Dollar Frugal

Most people know that it goes against conventional wisdom to pay off a mortgage early.  You’re better off in most markets to invest your money in the stock market.  It is possible, however, to pay off your mortgage in just a few years and become nearly expense-free (excluding utilities and your food bills) if you don’t have any consumer debt.  Here’s how I do it:

1.  Stay motivated.  What you focus on becomes real.  I know this sounds new-agey, but it’s true.  You will find a way to “come up” with extra money in many different places.

2.  Cut costs at every corner.  Look for tips at PF blogs.

3.  Apply all raise money to extra principal payments.  When you have a raise or extra income, immediately move it to somewhere you cannot touch it easily.  Don’t raise your standard of living.  If you are already in the US, you enjoy the greatest standard of living in the world anyway.  Jacob’s S-curve applies here; it requires much greater inputs a this high level to increase your standard of living at all.

4.  Once you do it, continue your ways.  I paid off our first mortgage in 2005 and wasted money for a bit after that.  If I’d have continued saving money at a high rate, I could have more easily financed the house we’re currently in, or contributed more to our current down payment.

Do some research for your area.  If house values are low, you might just benefit from paying off your house instead of investing - check what types of returns you’re getting on your investments vs. local mortgage interest rates.  Also, if your mortgage is not very high, likely you’re not getting a tax deduction (if the standard deduction is higher than your interest).

Although debt consolidation is a way to refinance, but according to the current mortgage broker, it is as bad as cancelling your insurance whether it is a travel insurance or a life one.