Last Updated on 17th January 2021 by Emma
A mortgage is usually the biggest financial debt you’ll ever have. When you buy your first house you are full of excitement and dreams about making it your perfect home with no thoughts about mortgage free living.
A year or two down the line and reality sets in. You have taken on a debt that means it’ll be 30 years or more before you are able to live mortgage free.
That $1000 a month you pay towards your mortgage is no longer your money. You owe it to the bank and they want it month after month after month.
Suddenly your house and your mortgage weigh heavily on you; you start looking at how to live mortgage free and the alternatives to 30 years of debt.
- What if you could pay off your mortgage 10 years early? Or even 20?
- How would it feel like to be living mortgage free?
- Can it be done?
Mortgage free living – what it means
A mortgage is almost like a utility bill, something you accept that needs to be paid month after month, seemingly forever.
When you become mortgage free that bill goes away, forever.
But not having a mortgage is so much more than one less bill to pay, it’s a whole different life you take on. Here are just some of the differences we have found being mortgage free.
Saves you money
Let’s start with the most obvious one. Getting rid of your mortgage saves you a huge amount of money. For every year you have a mortgage you pay your bank interest on the amount outstanding.
Reduce the outstanding amount more quickly and pay it off early and you will save 10s of thousands in interest. Seriously! Use a mortgage repayment calculator to see for yourself.
Your mortgage payment is your biggest bill each month and it’s a stretch to pay for everything every month.
Imagine not having that payment go out each month, instead it remains in your account for you to do something else with.
You no longer stress about making ends meet, receiving an unexpected bill or making your mortgage payments.
Sense of security
A mortgage is your ticket to owning your own home outright. When you have no mortgage no-one can take your home from you.
You cannot be evicted, your payments cannot be hiked up. It’s your home and you no longer have to worry about keeping a roof over your family.
No Worrying About Mortgage Rate Hikes
Whenever there is a hike in interest rates the media is full of stories of people worried about losing their home. You never have to worry about mortgage rates being increased when you have no mortgage.
Changing Mortgage Rules Don’t Impact You
Mortgages change over time and the rules with them. Without a mortgage these changes don’t impact you.
When we paid our mortgage off 10 years early we had to pay our bank an exit fee. The exit fee is one of the fees that banks suddenly started hiking up regularly, probably to try and hold onto more of our hard earned money.
The exit fee was just £50 when we signed our mortgage documents, when it came time to pay off our mortgage early, the bank charged us £175.
These retrospective hikes were highlighted in the media as being illegal and we had the difference refunded, thankfully.
With your outgoings much lower you have less demands on you earning the maximum salary you can. Mortgage free living brings with it the freedom to pursue other jobs.
One that are of more interest to you, perhaps a lower paying job in the voluntary sector, or going part time.
Choice Of How To Spend Your Money
Every month you have that mortgage payment money free and clear to spend how you wish. And I am sure you aren’t going to fritter it away.
In fact I bet you have grand plans for it. Plans that you can put into practice when you are living mortgage free.
benefits of mortgage free living
What does it feel like to be mortgage free? you might well ask.
For the first 6 months, it feels very strange. You are so used to either paying out a large amount every month or squirreling away any extra money you can save into over-payments.
That not doing so takes a little getting used to. Becoming mortgage free is not an instant thing so you will have formed many habits to help you find ways to overpay your mortgage and save extra money.
Habits that you no longer need to do. And then there are the many benefits of mortgage free living.
safe from life’s curve balls
We paid our mortgage off in 2009 with no expectation of imminent changes to our lives. 2 months later my Father-in-law died unexpectedly.
The impact on my husband was profound and going to work each day became something that he had to stop for a while in order to focus on his grief.
If we’d still had a large mortgage payment we could not have supported my husband like that. And he would have suffered more as a result.
Living mortgage free gives you the flexibility and scope to deal with the curve balls that life throws at you when you least expect them.
Reallocate that money
Curve balls aside, not paying out a mortgage payment each month means you have that money to put toward something else. Many people find it difficult to invest for their future in retirement accounts.
Without a mortgage this is something you can do and play catch up. You can put the money into retirement accounts, investments for your future.
With no mortgage to pay you have made a huge step forward on the road to financial freedom. Being financially free means you can choose whether to work or not, where to live and what to do with your precious time.
The next steps you take with deciding what to do with your money are opportunities to achieve financial freedom if you want it or something different.
a different life
If you started out life with no mortgage or rent to pay would you make the same choices of where you live and where you work? Becoming mortgage free gives you back these choices.
- Do you need to stay living where you are?
- Do you stay working where you work?
- Do you want to re-train into a different career?
Living mortgage free opens up new opportunities for you and your family.
Relationships can be strained by money worries. Banish the worry and the relationship you have with your spouse can blossom.
My husband always felt the mortgage payment more heavily than me. So imagine his surprise and delight when his birthday present was a bank receipt showing we had paid off the last few thousand on our mortgage!
It was hard keeping this decision and the payment a secret for 10 days but so worth it. He went to work in a daze and has never felt weighed down by money concerns like that again.
Why it’s good to pay off your mortgage
There are some people who say you should never pay your mortgage off because you can make more money by investing your extra cash into the stock market.
Firstly I’d say these are invariable people who earn six figure salaries, who can choose to pay off their mortgage in just a few years if they wanted.
Ordinary people, like you and me, don’t earn big money, we don’t have spare cash every month and we worry about money every day.
We don’t feel comfortable investing in a volatile stock market with a large mortgage hanging around our necks. If 2020’s pandemic has taught us anything, it’s that having financial security is priceless.
You can live on very little if you have no mortgage payment. When you need money most, your stock market investments are likely to be worth less than you paid so you don’t want to cash in.
Investing is good to do but not instead of paying down your mortgage.
how to pay off your mortgage early
Lower Your Interest Rate
Most of us take out fixed rate mortgages because they often provide the best and lowest interest rates and peace of mind of the exact payment due every month.
But fixed rates come to an end and staying on your lenders standard rate is rarely a good deal.
For extreme ease, you can call your lender and ask for another fixed rate or product they offer for existing customers. These tend to require little action on your behalf and often no new valuation (and therefore a fee).
Staying with your lender (on a new product) is very simple but being a new customer with a different lender can get you a better interest rate.
There are more hoops to jump through but new lenders will often pay all or most of the costs associated with transferring your mortgage to them. Some even sweeten the deal with cash back.
Keeping your mortgage payment as low as possible means you have more money to put towards overpaying it.
Reduce Mortgage Term
Not such a common occurrence but it’s something we did more than once. Most lenders will allow you to reduce the overall term of your mortgage even while on a fixed rate.
You might be on a 30 year mortgage, fixed for 5 years. But you could ask to reduce your term to 25 years. It increases your monthly payment but doesn’t invoke the early redemption clause on your fixed rate.
A word of caution, once you have reduced your mortgage term you have no right to stretch it back to it’s original length, this is a one way process.
Even on a fixed mortgage rate you can usually make over-payments. Some lenders only allow one payment, but it can be as much as 10% of your outstanding balance.
Others allow that same maximum of 10% but it can be multiple, small over-payments. Our lender allowed regular over-payments so each month I totaled up the extra money I had saved that month and sent a payment to our mortgage account.
Check the terms and conditions on your mortgage to see when and how you can overpay.
Mortgage lenders may allow you to offset savings held with them against your mortgage and reduce the interest you are paying accordingly.
For instance, if your mortgage is $100,000 and you have $20,000 in savings, with offsetting you would only pay interest on $80,000 of your mortgage, not the full $100k.
Of course you wouldn’t earn interest on your savings but right now the rates for savings are
so pitiful you’re not missing anything.
Get rid of debt
If you are carrying any other debt then in most instances this will be at a higher interest rate than your mortgage. Focus on paying off this debt first then divert the money you have been using for debt repayment to put towards overpaying your mortgage.
don’t get the biggest loan
A bank may tell you that you’re eligible for a loan of XXXXX. Being eligible for a large mortgage and taking one out are two very different things.
The larger your mortgage, the higher your payments and likely the longer you’ll end up with a mortgage. Choose a mortgage that fits best with you and the corresponding house.
buy a smaller house
Do you need a huge house, and the associated mortgage that comes with it? Or would you be just as happy in a smaller home, one that take less maintenance and a smaller mortgage?
Ignore the banks, ignore what others do, buy the right size home for you and your family. Also try not to move house very often – it’s such an expensive thing to do!
No car finance
Car finance is debt by another name and it’s rarely interest free. If it is interest free it’s usually because you have bought a brand new car, which loses up to 30% of it’s value in the first couple of years so not a great investment for your money.
Use sinking funds to save up for your next vehicle and pay with that. Keep your existing car longer, especially if you currently have finance, to give yourself time to build up funds for your new (to you) vehicle.
use work bonuses and unexpected money
Bonuses are never guaranteed although I know you can get quite used to expecting them. Your budget is based on your regular paychecks so a work bonus has no expectations for it’s use.
If you want to be enjoying mortgage free living then throwing your bonus into the mortgage pot will get you there all the quicker. Same goes for other unexpected or irregular money.
If you have a clear out and sell some stuff on Ebay or Facebook Marketplace, put it toward your mortgage.
have an Emergency fund
Emergency funds are key to being able to manage your finances through everything that gets thrown at you.
With an emergency fund in place, your plans to pay off your mortgage faster won’t be derailed if an emergency pops up. That’s what that fund is for. Keep it at a minimum of $1000 and ideally closer to 3-6 months worth of expenses.
The Small things we did to be mortgage free
In our efforts to work out how to live mortgage free as quickly as possible, we didn’t just stick to readjusting our finances as listed above.
We didn’t earn great salaries (or even good to be honest) so even with all those money moves we still didn’t have a lot of spare cash.
Focusing on the big money moves only get’s you so far. You can be mortgage free much quicker if you pay attention to the small everyday money saving things you can choose to do.
It was these small things we gave up that made such a difference to our mortgage free journey.
The Entitlement Mentality
When you are working hard and paying all your bills on time it is very easy to fall into the cycle of thinking that you deserve to reward yourself by spending more money.
We had got into the habit of thinking that we were entitled to, that we deserved, that we should be able to buy anything we wanted because we worked hard.
Shifting your entitlement mentality to one where you recognize that every spending decision you make is just that. A conscious decision and one where you could choose differently.
We chose to think differently and prioritize our mortgage payments over entitlement spending.
Related post: How To Be Good With Money: 10 Top Tips
Going out for a meal even once a week can easily add up to $50 a time for the two of you.
When we went out for a meal we used to have the full 3 courses plus a couple of drinks although we did save on taxi fares by one of us opting to drive.
We didn’t have high outgoings to start with so not eating out was an easy win for us. We gave up birthday meals, anniversary meals, all of them. For 10 years.
Expensive Travel Abroad
As a young family tied to school holidays any holiday we took was going to cost us dearly. Many of our friends went abroad to Europe every summer taking all year to pay for it and paying credit card interest as well.
We decided we could save up to £1000 if we didn’t have a traditional package holiday and made do with camping. Every few years we splashed out and camped in France but always at the end or beginning of the season, never peak time.
We managed to get 7 or 10 day holidays for just £400 this way. Cheaper than staying in the UK!
Buying New Cars
We have always been a two car family and we’ve never bought brand new cars. Which means our cars got old really quick and needed repairing more often than a newer car.
We took breakdown cover to help us get back on the road quickly if one of our cars broke down as we both needed them to get to work. We kept our cars going for as long as possible.
Sucking up the repair costs because these were far less over a whole year than a car payment on a newer car.
Fish And Chips
Here in the UK Friday night is often fish and chip night or take out night. Friday is the end of a hard week’s work for many people and we like to treat ourselves by not having to cook.
We were no different and looked forward to our fish and chips. But it was a cost we could get rid of and add to the mortgage repayment. Fish and chips at home is more healthy so we cooked at home and banked the extra money.
I know our winters are very much less cold than friends in Canada and the US but it’s still cold! We chose to dial down the thermostat and increase our clothing layers to reduce our bills.
We didn’t go as far as wearing hats at home but thought nothing of wearing 3 layers in the winter.
I always feel the cold more than my husband so for my birthday one year I received a couple of pairs of fleece lined trousers. Absolute bliss! I still wear fleece lined trousers every winter as they really made a difference.
When we started attacking our mortgage mobile phones weren’t a must have (can you believe?). But of course they rapidly become exactly that.
I made do with an employer provided phone until I changed jobs and it was no longer provided.
As mobile phones became more popular my hubby and I bucked the trend and didn’t take on phone contracts, nor did we change our handsets when the newest release came out.
In fact I only got a phone which connected to the internet in 2016, about 8 years after everyone else! I stayed on a ‘pay as you go’ tariff until then paying for each text I sent or call I made – I didn’t make many.
My phone contracts now cost £9 a month and that is the most I have ever paid.
I have long, fine hair which doesn’t require much styling as nothing lasts. But it does require regular cutting as the ends get straggly very quickly.
I never had my hair washed at a hairdressers as it seemed pointless when the only bit that was going to be cut was right at the end, often more than 18 inches away from my scalp.
But it still cost £20 to have my haircut. So I got my husband to cut it, and he still does. He has had his own set of clippers for 20+ years and cuts his own hair too. He has a number 2 all over so not exactly hard to achieve at home.
Birthday cards, celebration cards, anniversary cards, the money you spend on cards can add up. I chose not to buy individually designed cards and always bought when card shops had special offers on, like 10 cards for £1. I’d rather pay 10p for a card than £3.
Now I know it’s not much, after all how many birthday cards do you actually buy? However it’s the principle of every penny counts.
Christmas In January
Rather than paying full price for Christmas cards and wrap I waited until January and bought at huge discounts. Sometimes getting rolls of nice wrapping paper for 10p and packs of cards reduced by 75%.
They went in the attic to be produced in November when I was starting to feel the pinch from present buying. If I found a great bargain then I would stock up.
After one great January I don’t think I bought any wrapping paper for about 4 years!
I also try to buy the plain wrap without Christmas motifs, that way I can use it for birthdays and other present giving events. Gold and silver wrap make birthday presents look luxurious.
Drive To Walk
Mr2p and I like to have a nice walk in the countryside and explore different areas. But this often comes at a cost of petrol.
We used to drive up to an hour to go some place nice, walk for a couple of hours then drive home again. Stopping this and making do with more local walks cut our fuel bill down – more money for the over-payment pot.
We still drove to different places but only 10 minutes away. The added benefit is we are reducing our impact on the environment by not driving so far.
These days movies get released in the cinema and quite quickly go to DVD and streaming services. When we were paying our mortgage off it took longer for movies to get to DVD never mind to terrestrial TV.
But going to the movies isn’t just the price of a ticket. There is the fuel to get there, the car parking, the popcorn and the drinks. The add-ons will double the price of your ticket all told.
So we gave up going to the movies and waited (im)patiently for them to trickle down to free TV. We got used to watching the Saturday night movie on TV which was always at least 3 years old and likely seen before.
We watched the adverts for new movie releases and looked forward to the day they appeared on our TV. Paying our mortgage off early was more important to us than watching a film when it was newly released.
Packing Your Lunch
When we were focused on becoming mortgage free hubby worked in the construction industry in a physically demanding job. Because of the energy expended in his job he could not survive on a salad for lunch.
All his workmates bought their breakfast and lunch from the local shop, takeaway or cafe, whatever was closest. Every day. Hubby was one of the very few who packed their meals.
Yes it was a big pack up, but it cost a darn sight less than buying burger, chips and a bacon butty daily. This, coupled with my packed lunches, saved us over £300 every month. For 10 years.
I used to love to read women’s magazines. The ones where they show you fabulous homes, gorgeous accessories and smart outfits. Everything that you could possibly want, as long as you could afford to buy it.
But magazines cost money even if you have them on subscription. I gave up magazines and saved my pennies.
How To Live Mortgage Free Today
Recently there was a show called how to live mortgage free with Sarah Beeny. It was supposed to be all about what you could do to own your own home free and clear of a mortgage.
Unfortunately, when you watched it you quickly realized that all the people on the show had one thing in common. Family money that gave them a huge step up.
One couple built a house on land owned by family. Another converted outbuildings in their home – again owned by family. Not really a true depiction of how you can live mortgage free today.
However, there are other ways that you can live mortgage free without family paying for it.
Tiny House Living
The tiny house movement is growing in popularity and with good reason. With the average US house now costing $295,000 and UK average prices at £256,000 (almost the exact same price!), many people on low incomes are being priced out of the market.
Tiny homes though can be bought for around $60,000 or less if you are happy to either live very tiny or do some of the work yourself.
Live In Jobs
Some jobs come with accommodation included. Often this is because the job is based in a remote part of the country but not always. Jobs with living accommodation include:
- wildlife warden
- National Trust warden
- farm hands
- hotel staff
An RV (recreational vehicle) is your ultimate mobile home. You can get huge big lorry size RV’s or much more modest ones. Many people live in a form of RV whether it’s static or truly mobile.
Much cheaper than a house and more adaptable to your life changing too.
In London the average cost of a flat was £563,664 ($763,622) at the time of writing, which prices almost all first time buyers out of the market.
But London has a canal system and rivers so boat life has become a great way to buy your own home without trying to fund a £500k mortgage. And many others do similar, yachts and old sea boats are rising in popularity.
How Being Mortgage Free Changed Our Lives
Seriously, it changed our lives in so many ways that we didn’t plan. When we set out on our mortgage free journey the sole intention was to be mortgage free, to not have that monthly payment, that debt.
Yet once we achieved our goal, we slowly realized we could do things differently, live differently.
Focus On Retirement Savings
With no mortgage payment we could afford to put money away for my husbands retirement (I already had a workplace pension set up). As a self employed person it’s all too easy to put off retirement savings until you think you can afford them.
But you never seem reach that stage. Of course it would have been sensible to put money aside from the start, but we didn’t, hindsight and all that.
I think my husband is a serial careerist. He seems to need or want to change careers every 15 years or so. He’s been in the military, he was a carpenter and then, with no mortgage payment, came the opportunity to re-train as a conservation officer.
After a break from work to deal with a bereavement he went back to work part time and studied part time. Then took a low paid job in his new field. Because our finances said he could.
Who wouldn’t want to stop working because you have to and start doing what you want to do, paid or unpaid? Becoming mortgage free meant early retirement could be an option, if we followed further steps.
Steps that included saving still harder, making the most of tax efficient savings into retirement funds, not treating ourselves to a new car and more holidays just because we had no mortgage.
We had another goal – early retirement. And we achieved that less than 10 years later.
Living mortgage free – can it be done?
It took us 10 years to pay off our mortgage once we started attacking it. We didn’t have a lot of spare cash so cutting our bills and going without some luxury items were the only way we could do it.
I know some people highlight how they paid their mortgage off in 5 years. But their income meant they had a lot of loose change to throw at it if they chose.
We had low incomes and little lose change but have proved you can become mortgage free despite this. If you make the choice to pay off your mortgage you will be able to do it.
Might take you more than 5 years but it certainly won’t take you 30!
Start taking back control of your money by grabbing your copy of the Money Saving Starter Guide today.