How to pay off your mortgage in 5 years

How to pay off your mortgage in 5 years

My wife and I have been “home buyers” for at least 7 years in our current home. Notice I said “buyers” not “homeowners”. There is a common misconception that when you take out a mortgage, you immediately become a “homeowner”.

Assuming you have a 30-year mortgage, the reality is that you are simply in the process of buying the home over a 30-year period. The bank is the true owner of the property. If you don’t believe me, try skipping a few mortgage payments and see what happens.

3 months ago we paid off our 30 year mortgage (in 7 years or 23 years earlier). Now we are real “home owners”. In this article, I will show you step by step how we managed to achieve this. Using our existing income and without accumulating additional debt.


Let’s talk about “Capital”. Equity, or appreciation, is the difference between the value of your home and what you owe the bank. So if you owe $100,000 and your house is worth $300,000, then you have $200,000 of equity in your home.

We had approximately $250,000 of equity in our house. We owed the bank $115,000 and our house was worth $367,000.

This $250,000 is inactive. Which means it looks good, but it didn’t do anything for us.

Home Equity Line of Credit (HELOC)

So the first thing we did was tap into that capital. We went to the bank and took out a home equity line of credit for $50,000.

What is a home equity line of credit? Also called a HELOC, a home equity line of credit is a liquid line from which you can withdraw funds at any time for any purpose. It’s like a giant credit card.

Even though the HELOC had a $50,000 limit, the amount we owed on it was $0 at the time we took it out. That’s because, like a credit card, you don’t owe anything until you actually use it.

Use a HELOC to pay off a mortgage

As soon as we got the HELOC, we took out $20,000 and applied it to our mortgage (additional principal payment).

So at this point we have $20,000 owed on the HELOC, but our mortgage is $20,000 paid off (from $115,000 to $95,000).

Use a HELOC as a “new” checking account

Before I go on, let me mention that after we used the $20,000 to pay off our mortgage, we still had the same $115,000 in debt ($20,000 on the HELOC and $95,000 on the Mortgage).

So to pay off the HELOC, we just used it as our new checking account. When we got paid, we took 100% of our paychecks and applied them to the HELOC.

Now you might be wondering, “with all our money going into the HELOC, how did we pay our bills?” Remember that a HELOC is a “liquid” line of credit. So at the end of each month we made 1 withdrawal from the HELOC to pay our bills (including our mortgage).

100% of cash flow

For us, our monthly salaries are around $6,000. Our bills, including our mortgage and all of our living expenses (gas, groceries, etc.) come to approximately $3,500. So by applying 100% of our monthly paychecks to the HELOC and then using the HELOC to pay our bills, we were able to use 100% of our monthly cash flow to pay the $20,000 down on the HELOC.

So with an approximate $2,500 cash flow ($6,000 minus $3,500) $20,000 was paid off in 8 months.

Repeat the process

We repeated this process until the remaining $95,000 was paid off (approximately 2 years).

What do you need?

1. Cash Flow – You must have positive cash flow in your family budget

2. Credit Score – Decent credit score (650 or above)

3. Equity – Positive equity in your home.

what you should Know

VERY IMPORTANT: The HELOC must be used to pay off your mortgage. It should not be used to finance a holiday, car or boat purchase.

ALSO IMPORTANT: A HELOC is not a home equity loan (HEL). A home equity loan is a second mortgage and is treated the same way.

#pay #mortgage #years

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