So you’ve got a mortgage now.
You’re hundreds of thousands of dollars in debt paying thousands of dollars in interest every year but you know what? That’s OK.
If you’ve thought about it properly, paid attention to how to buy a house and borrowed a sensible amount… you should likely be fine. However it’s always nice to have a good step-by-step plan and that’s what I hope to set out here.
Step 1: Have a VERY specific goal
It’s common to start paying down a mortgage early on the vague notion that you’d like to be richer or debt free. Common but dangerous.
The problem with a fuzzy goal is that it’s all too easy to abandon.
There is no way to measure success or to keep you on track and this vague “plan” will quickly be forgotten when disillusionment pays a visit. When something shiny comes along… when a hiccup occurs… when you get bored with the idea.
Which is why a specific, measurable goal is required. What might this look like? Well here are a few examples:
- To pay our mortgage off before I’m 30 / 35 / 40 / 45 ….
- To pay our mortgage off before we have children
- To be completely debt free within 10 years
It’s OK not to have thought about this before too, many people don’t. The point is you will likely have “things” you’d like to achieve in life. Important things like maybe “starting a family in 5 years” or “being free of ALL debt (house included) in 10 years”. Whatever it may be this serious goal should obviously be related to paying off your mortgage fast (this is Mutilate The Mortgage after all).
Through calculations and use cases I posit that even average salary people can become free of their mortgage debt within a far shorter time frame than the “normal” 30 year period. Below are some suggested time frames for your goal depending on your income and assuming a roughly $300,000 loan amount:
|Single Income Of:||Loan Term:|
|< $70,000||15+ Years|
|= $70,000||11-13 Years|
|> $95,000||6-7 Years|
|Couples Income Of:||Loan Term:|
|< $140,000||7+ Years|
|= $140,000||5-6 Years|
|> $180,000||3-4 Years|
Or feel free to calculate or come up with your own! Perhaps you want to travel forever or buy a huge farm with 10 dogs on it! It’s your goal, just make sure it is clear, has a measurable part to it and really means something to you.
Step 2: Start
Using your energy and enthusiasm that you have right now go and do the most important thing. Set your repayments higher and make them automatic.
You don’t have to set it up with a huge amount, it can be $1! Just set it up as quickly as possible and start experiencing the automated process.
The thing about humans is that 99% of the time, starting is the biggest hurdle to overcome. Commit yourself to doing just 5 minutes of work on that project you’ve been putting off for weeks and you’ll almost certainly end up working on it for hours. Mortgages are no different.
Commit to simply setting up the automatic extra home loan repayment. Make it $1, make it $100, make it $1,000 it doesn’t matter just set it up. You can work out exactly how much you should be paying on your mortgage another day. For now just take that first critical step.
If you’d like specific step-by-step instructions on how to setup automated extra home loan repayments I’ve also got you covered here.
Step 3: Hustle
After you’ve setup and seen your first automated extra home loan repayment go through I hope a little light bulb has gone off.
With modern day banking automated finance is an astonishingly powerful weapon to have on your side. That weapon is only as powerful as the person wielding it though, so you need to hustle a bit and get your finances mostly organised.
Now there’s many views in this area. Some people think budgets are sexy, others like them and spend hours fine tuning them in Google Spreadsheets, others are happy to do them or adhere to budgets but don’t do so very frequently and others still vehemently hate and detest them.
I’m personally a big fan of at least being aware of what you spend. This is because the human brain really isn’t good at simultaneously tracking a large number of varying figures over long periods of time.
Now you don’t have to love budgeting or even be that strict with yourself about it all, but keeping a semi to full detailed list of your yearly expenses and financial position will help organise you and prepare you for your future. It will also enable you to put as much money towards your mortgage repayments as possible, whilst still maintaining a stable amount of money in your personal account for everyday items.
Once again, I’ve got you covered with the completely free Mortgage Planning Spreadsheet.
Using this spreadsheet makes it super quick and easy for you to just plonk in your numbers and get personalised data to help you with steps 1 and 2 above.
These first 3 steps are obviously just the beginning, however there’s a huge amount of content on Mutilate The Mortgage to help you every step of the way as you get more and more advanced.
But hopefully the above, simple steps give you a great springboard to get right into killing that mortgage from the get go. Just don’t do what most do and ignore the problem. If you do, you’ll not only pay with the blood sweat and tears required to earn hundreds of thousands of dollars, but the many wasted years of your youth. Arguably much more valuable than any monetary amount.
The benefits include: 1) How to pay off your mortgage faster than 99% of people with one hour a month of work 2) How to get rid of your debt and have the freedom to spend money on the things you love, guilt free 3) Clear outline of how to setup your expenses, mortgage and general finance 4) How offset accounts work and how to get the same result without being gouged by the big banks 5) How to cut through the crap and focus on the things that truly matter when taking down a mortgage 6) How to adjust the strategy so it works for you, even if you have kids, even if you only have one income 7) How to do all of these things and maintain a normal social life (and never be cheap).