This story begins about 10 years ago, around the time my husband and I were married. It’s also a story that I have never told on Simply Frugal. In all honesty, I have never told this story before because it just seems too simplistic. But I’ll take a risk with this one and assume there are some of you out there that can relate to or need to hear our story.
You may have noticed that I have never discussed all the ways that we have personally climbed out of mountains of debt. Like most other websites similar to mine, they are sharing their story of how they knocked down thousands upon thousands of dollars in debt.
But I do not share these steps for one simple fact: Until the purchase of our new home, my husband and I have never had any debt.
I don’t share this to brag, but to perhaps tear away at the thoughts that our society suggests the idea that we need debt in order to be or appear successful.
We are by no means wealthy, but we have done well considering there have been some years with very low income.
As I mentioned, our journey to paying off more than 50% of our mortgage, began about 10 years ago when we started making smart financial choices. (Instead of ones that “society” suggested we make.) Our story may be possible because of circ*mstances but I also believe it’s because of our intentional decisions.
At the time of our marriage, my husband owned a condo that he then sold for a profit. We purchased another townhouse at the time of our marriage and decided the smart thing to do was to put his profits into our new home, paying off the mortgage in full. This was essentially the best decisions we have made for our family. There were so many fun things we could have done with the money. We could have been world travelers or bought a boat or fancy car. But we decided to be forward thinkers and determined that we wanted to set up our future for success which to us means no debt.
Because of our choice many years ago, we had a very low cost of living, which enabled us to save even more money. (Even in the very low income years.)
So, cut to March of 2017, we purchased our new home using the profits from the sale of our townhouse and the savings we had in the bank. That allowed up to pay off more than 50% of our mortgage!
As you can see, our story is not typical of most frugal websites out there today. It’s also quite “simple” because we happened to buy and sell at “the right times” allowing us to profit.
But… I also attribute our success so far to the spending choices we make on a daily basis. Here are our “rules” for spending that I hope will help you decide with future purchases:
1. Pay with Cash
When we want something or need something, we always pay with cash. Now, we do use a credit card, but we only use it if we already have the money in the bank. Over the years, every purchase we have made (aside from our new home) has been with cash.
2. Buy Used
Looking around our home, many of the things I’m looking at have been bought used. Our couch set, our dining room table, toys, our vehicles even. (Though we do keep those outside. 😉 ) When it’s time to make a purchase, we look for something used first.
3. Buy on Sale
If we can’t find what were looking for used, we wait for a sale. Everything goes on sale eventually! Why pay full price if you don’t have to?
4. Determine Wants vs. Needs
My husband wants a new TV for the basem*nt. We still haven’t purchased one because we have determined that there are other purchases that we need to make that are more important. The way we have set up our finances allows us to buy wants, but that doesn’t mean we instantly go out and buy something just because we want to. We do our research and think through the purchase. Now, I’m not perfect and I struggle with buying more small wants than my husband. Something both of us wish to change. 🙂
5. Have an Emergency Fund
My husband and I don’t feel comfortable if we don’t have a certain amount in the bank. We highly recommend having an emergency fund. The amount you have in this account is up to you, but it should only be used in real emergencies.
All in all, it takes practice, thoughtfulness and a shift in mindset. Be a future thinker instead of a present thinker in terms of your finances. It wasn’t until I completed my very first No Spend Challenge many years ago that I had that mindset change. The challenge helped me to switch my mindset from shopping for entertainment to realize the enjoyment of having money in the bank.
My hope is that our story is an encouragement to you. If you’re in a less than ideal financial spot, it doesn’t always have to be that way!
I’d love to hear your thoughts on this. Please share in the comments below!
FAQs
While the Consumer Financial Protection Bureau (CFPB) reports that banks will qualify mortgage amounts that are up to 43% of a borrower's monthly income, you might not want to take on that much debt. “You want to make sure that your monthly mortgage is no more than 28% of your gross monthly income,” says Reyes.
What happens if you want to move before your mortgage is paid off? ›
Moving out of your home does not release you from the obligation of paying your mortgage. If you sell your home as part of your move, you can use your sale proceeds to pay off your loan. If you decide to keep your home, you'll have to continue paying your mortgage to avoid foreclosure.
What happens when you pay off a large portion of your mortgage? ›
What Happens When You Make a Lump-Sum Payment. When you make a lump-sum payment on your mortgage, your lender usually applies it to your principal. In other words, your mortgage balance will go down, but your payment amount and due dates won't change.
How will I feel after paying off my mortgage? ›
After you pay off your mortgage, you might gain a newfound sense of pride in your home. You really, truly own it. You'll likely have extra money every month and face a much lower risk of losing your home if you fall on hard times.
Can I afford a 300k house on a 60k salary? ›
An individual earning $60,000 a year may buy a home worth ranging from $180,000 to over $300,000. That's because your wage isn't the only factor that affects your house purchase budget. Your credit score, existing debts, mortgage rates, and a variety of other considerations must all be taken into account.
How much house can I afford if I make $70,000 a year? ›
If you make $70K a year, you can likely afford a home between $290,000 and $310,000*. Depending on your personal finances, that's a monthly house payment between $2,000 and $2,500. Keep in mind that figure will include your monthly mortgage payment, taxes, and insurance.
What happens if you move while you have a mortgage? ›
Porting a mortgage means you transfer the deal you've got on your old home to the new place you're buying. The majority of mortgages, though not all of them, can be ported to another home. There can be restrictions on the number of times you can port a mortgage. Porting will not always be the best deal for you.
What happens to escrow when you pay off a mortgage? ›
When you have paid off your mortgage in full: Your escrow account will be closed. Any funds remaining in the account will be returned to you. The mortgage servicer is obligated by law to send you your escrow refund, if any, within 20 days after it closes your account.
Should I receive a deed after paying off my mortgage? ›
Once a mortgage is paid off, a lender is required to provide a deed of reconveyance. This would apply even if you pay off the loan early.
What happens if I pay $500 extra a month on my mortgage? ›
Making extra payments of $500/month could save you $60,798 in interest over the life of the loan. You could own your house 13 years sooner than under your current payment.
Increasing your monthly payments, making bi-weekly payments, and making extra principal payments can help accelerate mortgage payoff. Cutting expenses, increasing income, and using windfalls to make lump sum payments can help pay off the mortgage faster.
What happens if I pay an extra $2000 a month on my mortgage? ›
The additional amount will reduce the principal on your mortgage, as well as the total amount of interest you will pay, and the number of payments.
Who do I notify when I pay off my mortgage? ›
If they have not within 90 days, bring your mortgage documents to the clerk to update their records. Notify your insurance company: Contact your insurance company to let them know that your mortgage has been paid off. They may require a copy of your mortgage documents to verify that this is true.
Do you get a tax credit for paying off a mortgage? ›
You can deduct the mortgage interest you paid during the tax year on the first $750,000 of your mortgage debt for your primary home or a second home. If you are married filing separately, the limit drops to $375,000.
Does paying off a mortgage affect credit score? ›
For example, paying off your only installment loan, such as an auto loan or mortgage, could negatively impact your credit scores by decreasing the diversity of your credit mix. Creditors like to see that you can responsibly manage different types of debt.
What percentage of my take home pay should go to mortgage? ›
Although most personal finance experts recommend the 28% rule, there are several other rules and guidelines that can be helpful in your calculations.
Is 40% of income on a mortgage too much? ›
Using the 35/45 method, no more than 35% of your gross household income should go to all your debt, including your mortgage payment. Another way to calculate, though, is no more than 45% of your net pay—or after-tax dollars—should go to your total monthly debt.
What percentage of your take home pay should you spend on mortgage? ›
To determine how much you can afford using this rule, multiply your monthly gross income by 28%. For example, if you make $10,000 every month, multiply $10,000 by 0.28 to get $2,800. Using these figures, your monthly mortgage payment should be no more than $2,800.
What percentage of take home pay should mortgage payment be? ›
The 25% post-tax rule says no more than 25% of your post-tax income should go toward housing costs. If you bring home $2,000 per week in your paycheck, or $8,000 per month, this means your full housing payment should be no more than $2,000.
