How Becoming Mortgage-Free Changed My Life

When it comes to money a common question that often comes up is should I invest money in the market or pay my mortgage off?  When we bought our first home it was a no-brainer decision for us. We wanted to be mortgage-free.  But we never anticipated how this one decision would change the trajectory of our lives.

I’ve written before about how we paid our mortgage off in less than 5 years and why we made that decision. But I’ve yet to deeply reflect on the after-effects of that decision.

Once we paid our mortgage off we lived mortgage free for 5 years.  Then we decided to move to a better home for our family. And because of our real estate investments, we were now faced with a mortgage payment again.

After being mortgage free for so long, I hate having a mortgage payment again.

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Immediate Benefit

One of the immediate benefits of being mortgage-free is the monthly cash flow.  After diverting so much money to our mortgage for years now that there was no mortgage it felt like we were printing money every month.

While it is suggested that only 30% of your pre-tax income should go towards housing expenses, the Canadian national average is a whopping 45.9%

Without a mortgage payment, we were paying much less than that every month for housing.  But we did pay much more than that for the 4 years and 11 months it took us to pay the mortgage off.

Decreasing our monthly expenses made it easier to budget every month. And we no longer had to watch our money so closely.  

The downside of this is that it could have made it easier for us to spend money mindlessly.  Thankfully, the years of accelerating our mortgage payments had provided us with great savings habits.

Throughout the time it took us to pay our mortgage off we had to focus on aligning our spending with our values.  Had we deprived ourselves while trying to achieve our goal we never would have made it. The habit of aligning our spending to our values continues today.

Increased Options

More monthly cashflow gave us room to breathe and the flexibility to entertain options. Options we would never have previously considered.

With the birth of our little one, we were able to share a full month’s parental leave.  If we still had a mortgage payment sharing parental leave would not have been an option. 

Or if we would have tried to force it as an option I would have been stressed about money the whole time. 

That year with our daughter is time that we cherished because it felt like an added gift.  It was a reward for achieving our goal. And time together that we can never duplicate.

So, what did we do with the extra cash flow?

Once our home was paid off we now had a decision to make. Where were we going to invest our extra monthly cashflow?

We decided to invest in real estate because it was something that we understood and was a tangible investment. So, we took out a HELOC (home equity line of credit) and leveraged our home a bit to invest in rental properties.

The power of leverage should not be ignored. But like anything powerful, it is a double-edged sword.  We know of people who are very overleveraged to a point that if one minor thing goes wrong they are at risk of losing a lot.

That was never the type of leverage I wanted. We paid our home off for security. I never wanted to lose our family home should something happen to one of our incomes.

When we invested in real estate we did our homework to make sure we were buying cashflow properties in good neighbourhoods.  So even though we were leveraged, the assets paid for themselves. 

And should something ever happen we could sell the properties and still come out ahead because of the amount of equity in each property.

Our long-long term plan is to eventually have all the rental properties free title and mortgage-free too.

Accelerating Our Path to FI

Now that we have 9 rental properties, we have 9 assets generating us income. Nine sets of tenants paying off 9 mortgages for us. This is substantially accelerating our path to financial independence. 

More so than if we could have chosen to invest in the market instead of paying our mortgage off.

You can borrow against the equity in your home a lot easier than your investments in the market.  I’m not even sure that you can borrow against your money in the market. Or if you can it’s complicated and expensive to do so.

The little bit of leverage we used was like throwing gas on the FIRE (financial independence retire early). 

Although I’m not a huge fan of the RE (retire early) part I do want the option of having more autonomy and control over my own time.  Teaching is a great profession with lots of time off.  Unfortunately, when you take the time off is dictated to you and is always in the busiest times of the year for travel.

I am now on track to becoming work optional before the age of 40. We will no longer need my income to achieve our goals.  This gives me the freedom to pursue passion projects and to have time to help other people take control of their financial lives too.

I won’t stop working when I become work optional.  I will be transitioning to working more for myself on other things – like this blog and helping to empower other moms with their money.

Psychological Benefit

I can honestly say that we are happier when we are mortgage-free.  

There is less need to watch every dollar we spend and earn so closely.  There is pride in knowing that we own the roof over our heads. And there is a massive sense of achievement in knowing that we accomplished such a large goal.

Through our actions, we are showing that we are the type of people who can save money and accomplish big goals.  This helps keep us motivated to set and achieve newer and bigger goals.  We don’t feel stuck or stagnant because we see what is possible.

Mindset Shift

Since becoming mortgage-free, I am trying to live a more purposeful life. To tune into my intuition and calling in life.  There are numerous psychological and health benefits of living a purposeful life. 

For me, being mortgage-free is a catalyst to this. It has been a mindset shift that I was not anticipating. When we had mortgage debt, that was all I could think about.  Being mortgage-free gave me mental space to think and dream bigger.

We are now an example to our friends and family that yes, people do and can pay their mortgages off early.

Realistically one of us could become work optional right now but we are not quite comfortable with that yet.  Now, if we currently didn’t have a mortgage on our principal residence again one of us would have already said goodbye to our day job.

Being mortgage-free is like having the key to the handcuffs that bind you to a job you don’t enjoy. 

If you’re ready to be mortgage-free sooner, sign up to take my course, Mortgage Free Living: Your guide to paying your mortgage off early so that you have more money for the things you love. This course is jam-packed with all of the tips and tricks we learned and applied to pay our $342,000 mortgage off in less than 5 years.

Final Thoughts

Due to the current low-interest rates, from a strictly monetary return on your investment, investing in the market may make more sense than accelerating your mortgage pay down. But the strict monetary return neglects the psychological aspect of the decision.

Knowing the type of person I am, I am certain that having a large investment portfolio in the market would have not provided us with the feeling of increased options and flexibility that being mortgage-free did.

And the happiness factor is not to be ignored. 

This is not to shame anyone who chooses to invest in the market instead of paying their mortgage down. Or anyone who chooses to rent instead of buying a home and having a mortgage.  

Our decisions were the right ones for us and everyone should make the best decisions for their families and circumstances. 

But too often I hear that paying down your mortgage is a silly thing to do. It wasn’t silly for us. Becoming mortgage-free completely changed my life.

10 thoughts on “How Becoming Mortgage-Free Changed My Life”

  1. Hi Maria,

    I paid my mortgage off in 7 years and the satisfaction and accomplishment it felt knowing the bank did not own a part of our home was freeing. After we paid off our mortgage we found FIRE and have not looked back since.

    1. Paulina – sounds like your story is very similar to mine. I’m so happy to hear when people make paying their mortgage a priority.

  2. I paid off my condo in 5 years…and then 4 months later bought a duplex and decided to rent out my condo. I am hoping to have my new house paid for in 5 years and then I’ll turn my attention to the condo. I borrowed money out of the condo to reduce the mortgage on my new house and that becomes an investment rental property mortgage.
    I am still going to make paying off my primary mortgage a priority as I hear you on the cash flow!

  3. Good morning. Given that you took out another mortgage on your primary home to fund the purchase of your rental property, have you returned to the habit of making large extra payments in order to pay it off ASAP? Or will you keep that mortgage for as long as possible due to the tax benefits of this move, i.e. borrowing to invest in real estate?

    1. Great question Blue Lobster. When we converted our previous home to a rental we pulled out as much equity as we could and got a mortgage on that property as a rental. Then we took the equity from that property and put it towards our principal residence. We had a HELOC on the previous property that we had used to buy rentals with so there wasn’t as much equity available but we did get rid of the HELOC to make everything cleaner.

      We are now doing a mix of accelerating our mortgage payments on our principal residence (because this mortgage has no tax benefit) and trying to max out our RRSPs for tax purposes. I know that paying off a mortgage fast isn’t for everyone, but we really can’t wait to be mortgage free again. It will give us many more options moving forward.

  4. I love your story and were in always the same situation… My question is it better to pay off your primary house or your rental? Or should have to kind of product on both house?

    1. Great questions Colts23. Personally, we favour paying off the mortgage on our primary house because the interest isn’t tax deductible in Canada. With our rentals, although we plan to pay them off eventually, we are in no rush to do so. The faster we pay off the rental properties, the more income tax we will pay while doing so. And this income tax can seriously add up if also working full time.

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