mortgage – My WordPress

Last week I posted about WHY we chose to pay off our mortgage. Today’s post is about HOW we paid it off in six years on one income.

First, I should let you know I did some substitute teaching for about 5 months before we had children. So we were “double income” during that time, even though the amount I made certainly didn’t approach full-time employment.

On our honeymoon Scott and I read one of our wedding gifts: Total Money Makeover. After that we were sold on paying off our mortgage. But we thought: “How in the world are we going to do this on one income, and a teacher’s income at that?!”

One of the main principles I took away from the book is: “Live like no one else so that you can live like no one else.” Scott and I knew that if we were going to pay off our mortgage on one income we would have to do this! This became a mantra for me when I felt like a weirdo for not doing what everyone else was doing.

Here are ten things we did to “live like no one else” so we could put that extra money toward our mortgage. You’ll notice there are no fancy formulas or budgeting techniques. We simply lived in a way many others would consider extreme, and we still largely live this way today. I believe many people would consider our lifestyle extreme simply because we live in such an indulgent society.

1. We rarely ate out.

Perhaps twice per year and only when we were traveling more than four hours on the road. Usually we brought food with us. If we did go out for a birthday or anniversary we used a gift card. Making meals at home saves LOTS of money. I must admit one thing that helped us was having four children six and under. They didn’t eat much :).

2. We didn’t go big on holidays or birthdays.

For birthdays we buy one gift for each child, and have dinner and cake that I make. Scott and I don’t buy anything for each other on holidays, anniversaries, or birthdays. It’s a nice mutual agreement we have that keeps expectations and expenses low 🙂 For Christmas we let each kid buy their siblings a small gift and then we ask the grandparents to only buy one special gift for each child. Holidays can REALLY ADD UP. Our minimalist approach to toys saves lots of money. We buy the same types of toys but not a lot of different ones. Many kids have toys laying around they never play with! Figure out what toys your kids like and invest in those. Now that we paid our debt off we have invested more in quality toys.

This is the first of a two part blog post! The next one will be on HOW we paid off our mortgage. This one will focus on WHY.

My husband and I paid off our house in six years of marriage. We owed $160,000 on our mortgage at the time. I also owed about $6,000 for school loans that we paid off within the first year of marriage. Scott (my husband) had some school loans but they would be paid off through a grant program as he taught at a low income school district in Ca. That was all our debt. We didn’t, and still don’t, do credit cards and we pay cash for vehicles.

Early on we wrestled with the idea of paying our house off because of the tax deduction we got for having a mortgage. Dave Ramsey helped us out with that decision though:

“If you have the opportunity to pay off your home and you don’t pay off your home in order to keep the tax deduction, that would be an indication that you are poor at mathematics. Let me help you with the mathematics on this. Let’s say you have a $200,000 mortgage at 5% interest. If you have a $200,000 mortgage at 5%, that would be $10,000. We have a $10,000 tax write-off because we have a $200,000 mortgage at 5%. That’s a tax deduction, meaning if that couple makes $75,000 a year and they take a $10,000 tax deduction, they don’t pay taxes on $75,000. They instead pay taxes on $65,000. If you do this weird Dave Ramsey thing, though, and you pay off the house, you no longer pay taxes on $65,000 because you would not have a tax deduction. You’d have to pay taxes on $75,000. You’re in a 25% tax bracket if you make $75,000 a year. That $10,000 a year that we’re talking about is taxed at 25%. By paying off your home, 25% of that $10,000 that you’re going to have to pay extra taxes on is $2,500. In essence, you lost a $2,500 savings on your tax bill, but you gained $10,000 by not having to pay it to the bank. A $10,000 tax deduction is the same thing as saying, ‘I would rather give Countrywide $10,000 than give the government $2,500.’”