MORTGAGE. One word included in many household conversations. The mention of this sometimes unavoidable financial responsibility makes people cringe. Paying off your home loan is a homeowners dream. There’s no better feeling than walking through the front door of an OWNED home. It’s mine….finally! The process of paying off your home can be a long and stressful period….even for the most financially stable household. How can you possibly live on one income and pay your mortgage off early? I’m a new homeowner living on one income and this is my strategy for eliminating my monthly mortgage burden.
1.) Buy What You Can Afford
Buying a home is one of the biggest financial decisions individuals will make during their lifetime. It takes careful planning and negotiating. Your future goal is to pay off your mortgage; therefore, buy a home within or under your price-range. Buy what you can afford! It’s easy to lose focus when buying your dream home. With so many homes on the market, it’s tempting to buy a home out of your budget. After all, the mortgage would only be an extra $200 a month! Don’t do it! Buying more house than you can afford is decreasing your chances of PAYING your mortgage….forget paying it off early. My husband and I qualified for homes double our price range, but we knew our budget and what we could comfortably afford. The amount of home you qualify for and can afford are drastically different. Have a grasp on your monthly expenses before attempting the housing market.
2.) Down Payment
You’ve now entered the housing market and hunt. Homes have different financing options….which one do you choose? Many will argue that the best way to create instant equity in a home is invest a minimum 20% down payment. I agree. It will decrease your monthly mortgage payment, eliminate the need for PMI insurance, and create equity. It’s an excellent way to jumpstart your early mortgage payoff. However, if a down payment is impossible, search for a zero down payment mortgage option. Invest in sweat equity instead of instant equity. With no down payment try to come in under budget when house hunting. The saved funds can be used for future mortgage payments.
3.) Eliminate Revolving Debt
Try to eliminate most of your revolving debt before tackling early mortgage payoff. Credit cards, personal loans, car payments all contribute to revolving debt. Decreasing or eliminating these amounts will make extra cash readily available for future mortgage payments. I understand that some revolving debt is unavoidable, ie. car payments. However, constant debt will hinder your mortgage progress.
4.) Open A Mortgage-Only Bank Account
I chose to open a bank account that is dedicated solely to our mortgage. Money is transferred into this account on a weekly basis according to our budget. Our mortgage payment is readily available and temptation spending is eliminated. Any extra money saved from our weekly budget is transferred directly into the mortgage fund.
5.) Pay Extra Principle
You have a house you can comfortably afford, debt is at the bare minimum, and a mortgage fund has been established….let’s strategize and pay the mortgage off early. Where is the extra cash coming from? Your household budget! You budgeted $1600/month for your mortgage, but actually pay $1500/month….$100 into the mortgage fund. You allowed $200/month for utilities, but only paid $150 this month….$50 dollars into the mortgage fund. The weekly grocery bill was under budget and you saved $15….mortgage fund! At the end of one month, total your savings and contributions to the mortgage fund. Apply that amount as extra PRINCIPLE on your mortgage payment. It all adds up!
6.) Amortization Schedule Calculator
Still not convinced you can pay your mortgage off early on one income? Find an online amortization schedule calculator and calculate your mortgage schedule for your existing loan. Then, do the same calculation with an extra monthly principle payment of $100. The interest saved will be incentive to start building that mortgage fund! Right now, my husband and I are paying an extra $250/month toward the principle of our mortgage payment. It doesn’t sound groundbreaking, but that small amount will enable us to pay our mortgage off 10 years earlier and save over $57,000 in interest! Our goal is to OWN our home in about 7 years. It’s going to require some creative money management, but the reward is worth the challenge!
Hopefully I’ve offered some encouragement to single income homeowners. A 30 year mortgage doesn’t have to last 30 YEARS! After relieving yourself of unnecessary debt, tackle your monthly mortgage payment. Save and contribute as much as possible to the principle amount. If not monthly, then every other month. Use an online amortization schedule calculator and understand the long-term effects of additional payments. Paying off a mortgage early with only one income can be accomplished….convince yourself of the benefits. Do you have any mortgage payment tips for single income households? Leave them in a comment. Was this post helpful? Let me know! Take care and good luck!