After making his first foray into the housing market four years ago, MoneyWise writer Sean Cooper set out on a journey to pay off his mortgage by the age of 30. In September 2015, he achieved his goal and kissed his mortgage goodbye. Here is his story:
In August 2012 I bought my first house - a beautifully renovated three-bedroom bungalow with a basement apartment. I was thrilled to have finally become a homeowner, having spent two years searching for a detached house in Toronto, Canada's second-priciest housing market at that time. It cost me $425,000 and I made a sizeable down payment of $170,000. That left me with with a $255,000 mortgage - an amount I'm proud to say I paid off in full as of September 22, 2015! You read that right - I paid my mortgage down to zero in just over three years, all before turning the ripe old age of 31!
Reaching My Mortgage Goal
It's been a long journey to mortgage freedom. Two summers ago, I set the ambitious goal of paying off my mortgage by age 31 (I had originally aimed to pay it off before Star Wars: The Force Awakens opened in theatres last Christmas) and I managed to do so, three months ahead of schedule! To celebrate, I threw a mortgage burning party to thank my friends for their support.
So, how did I do it as a single, first-time homeowner? It definitely wasn't easy. I experienced my fair share of bumps and bruises along the way. Finding a home in my price range took time - and two failed offers. And, despite my house passing the home inspection with flying colours, I ended up spending $25,000 in home renovations in 2014. But I met each challenge head-on. So here are a few of my tips for paying your mortgage down faster.
Tip 1: Live Frugally
Homeowners face a tough decision: do you want to continue to live the good life or do you want to pay down your mortgage sooner? There are many ways to live frugally: pack your lunch, walk/cycle/take public transit, cook meals at home, and shop at discount supermarkets, just to name a few. Together all of these strategies can save you a lot of money that can be put towards paying off your home.
Tip 2: Get a Second Job
While living frugally can save you money, it won’t pay down your mortgage alone. If you’re looking to reach mortgage freedom sooner, you’ll need to look for secondary sources of income. The simplest way to earn more money is to get a second job. I worked part-time at a supermarket for over 10 years on top of my regular nine-to-five. You don’t have to work in retail like me – there’s freelance work that typically pays a lot better (you can also do it on your own schedule).
Tip 3: Become a Landlord
In addition to being a first-time homeowner, I'm also a landlord. Rental income is a great way to earn extra income. I was inspired by Scott McGillivray of HGTV’s Income Property to live in the basement and rent out the main floor. This helped me bring in a lot more income and pay off my mortgage sooner. Just be warned that being a landlord isn’t easy. I’ve dealt with everything from bounced rent cheques to damage to my house.
Before you buy a rental property, make sure you’re cut out to be a landlord - check out my tips here.
What I Plan To Do Now That My House is Paid Off
Now that my house is paid off, I have let loose a bit and I'm enjoying the things I had deprived myself of. Now, it's important to begin travelling. Places on my bucket list include Vancouver, New York, Chicago and Europe.
Instead of working 80 hours a week like I used to, I have been having a lot more fun. I’m going out a lot more with friends to restaurants and events around the city. I’m also getting involved with new activities, including signing up for improv classes at Toronto's Second City and taking hip hop dance lessons. Lastly, I’d like to find the right woman and get married.
How I’m Changing My Financial Strategy
Since 90% of my net worth is tied up in my house, I plan to better diversify by investing in mutual funds. I’m working on maxing out my RRSP and I've been catching up on my TFSA contributions, as those had been on the back burner since I'd been so focused on paying down my mortgage.
Was Paying Down My Mortgage Early the Right Decision?
Since I reached mortgage freedom one year ago, I have had mixed emotions. While I’m happy to have paid everything off, I made a lot of sacrifices along the way - the biggest of which was my time. I was so focused on paying down my mortgage early that I neglected my social life and I missed out on my 20’s. I've been working very hard to change that. My goal is to expand my social circle and make more friends.
If I could do it over again, would I pay down my mortgage so quickly? I’m not sure. If taking three additional years to pay down my mortgage meant enjoying life more, having more friends, and getting married, I think I’d rather take more time. The lesson is while it’s good to focus on work, it’s important to achieve a healthy work-life balance. You won’t be young forever, so enjoy your youth while you still have it.
Are you a first-time buyer looking to pay off your mortgage quickly, or would you rather relax and take your time?