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Are you wondering how to live mortgage free? A mortgage is one of the most substantial expenses for most families. Many people dream of mortgage-free living. There is, however, a few factors that one may want to consider first before they settle on the ideal way to follow. Living mortgage free is a possibility for many just consider a few of these options and remain creative. Here is how to live mortgage free.
How To Live Mortgage Free: 12 Mortgage Hacks to Consider
Of course, living mortgage free sounds great, but there is no one fit all approach to achieving it. It’s not easy and calls for sacrifice regarding one’s spending habits. Paying off your mortgage now can mean less money to spend, save and invest. Living completely debt free is an attractive value proposition.
By choosing to make investments option first, you could earn more in interest if your investments earn more with time through compounding. Of course, it all depends on the market and economy timing.
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Factors to Consider on How to Live Mortgage Free
It is vital also to consider the emotional effect it can have on you. If you get rid of that commitment to pay your 30-year mortgage debt now, then it can make a significant impact on how you feel. You may experience not just financial but also emotional freedom bearing in mind that you will never make a mortgage payment in your lifetime. Your mind can settle down and allow you to make other sound financial decisions going forward.
Another factor that can affect your mortgage settlement decision is your source of income. If you are self-employed or have an income that fluctuates, you desire to keep your monthly bills as low as possible. It reduces your stressful situations as well. At least you no longer have to include those monthly mortgage payments in your budget. Life happens, and you can encounter bad experiences like a loss of a job or income. You won’t fret about a roof over your head or how to raise mortgage payments. So, it offers you a certain level of financial security and freedom.
It is also pretty evident that mortgage-free living gives you more flexibility in your monthly spending. It may be an excellent idea first to invest rather than pay off a mortgage – may be just on paper – because, in everyday life, many factors determine the outcome of every decision one makes. In essence, there is no ideal solitary option since everyone’s situation is different. An individual’s decision depends on different things like their work or employment situation, family life, and tolerance, attitude or mentality towards money and debt.
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So, how can you live mortgage free?
Living Mortgage Free: 12 Mortgage Hacks to Consider
There are many ways to pursue so that you can achieve a life without a mortgage. They can fall into one of these three categories:
- Paying off a mortgage quickly,
- Avoiding mortgage loan altogether, or
- Choosing an alternative loan.
Here are 12 surefire tips on how to live mortgage free.
Prioritize paying off the mortgage or set a full settlement target date
It’s apparent that if you want to live without a mortgage, then you need to find ways to clear it. If you don’t have the cash to it do right away, then you can create a budget to work with and have a target date in mind. For example, if you want to pay off your mortgage in 7 years, then you can create a budget of how much cash you need to raise every month so that you can clear the mortgage debt in 7 years.
Switch to a biweekly instead of the monthly payments
Another way to quickly pay off your mortgage and live mortgage free is to increase the frequency of your payments. You can opt for a half-sized payment every two weeks instead of making one monthly payment. It helps to increase the frequency of your payments, and you end up making extra mortgage payments every year.
Since a year has 52 weeks, if you follow a biweekly schedule, it means you can make 13 full sized payments a year instead of the usual 12 if you were to pay monthly. You can create automatic payments at your bank to avoid skipping payments.
Make extra principal payments
Another way to live without a mortgage is to make additional principal payments which can help you clear the debt quickly. A majority of mortgage lenders allow borrowers to make extra principal payments and they label it as principal only.
It means that the payment goes towards a reduction of the principal amount rather than both the principal and interest. If you reduce your principal amount, it can save you quite a considerable amount in interest rates and of course can help you get out of the loan some years ahead of schedule.
This is onee of the most straightforward ways to live mortgage free. Call it the old fashioned way where you just work hard to reduce your principal balance as fast as possible.
Put any extra cash, bonuses or other windfalls into your mortgage
If you receive any form of a windfall, for example, a tax refund, a pay rise or a bonus at your workplace, put it into an extra mortgage payment. Even a few hundred extra dollars can make an impact on the mortgage schedule as it can add up over time and reduce your overall interest. These are some of the best money hacks from millionaires. They follow these habits of paying extra cash to debt.
Refinance your mortgage
You can also consider a mortgage refinance. If you refinance your mortgage, it could reduce your interest rate. To refinance means that you take out a shorter-term loan with a lower interest rate. It can shorten the loan term, and it also means that you could pay lower interest rates. You can also consider taking out a home equity line of credit (HELOC) which is a strategy that can help you achieve equity optimization. It allows you to pay off the mortgage in less time than it was scheduled.
I refinanced my student debt with SoFi and that was truly a game changer. I saved so much money for the long-term and repaid my student loans significantly faster.
Increase your income
You can also try to find extra streams of income to help you raise additional cash to offset the mortgage payments. Look for side hustles and ways to make extra income, for example, learn how to make money online or find a part-time job among others. You can also cut on your spending and then use any extra income you earn to make additional annual payments each year which can help quicken the mortgage payment process.
Borrow your retirement funds
NOTE: This is just an option, but it is never advisable to withdraw or borrow against your retirement funds. This option makes most sense if you can borrow at a lower rate than your mortgage and you are able to pay off your entire balance. Otherwise, this should be viewed as a last ditch effort.
You can also consider investing some of your retirement funds into your house. You can borrow from your 401(k) or IRA though it has some drawbacks. If you are under 59 ½, then you must pay a withdrawal penalties to take money out of your retirement accounts. An option could be you borrow from retirement accounts instead of taking out a mortgage. What you would have to do is find a house that would be suitable for a complete cash purchase. You would still have to pay interested on your loan against your retirement funds, but this could be a way to extract more dollars for purchasing a home.
I wouldn’t advise this in every instance and may only be suitable for some people. This is not suitable as a low-risk solution.
Buy a home on contract
You can enter into a contractual agreement with a homeowner where they finance the purchase and set up monthly payments for you to pay. When you pay the full amount, the title gets transferred to your name. It’s a viable option if would like to keep the loan agreement between you and the homeowner only. It’s important to note that if you buy a home on contract, the loan still has an interest rate.
Try a rent-to-own option
You can try a rent-to-own option and bypass a leasing contract. It is where any rent you pay on the house goes towards paying a down payment of a house that you want to own eventually. Consider this option if you don’t want to take out a loan yet but do want to own home soon. When you opt for the rent to own option, you do not have to sign an agreement or a contract promising to purchase the home. The purchase price is also a bit higher for rent to own options compared to when you buy a home on contract.
Build your own home
Another way to live mortgage free is to build your own home with your cash or using a home construction loan. A home construction loan is usually a short-term loan and can last up to a year after you have completed building. If you can build a house without using any loan, then it’s an ideal option to consider. Tiny houses are quick and affordable to build.
Live in a mobile home
If you want to avoid monthly payments altogether, you can opt for a mobile home option, for example, you can live in a van, a camper or a trailer. You can eliminate loan payments if you entirely purchase the mobile home. You might also consider living in a mobile home while you save up for payments to make on a home. If you opt to live in a mobile home park, then you need to consider the monthly fees charged for the lot. You might also try renting out a room in your current house to Airbnb or move into a smaller house or opt for a less expensive rental home then you can use the extra money earned to clear the mortgage.
Use Airbnb to pay your mortgage
Airbnb can be a great way to increase your income and live completely mortgage free. I recently purchased a home and love this option. By using Airbnb, you can set up your house to be a ‘mini-bed and breakfast’ where you rent out rooms to others.
You then use all of the proceeds from the Airbnb to pay your mortgage all the while you are living in you home. The proposition of constantly hosting guests may not be for everyone, but if it allows you to pay the mortgage completely or sooner… that’s pretty attractive!
Here are some characteristics that enable you to live completely mortgage free by using Airbnb:
- Buy a home with extra bedrooms in the basement
- Have a separate entrance for the bedrooms and access
- Set up your Airbnb profile to allow renters to rent the entire basement and/or individual rooms
Why Mortgage-Free Living Is Important
Living mortgage free is actually pretty lucrative. You eliminate your single biggest living expense off your balance sheet. By eliminating your mortgage, you end up being able to save exponentially faster and live completely financially free. You have the freedom to quit your job if you have enough funds saved up to live off of or have the income to supplant the minor expenses without your mortgage such as home insurance, property tax, etc.
The best way to double your income is by cutting your expenses in half.
Mortgage free living can change your life. Keep in mind that if you want to have a mortgage-free life you need to be patient and work very hard. You will need to make sacrifices in order to get reach a mortgage-free life. You can ensure you get the right value for your home by using a home appraisal checklist upon purchase.
Conclusion on Living Mortgage Free
There are numerous tips on how to live mortgage free that you can find. However, it’s vital to include property taxes and home maintenance costs in your budget when considering your homeownership option. Your wealth can grow exponentially in a no-mortgage situation.
Mortgage free living may eliminate anxiety to a certain level but, financial stress and challenges don’t end when you pay off your mortgage.
Not having to make mortgage payments each month is lovely, but there are still many other things that can create financial challenges and stress. Don’t presume that you are free of all challenges just because you don’t have a mortgage payment to make.
However, don’t limit yourself; focus on your goal, and go for it. Living without mortgage payments is a very attractive option. You can earn income a lot of different ways, including flipping items for a profit.
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