If you’ve been reading this series, you know our goal is to have our second mortgage paid off within a year. Part One in this series is here.

You may think our plan is silly, or unattainable. You may think we’ve been frivolous in the past – or that the cuts we’re making are ludicrous. Whatever frame of reference you’ve come from, I hope I’ve offered some food for thought.

A FEW LESSONS WE’VE LEARNED

We tend to spend what we have – in order to make mortgage-paydown a priority, we need to budget it like a bill.

If we didn’t look at the cumulative savings, we wouldn’t choose to tighten the belt at all. Saving ten dollars here and there did not offer us enough incentive to bother with a budget. A complete budget recalibration was in order. When I did the math to look at annual savings in multiple areas of the budget, I finally understood how much money was slipping through the cracks.

We don’t miss what we’ve cut out of the budget. So the fact some of the cuts are short-term (like travel) should make this whole process far simpler than we thought it would be.

Our pay-down went faster once the loan amount was less. The bank gets most of your payment early in the amortization, so the quicker you can reduce the balance, the better.

For instance:
• If you owe 100,000 at a rate of 5% and amortized at 15 years, only $375 of your $800 payment goes toward the principle on your loan.
• If you’ve paid it down to $50,000, $575 goes to principle.
• At $25,000, $685 of your $800 payment pays down your loan.

An excellent credit score translates to thousands saved in closing costs. Know your score and if it’s low, figure out what’s bogging you down.

Spreadsheets can be FUN - especially when you watch the loan balance decrease by leaps and bounds. The decreasing loan amount and budgeted monthly expenditures are tangible outcomes that validate your efforts when achieved.

Some budget cuts should be permanent. Some can be temporary. Both are good.

Ours is just a smaller second mortgage. But you have to start somewhere, right? Other families may need to start by paying off their car loans or credit card debt. Will we pay it off in a year? I hope so. Either way, we know we’ll have developed habits that last a lifetime – and we’ll have passed on these habits to our kids.

Our first mortgage? Well that’s a different story – and one that looks to be about 15 years from its conclusion. But with our new habits in place, after we reach our first goal, I bet we’ll find room in the budget for accelerating these payments as well – while loosening up on some of the sacrifices too.

Thank you for joining me on my Mortgage Payoff 101 series. What is your debt-control goal?

MORTGAGE PAYOFF 101 SERIES:
Getting Started
Monthly Charges
The Credit Card
Sell Your Stuff
Lessons Learned