Four years, eleven months – that’s how long it took us (my husband and I) to pay off our $342,000 mortgage. One frequent strategy we used to pay off our mortgage in less than 5 years was hacking. No, we didn’t hack into the bank’s computers and change anything.
I’m talking about applying life hacks. At the time, we didn’t know what all these hacks were and just applied them coincidentally. In order to pay off our mortgage in less than 5 years we travel hacked, career hacked, and house hacked. We also mortgage and RRSP hacked – if those are things.
When our friends and family hear that we paid off our mortgage in less than 5 years their immediate thought is that during that time we must have deprived ourselves. Nothing could be further from the truth. During the time it took to pay off the mortgage we travelled to 8 countries on 4 continents.
How? By travel hacking.
I am lucky enough to have a job that involves international travel from time to time – it is one of the things that attracted me to the profession. When I went on business trips I would just pay the extra few dollars to extend the trip to do some personal travelling.
With someone else paying the big-ticket item of the flights, this made travelling a lot more affordable. On the odd trip we would also just pay for my husband’s flight and he could come meet me after I was done working.
Another way we travel hacked was in using loyalty points, through our credit card and other companies that we frequented. We were diligent (and still are) about putting everything on our credit cards and then paying them off in full every month.
Just that one move alone has paid for our flights to a new country every other year. I am no expert at this form of travel hacking but am learning and applying more all the time.
During the five years it took to pay off our mortgage I made a huge career move. I went back to school to get my teaching degree. Prior to that I had been working in a school as an independent contractor which meant I had no benefits and no long-term savings plan.
With the support of my then principal I went back to university part time to obtain my bachelor’s degree in education. The two and a half years it took me to complete this was an extremely busy time. In order to afford all of this I continued to work full time hours on top of my part time schooling.
I transitioned directly into a teaching position at the school I was working at. This new position came with benefits and almost doubled my annual wage. Because we had been so used to living and saving off my previous wage, the increase went directly to achieving our financial goals.
While I went back to school to increase my salary my husband took as much overtime as he could get. As a shift worker he has ample opportunities for overtime every year.
We were diligent in applying every extra dollar towards our goals. We did our best to avoid the lifestyle inflation trap we saw our friends and family fall victim to.
When we bought our first house we ended up spending more than we had originally intended. The higher purchase price was out of “necessity.” At the lower price range that we had been looking at some of the houses had shag carpet – on the front door! At the time we wanted a turn key property because we were not interested in doing any renovations.
With the higher price point property there came a slightly bigger home than we needed for the two of us, but knew we would grow into when starting a family. My sister and best friend were both looking for places to live at the time so we rented out rooms to them. They paid a nominal amount for rent that was affordable for all of us.
Throughout the first few years of living in our new home we had people living with us, but it was always friends or family. We had qualified for the mortgage without any assistance so the extra rental income was a bonus and again went directly to our financial goals.
Getting pre-approved for a mortgage is key. I would also suggest using an independent mortgage broker instead of just working directly with a bank. The independent broker can shop around various banks for the best rate.
By working with a broker we were able to get a much better mortgage rate than through our regular bank. Even just a few interest basis points can save you tens of thousands of dollars throughout the life of the mortgage.
Before going to a broker it is a good idea to check online for current rates. Perch Mortgage has a great tool for this. Check out their Perch Pathfinder Tool to compare rates. This tool provides way more information than regular mortgage calculators. And when it comes to getting the best mortgage knowledge is power.
Although we spent more than we had intended it was still way lower than what we qualified for at the bank. The bank’s interest is in getting as much money from us in interest as possible. Our priority was in buying something we could afford.
We also opted for biweekly accelerated payments. With monthly payments you are making 12 payments a year. With biweekly payments there are 26 “half” payments or 13 “full” payments in a year.
The extra payment goes directly towards the principal and saves you interest year over year. The accelerated portion of our payment meant they took the biweekly amount and increased it by 20%. This further increased the amount going directly toward the principal with every payment.
The biweekly mortgage payments lined up with one of our paychecks so we would get paid and the very next day the mortgage payment came out. This out of site out of mind trick really helped us. If we didn’t see the money in our account we didn’t spend it.
Not every choice we made with our mortgage was optimal in helping us pay off our mortgage in less than 5 years. At the time the fixed term mortgage rates were 3.94% so we locked in thinking they would never be lower – boy were we wrong!
Rates did in fact come down substantially during the five-year term of our mortgage. Had we done a variable rate mortgage we probably could have saved even more money on interest. Oh well, live and learn.
The RRSP (Registered Retirement Savings Plan) deadline is the end of February. Our mortgage anniversary was end of August. Coincidentally these dates were approximately 6 months apart.
For half of the year we would put all our savings to our RRSP and then when our refund came in we put it on our mortgage. The other half of the year we put all our savings towards our mortgage.
The benefit of this was twofold – not only were we paying down our mortgage we were also investing for our retirement. Both of these savings vehicles were also helping to increase our net worth and meeting our financial goals.
Fast forward 10 years and we have been mortgage free for the past 5 years. What a great feeling. Every month it felt like we were printing money as none of our paychecks went to a housing payment. Living mortgage free truly changed our lives and accelerated our path to financial independence.
We have now converted that property to a rental and have bought a new home for our growing family. This home is a slight upgrade. This time we have decided to do some renovations before moving in. Because of this and a few other factors this property will have a mortgage on it.
New Home, New Mortgage
We plan on using what we’ve learned to pay down this new mortgage as fast as possible.
We will continue to travel hack but may not travel as much as our intent is to continue to grow our family. Hopefully with an upcoming maternity leave in the next five years our cash flow will decrease for a period of time.
As I am now in a unionized job there is not much room for career hacking at my day job. I plan on creating my own raise through other side hustle means.
Our house hacking is also different this time. We have no intention of having people live with us. We do however now own 9 rental properties. Any extra cashflow from there will go to paying down the mortgage on our principal residence.
We have already been aggressive with our mortgage hacking. Our current fixed rate is much lower than the first one we had. The terms of our new mortgage will also enable us to pay it off in 5 years without penalty.
Our goal is to pay off this next mortgage of $352,000 in five years (or less).
What strategies do you use to meet your financial goals?