Finances, Financial Friday, FIRE, Goals

Our Plan to Pay Off the Mortgage Early

In case you missed the announcement, I posted earlier this month that my husband and I are now officially planning on retiring by 50. Or, more accurately, we’re planning on reaching a level of financial independence by 50 that would allow us to only work part-time if we so choose, and at doing whatever we want to do. A huge part of our three-part plan is paying off our mortgage in about 15 years (which is about how long we have until we both turn 50).

Being the number cruncher that I am, I sat down with a spreadsheet and started calculating the extra we’ve managed to pay off so far as well as the average surplus monthly amount we have to put towards our principal in the future in order to reach our goal.

The magic figure I’ve come up with?

$700 EXTRA per month.

Honestly, that’s lower than I thought it’d be. Going off the rule of thumb that states that if you double your monthly payment on a 30-year mortgage, you’ll pay it off in about 10 years, I was thinking that I would need to pay a little more (like $800) a month to hit the 15-year mark, since the principal and interest portion of our monthly mortgage payment is around $1,165.

And while finding an extra $700 per month is no mean feat, it also feels slightly more do-able, especially once the flower farm hopefully starts turning a profit in the next year or two.

Monthly VS. Annually

While it’s useful to have the monthly amount we need to pay, I actually prefer to think about the ANNUAL amount of extra we need to pay towards the principal. The reason? While there are some months that there just won’t be $700 extra to be found — no matter how frugal we are — we *should* be able to come up with the right YEARLY amount if we take advantage of windfalls, work bonuses, tax returns, stimulus checks (such as the child tax credits coming up), etc.

So, if we look at it as a yearly amount, we need to shoot for an extra $8,400 a year towards the mortgage.

Now, that still seems like a crazy hefty goal, especially when we struggled in the past to even put an extra $3,000 towards the mortgage in THREE years. However, we have some things working in our favor now, such as the additional income coming in from the flower farm (well, that hopefully will come in—everything we’ve made thus far has had to go right back into the farm itself), a recent raise from Matt’s work, and the child tax credit mentioned above.

If nothing else, just the fact that we’re making this a priority and I’ll be recording (and sharing!) our progress should definitely ensure that we get a lot further than we would have had we not decided to just go for it.

So What’s Our Starting Point?

We bought our home near the end of last year, during a VERY hot housing market here in Utah. And in fact, the housing market has only gotten MORE insane over the last six months, to the point where we are feeling extremely fortunate to get the house we did at the price we did.

Thanks to that same hot housing market, we were able to make a nice profit when we sold our last house, which allowed us to have a really solid down payment on this current property. While we’re not quite at 20% equity yet, we’re awfully close, and once we reach that milestone, we’ll be able to put an easy extra $35 towards the principal since that’s what we’re currently paying each month toward our PMI.

Starting Amount Left on Mortgage: $276,169

Like anything else, if I just look at that number and also look at having to come up with an extra $700 per month to pay towards the mortgage, it’s tempting to just give up before I’ve even started. After all, it’s not like we’re making so much money that we can just magically come up with $700 by making “easy” fixes.

But I also know that we’ve let some of our good frugal habits slide in the past year or so, just because we could—we’ve been spending more than we need to on groceries (mostly because I keep falling off the meal-planning wagon), I’ve been buying an obscene number of books (when I literally own hundreds I haven’t read), and we haven’t been as careful on the little things, like making sure we turn off the heat or A/C whenever we leave the house.

However, even after making those tweaks and trying to be more intentional with how we spend our money, this is definitely still a huge stretch of a goal, but that’s the point! I know for me, if I don’t have a big goal I’m working towards or some specific challenge in front of me, I’m much more likely to just coast rather than consciously progress. So here’s to making sacrifices and challenging ourselves and seeing just how fast we can get this thing paid off!!

Do you have a mortgage payment? Do you have a plan to pay it off early? Let’s talk big mortgage payoff goals!

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