How We Paid Off $110,000 of Mortgage Debt Over 14 Months

mortgage debt

We took on risk on a very large mortgage debt load, and subsequent financial gamble in the summer of 2013. We were looking to move to a rural property. Our desire to live in an urban centre (Peterborough, Ontario), over time, transitioned to a desire to live in the “country” with all that “country life” has to offer.

So, in June of 2013 we purchased our dream home. Our property sits on just over an acre of land on a lot that is partially treed and provides plenty of space for our kids to play outside, to raise a garden and to relax in the solitude of the country side.

The downside?

We bought our new home before we sold the previous one. A big financial burden that limited our financial growth. Our  previous home sold in December of 2013 so we carried two homes for 6 months.

During this time, aside from our amortization choice, we paid the minimum on both mortgages.

One of the biggest expenses you will ever have is your home. By the time you pay off your mortgage debt over a period of two or more decades, you will pay tens if not hundreds of thousands of dollars in interest. If you’re looking to reduce your debt, and save thousands, paying off your mortgage debt quicker can be one of the best ways to proceed. For our American readers, in Canada we can not claim mortgage interest as a tax deduction in most circumstances (a few exemptions apply).

Watching my parents struggle with mortgage debt instilled in me a desire to avoid similar problems in my own life. You never know when interest rates are going to start rising again, and paying off your mortgage quickly can help you avoid that uncertainty. Mrs. SPF had similar experiences watching her family struggle with mortgage debt, so it was easy for us to agree that we wanted to do things differently. For Canadians, there is an argument for a guaranteed return on investment that paying off mortgage debt can provide.

Mrs. SPF and I created a plan to reduce our mortgage quickly when we bought our current home. In fact, over a period 14 months, we paid off almost $111,000. When we really started focusing on our efforts in December of 2013, our mortgage balance was $292,145.94. On January 30, 2015, after 14 months, our balance was $181,158.46. Here’s how we did it:

Structuring Our Mortgage

Here in Canada we have a range of somewhat flexible mortgage products so that you can mix and match your payment abilities. The key to our success is amortizing over 15 years, rather than sticking to the “usual” practice of amortizing over 25 years which the banks seem to promote whenever people move. We also make bi-weekly accelerated mortgage payments. This means that we end up with the equivalent of an extra payment every year, speeding up the debt repayment process.

Not only that, but our mortgage product allows us to increase our bi-weekly mortgage payments by 10% each year. This means that we can boost our regular mortgage payment each year without refinancing. As our income increases and our finances improve, we increase our monthly payments which we we have done each year from 2013-15. Our mortgage product also allows us to make lump sum payments of up to 10% of the original principal amount each year. This means that if we get a windfall, it’s easy to take the money and apply it to our mortgage balance.

While our five-year fixed rate of 2.84% is great, and means less paid in interest, our real advantage is the flexible mortgage product that allows us to change things up in favor of accelerating our payoff. As a result of our strategy, we expect to be mortgage free by January 2020, instead of continuing to pay until June 2028 which was our original final payment date.

Frugal Living and Making Mortgage Debt Reduction a Priority

Our frugal and sustainable lifestyle allows us to make mortgage debt reduction payments on our mortgage. Because our lifestyle is simple and inexpensive, it means that we have enough money to aggressively pay down our mortgage, even as we fund our emergency, retirement, and kids’ college accounts. Some of the ways that we live simply and frugally include:

  • The kids and I get DIY haircuts from Mrs. SPF
  • We don’t have cable TV.
  • Almost all of the clothing we buy for our children is used. We hope to use all of it.
  • We use Android instead of Apple products which are less expensive and use a pay as you go plan for our cell phones.
  • About three quarters of what we buy at the grocery store is on sale.
  • Because … growing some of our own food is important to us.
  • And … we purchase organic veg baskets from a neighbour as a member of their CSA
  • We buy used online with Kijiji when we can.
  • Our meals are mostly prepared at home -we don’t dine out often.
  • We buy when we need, not when we want, based on family priorities

We also save by thinking of out-of-the-box ways to accomplish our goals. When we bought our Subaru Outback, we did our research and imported the Outback from the United States, saving us more than $9,000 compared to buying the same vehicle north of the border. The Outback is built in Indiana so we avoided import duty (almost 7%) while taking advantage of the skewed markets for consumer products between the U.S. and Canada while leveraging strong Canadian dollar in the Summer of 2010. We plan to drive our Outback into the ground before replacing it.

Not only do we have a generally frugal lifestyle that allows us to handle higher monthly mortgage payments, but our focus on debt reduction as a priority means that we already know what to do when we have a windfall. A recent pension adjustment allowed us to make a lump sum payment (~$21,000) in October 2014, and an inheritance also provided us with the means to make a lump sum payment ($29,990) not too long ago. After carrying two homes, when the first sold we were able to apply almost $30,000 to the principal.

Because our priority is reducing our mortgage debt as soon as possible, it’s easy to consider that money earmarked. When our current five-year fixed mortgage situation expires in June 2018, we will be interested in raising our bi-weekly payment amount for the final stretch, which would accelerate our payoff even faster. When we are mortgage free we will change our focus to investing in order to supplement our defined benefit pensions. At this time we do not see a need to prioritize investing as we already sock away close to 10% of our income in the DBPs (where our employer matches the contribution). We will focus a now freed up ~$3000 per month on investing for our retirements and to save for our kids’ schooling if they choose post secondary education.

Finally, we make it a point to use our income generating web properties to help us make payments. This extra money coming in allows us to continue to pay down our mortgage without the worry of interfering with our regular finances.

In the end, it’s about priorities and a little ingenuity. We have set up our finances to take care of our major goals (retirement, college for our children) at a more relaxed and moderate rate – we fund our kids’ RESPs annually and contribute to our DBPs while paying off mortgage debt instead of investing in the markets.  Lessons from our parents still make sense to us when we examine our family financial planning. We are committed to becoming completely debt-free in less than 5 years.

Our choice and we are comfortable with it.

What are your thoughts on your mortgage debt?

How to Sprout Your Own Garden Starts

Gardening on the balconyOne of the best ways to ensure good food — and save money in the bargain — is to grow a garden. My parents always had a garden when I was growing up, and my husband and I regularly planted a garden when we had a house.

While you can buy young plants to transplant into your garden, it can be more cost-efficient (and rewarding) to sprout your own garden sprouts. If you want to get a head start on your garden, you can sprout plants indoors, where they are safe from the cold weather, and move them outside to your garden later.

Here’s how to get started:

Identify an Area with the Right Lighting

First of all, make sure you have room for your sprouts. Choose an area with the right lighting. Different plants have different needs, so make sure that you have a plan to keep sprouts with similar needs together.

A sunny window is usually a good option when it comes to your garden sprouts. Make sure you have enough room for the seeds you want to sprout. You can prioritize based on space.

Prepare the Containers

Next, you need containers to sprout the seeds. The good news is that, in many cases, you don’t need anything very big. For the beginning seeds, a small container that is one or two inches deep is usually fine. Egg cartons work really well. However, you can also buy “market packs” that include rows of small containers.

Think about how big your plants will get before you move them outside. The fewer times you need to move your plants, the better off they will be. If you know you will transplant your seedlings before they outgrow the smaller containers, that isn’t a problem. Another option is to plant your seedlings in bigger pots. This gives them more room for growth and root spreading before you move them to your garden.

Containers should contain soil that is dry and free of toxins. The good news is that you don’t need to go to great trouble to get nutrient-rich soil, since the seeds contain the nutrients needed for sprouting. However, you can grow your seedlings stronger if you mix your soil with perlite, compost, or peat moss. Just make sure you mix carefully so that you don’t end up with a mix that isn’t ideal for the seedling involved.

There are some seeds that will sprout without soil at all. For these, normally a damp paper towel is enough. Keep the paper towel damp and in the proper light. After the seed sprouts, you can transplant it in a pot for further growth and root development before moving it outside to your garden.

Plant the Seeds

When planting the seeds, make a small hole. You should only cover the seeds with enough dirt to be about three times its height. Some seeds don’t need to be properly covered with dirt at all. Check the seed packet for more specific instructions related to your seeds.

For the most part, you should just loosely cover the seeds with dirt. Don’t pack the dirt down. You can moisten the soil by using a spray bottle to mist the water. One of the keys to successful seed sprouting is to keep the soil moist, but not over-watered.

Find out whether or not the seeds need light to sprout. You can sometimes stack seed flats until the sprout if the seeds don’t need a lot of light. Continue to watch the seedlings. There will be a time to thin them out so that the seedlings that remain can grow stronger. You don’t want to keep all the sprouts, though, since you want the strongest for your garden.

Moving Your Plants to the Garden

Once your seedlings are strong enough, and the weather is favorable, you can move your plants to the garden. Make sure your garden plot is properly prepared and ready to receive the plants. Keep an eye on the weather, since you might want to wait a little longer, or be prepared to cover your plants, if the nights are still too cold.

Sprouting your own seedlings can be a cost-efficient way to get the starts needed for your garden. These plants are often stronger and hardier, and it can give you a good way to get your garden started without risk your plants to frost.

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