The Emergency Fund is Built, Now What?

The new year has come, the emergency fund is financed – what is next? If you are familiar with the baby steps, we are teetering between step 6 and 7 while simultaneously building the children’s college funds. Step 6 is to pay off the home early and step 7 is to build wealth and give. Our mortgage is the largest thing between us and absolute financial freedom. Imagining life with no house payment can be difficult sometimes but it is so close. 2026 baby!

Here are some tips on how we have been able to shorten our mortgage payoff from 15 years to 10.

 1. Find additional money in your budget

Of course we are all making a financial budget and sticking to it every month, right? Well, if you’re like us – maybe?? Our budget is pretty much on autopilot so a lot of things don’t creep up or come out of the blue. By using this automation we’ve been able to find “extra payment monies” by not eating out, shopping for insurances, deleting subscriptions and couponing. This first tip can be a little difficult in the beginning, but find what works best for you and you’ll be a pro in no time.

2. Refinance

Using this option is HUGE! Updating the mortgage payoff can either shorten the term of the loan, lower the interest rate or do both. We opted to refinance for the lower interest rate. Since the interest rate went to a 2.62%, and we make extra payments throughout the year, our payoff rate was accelerated by roughly 4 years. If you don’t want to go through the hassle of refinancing, you can pretend like you did by making additional payments to the loan. Play around on a mortgage calculator to see what fits into your budget and how you can cut down the payoff term yourself.

3. DIY renovations

This tip is a hit or miss. Of course I wouldn’t advise on doing huge renovations on your own. A licensed professional is always the way to go. However, if you are wanting to spruce up a space with some paint and lighting fixtures – this is something you can do on your own while saving money while you’re at it.

4. Make extra payments from bonuses

There are times throughout the year where you may receive a little extra money in your check or for your birthday. You even may elect to work overtime or receive a raise. Instead of spending that money, we put that extra income towards the home loan. Of course we still treat ourselves but that “fun” money was already earmarked in our budget, so anything additional does not come into play. The current goals is to get the mortgage paid as fast as possible.

5. Make additional house payments

One extra payment to your mortgage will knock years off the term of the loan. This will also reduce the amount of money that will go to interest….into the thousands of dollars. For example, let’s say you had a $197,000, 15 year mortgage with a 7% interest rate and a monthly payment of $1770 (including principal and interest). If you made 4 extra payments during the year, you’d pay off the loan in less of the time! You would essentially save 40% in interest payments and payoff the loan 5 years sooner than originally expected. 

We do a variant of this example depending on how life is going at the time. We are less strict when it comes to additional payments because we chose to give ourselves grace in our payoff decision making. We know, no matter what the mortgage will be paid off by 2030 but because of our extra payments, the current payoff year is 2026. Even if you haven’t started this process, every little bit helps! For instance, our current loan balance is $85,376. If we were to send an additional monthly payment of $1904 starting January 2024, we will save about 51% on interest and payoff the loan by December 2025. I am all here for that!

*PLEASE NOTE THE FOLLOWING

a. Call your lending company to confirm there are no penalties for making extra payments or pre-payoff terms

b. Write “For principal payment” on your additional payment