k, we’ll still owe lots of money on our mortgage.  Hopefully we’ll be able to pay this off completely in less than 10 years.

I’ve always believed that financial independence comes from having a healthy stream of investment income with no major debts.  Over the past few years, I’ve been focused on growing my investment income.  Now I’m placing a bit more emphasis on tackling our mortgage debt.  Paying off a mortgage as soon as possible will go a long way toward achieving financial freedom.

If you enjoyed this article, check out my other post on paying off your mortgage:

How To Pay Off Your Mortgage Faster

And this post on whether to pay down a mortgage or invest:

Pay Down Mortgage or Invest?

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