On August 28th, 2014 I passed a major milestone on my way to mortgage freedom. After a lump sum payment of $8,000, I can now proudly say I only have five digits of debt to my name. This lump sum payment brought my mortgage balance from $104,826.10 down to only $96,826.10.
It’s hard to imagine that a little over two years ago I started with a massive mortgage of $255,000. When I first purchased my house I was just happy to be a homeowner. It took me nearly three years to find a home. It wasn’t that I was being overly picky and looking for the perfect house, I just kept losing out on bidding wars. I lost two heartbreaking bidding wars before I finally purchased a three-bedroom bungalow in east Toronto. My house was by far the nicest property I saw in my three years of house hunting. Not only has it been newly-renovated from top to bottom, it has an ensuite bathroom and a walk-in closet off the master bedroom, something I’ve never seen in a bungalow.
Little by little I’ve managed to chip away at my mortgage by making regular lump sum payments, doubling up my payment, and increasing my regular payment. To pay as little interest as possible, I decided to pay my mortgage on an accelerated weekly payment plan. My mortgage lender First National allows me to prepay up to 15 per cent of mortgage ($38,250) each year. In my first year as a homeowner I managed to maximize my prepayment privilege by February. My mortgage anniversary wasn’t until August 1st, so I maximized my RRSP contribution in between.
With my first year a homeowner under my belt, I maximized my prepayment privileges even faster in my second year. I had already paid the maximum 15 per cent by November 2013. This year has been an especially costly. After the coldest winter in decades, I spent nearly $25,000 on home renovations, including a new retaining wall, sidewalk, front porch and eavestroughs. Despite the minor setbacks, I’m still planning to maximize my prepayment privileges this year, even if it takes me a little longer.
It wasn’t until my second year as a homeowner that I set the stretch goal of reaching mortgage freedom by age 31. Although I’m a strong believer that you should diversify and contribute to your RRSP and pay down your mortgage at the same time, I’ve taken a different approach. By living a frugal lifestyle and boosting my income by taking on as much freelance work as possible, I’ll be able to reach mortgage freedom before the average Canadian owns their first home. The average Canadian won’t become a first-time homeowner until age 36, according to a survey by BMO – I plan to have my mortgage paid off before then.
With my four year marathon towards mortgage freedom coming near an end, the reality of paying off my mortgage is finally starting to sink in. I ran into Melissa Leong of the Financial Post this week and I was happy to tell her I was on track for paying off my mortgage. I was also recently featured in the Globe and Mail, I’m on track to be mortgage-free by 31, which only helps motivate me further. Although I’ve made a lot of sacrifices, it’s been well worth it. I plan to a good old fashioned mortgage burning party once my mortgage is finally paid off at the end of 2015.
What are your long-term goals? How do you keep yourself accountable and motived?
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, available now on Amazon and at Chapters, Indigo and major bookstores, and as an Audiobook on Amazon, Audible and iTunes.