We did it! It’s been nearly a year since we paid off our house and I’m sharing some of the details that led to paying off our home and how it’s impacted our lives since (especially in the last year)!
Listen in as I debunk three common myths people have about paying off debt, along with a few really important steps that helped us on our journey to paying off our house (in just five years).
Clocking In with Haylee Gaffin is produced and brought to you by Gaffin Creative, a podcast production company for creative entrepreneurs. Learn more about our services at Gaffincreative.com, plus you’ll also find resources, show notes, and more for the Clocking In Podcast.
Disclaimer: I am not a financial advisor, the things I’ve shared here are simply my own personal experience.
Three Myths to Paying Off a House
Myth 1: You have to be rich to pay off your house. NO YOU DON’T. You just have set a realistic goal, set a budget or a plan, and purchase a home within that budget.
Myth 2: You can’t live a fun life if you’re just paying off debt. Again, budgeting and understanding your spending is everything. Determine what’s important to you and what your priorities are. For us, vacations and becoming debt free were our two priorities for our 10 year plan when we got married. We made sure that we always budgeted for a vacation or two every year, while still hitting our house payment goals.
Myth 3: I can only pay a little extra, which won’t make a difference. I highly encourage you to take a look at an amortization chart and plug in your numbers. Make a copy, then plug in how much you can afford to pay extra on principal. The amount you save in the long run is actually impressive.
How We Paid Off Our House in Five Years
1. Get on the same page as your partner.
2. Purchase a home you can afford.
3. Ask questions to your lender to better understand what you’re getting into:
a. Ask your lender for an amortization chart or get one offline.
b. Ask if your mortgage has a pre-payment penalty.
c. Ask about down payments, what’s required, and how much you can afford.
4. Remember that in paying off your home, you’re investing into your assets
Links
gaffincreative.com
Episode 005 – Paying Off Student Loans
instagram.com/hayleegaffin
Review the Transcript:
You’re likely listening to this episode because of the catchy title, and I’m so glad you’re here.
Don’t worry, it’s not clickbate—we did it! 🎉 Almost one year ago, we paid off our house! While I’m not a financial advisor so you’ll have to take this episode as just an opinion of mine, I’d love to share a few things that we did that encouraged us and helped move us towards paying off our house early!
If you know my husband and me at all, you know we’ve been on a journey to become debt free since we got engaged. I even talk a little about this in episode 5 where I share how I paid of $36k of student loan debt in 3 years.
I’m not going to sit here and pretend like this was an easily attainable journey to financial freedom—it wasn’t. We gave up a lot of things to make this dream a reality. Lots of missed dinners out with friends, lots of buying things on sale or not buying them at all. Do I regret any of that? Not one bit. We’d invite friends over, hang out at free things, and half of the things I bought over the last five years, I’ve gotten rid of.
I personally loved the idea of being debt free, but if you knew Haylee 6 years ago, you’d laugh at my spending habits. I was the person who felt that I needed Starbucks or a drink from Sonic every time I left my house (I still struggle with the idea that I don’t), I spent money on clothes all the time thanks to my days in retail where I felt like I always needed the latest trends. I didn’t manage my money well. And I say well, because I never overspent, but if I had it, I spent it on whatever I wanted in my early 20’s.
Before we dive too far into this episode, I want to jump in here really quickly. I don’t believe that every person should have the same goals as we did. I don’t think that paying a house off early is the end all be all of financial goals to strive towards. Do I think it’s a great idea? Absolutely! Am I happy we did it? Of course! Having financial freedom has allowed me to pursue this business full time without the struggle of balancing a full time job and a full time side hustle as I make the transition. I think that’s another episode for another day though.
I’m thankful we’re in this position right now, but I also don’t want to sit here and act like my way is the best way.
I’ve talked about this on the podcast before in a different capacity, but I believe that everyone should be able to define their own success based on their goals in life. Maybe you have no desire to pay off your house before your 15 or 30 years is up on your mortgage. Maybe you have other goals with your money. Or maybe you have no desire to ever own a home—I know plenty of people who prefer renting over owning. As long as it meets your goals and plans for your life, that’s really all that matters..
So now that I’ve shared that, let’s jump into this conversation about paying off our house in 5 years.
So let me give you a little back story and timeline.
In early 2015, Steven started looking for a house. We were dating so I wasn’t looking “with him”
Then in May of 2015, we got engaged and i got in on the excitement of finding a house for us.
In July of 2015, we made an offer on a house that was denied, then a few weeks later they came back and accepted it and sold us our house.
We moved in August of 2015 with the intention of starting our journey to being debt free.
At that time, I was still paying on my student loans and I would for about 2 more years. We were making the minimum payment on our home and not really putting forth the effort into paying it off.
We knew that the second my student loan bills were paid off, I’d move that money to paying off the house. In August of 2017, we started the process of paying extra until we would pay it off in full in August of 2020.
That’s right, we actually made our final payment in the middle of a global pandemic. We have not paid a house payment in Xmonths.
I actually made an Instagram post about it back when we paid it off, which I’ll link to in the show notes, where I debunked 3 common misconceptions that people believe when it comes to paying off a mortgage. So let’s quickly review those:
Myth 1: You have to be rich to pay off your house. NO YOU DON’T. You just have set a realistic goal, set a budget or a plan, and purchase a home within that budget.
Myth 2: You can’t live a fun life if you’re just paying off debt. Again, budgeting and understanding your spending is everything. Determine what’s important to you and what your priorities are. For us, vacations and becoming debt free were our two priorities for our 10 year plan when we got married. We made sure that we always budgeted for a vacation or two every year, while still hitting our house payment goals.
Myth 3: I can only pay a little extra, which won’t make a difference. I highly encourage you to take a look at an amortization chart and plug in your numbers. Make a copy, then plug in how much you can afford to pay extra on principal. The amount you save in the long run is actually impressive.
After making that post, I had dozens of questions in my DMs about how we did it, invasive questions about our income, what our house costs, and honestly I was hit with a little hate—does that mean I’ve made it on Instagram? HA. So I thought what better platform to address these questions than this podcast to share.
I do want to highlight a few really important steps if you’re wanting to pay off your house early:
1. Get on the same page as your partner. This is one of the hardest steps, because if you’re not on the same page with your goals, you’re going to struggle to meet them. While I was on board with the idea of becoming debt free, my habits haven’t always matched. Steven and I have never really had a budget that said, you can spend X on this, X on that, and X on this other thing. Our idea of budgeting was spend as little as possible on everything. We live below our means, our bills have always been less than our income and whatever we had to pay, we tried to find the best deal on. So when I’d come home with new clothes or buy something that I knew I shouldn’t have—that didn’t align with the goals we’d set for ourselves.
2. Purchase a home you can afford. I think this is a big concern most people have when paying off a house—did they buy a home outside of their budget? When we were looking for a home, Steven had already been approved for a loan based on his income. We were happy with the market and the houses that fell within our price range, so we didn’t add me or my income to that pre-approved mortgage. I love our home—it’s a standard starter house, built in the 90’s in an older neighborhood, and it’s not lavish—but that’s what we wanted and that’s what was in our price range.
Now when I shared our post, I had a number of questions about how much our home costs. Honestly the post went micro-viral so I had tons of strangers reaching out from all over the country. Some of them hit me differently, because of the market value.. It’s important to still make decisions based on what you can afford in any space.
When you’re approved for a loan, ask the questions to help you understand what you will be paying out monthly. If you can find a way to keep it under your budget, this will allow for you to pay off more each month.
3. Speaking of asking questions, this is my third step: ask questions to your lender to better understand what you’re getting into. Make it a priority to know all of the details of what you’re paying, how much interest, if there are pre-payment penalties, etc). SO let’s dive into each question you should ask and why:
- Ask your lender for an amortization chart or get one offline. Basically this chart is a plug & play spreadsheet that allows you to see just how much interest you’re paying for on your house over the life of your mortgage. I recommend creating one of these based on the terms of your mortgage, then duplicating it to see what the difference would be if you paid X amount more per month. For the first year and a half, we didn’t pay any extra because I was working on paying down my student loans. Then we began paying an additional $500 on principal per month, then a year later, we began paying $800 extra on principal per month. When we’d save enough or got our tax return back, we’d put down a large sum. Beginning in 2019, we started paying $1600 extra on the principal per month. My favorite thing about an amortization chart is that it allows you to see just how much interest you’re saving if you pay off early. Our mortgage was a 30 year loan. By paying off early, we were able to save $80,317 in interest, an amount that could be invested into a second property.
- The second thing you need to ask about is if your mortgage has a pre-payment penalty. This is something you can work with if you already own a home but want to pay off early, but it’s not something you want to be shocked by when you go to pay off your home. We did not have a penalty, but if you do, you’ll have to pay a penalty for paying off early.
- Ask about down payments, what’s required, and how much you can afford. Thankfully, my husband picked up a secondary job for a few years before we were looking for houses where rather than taking a paycheck, he was given an apartment to live in. This allows for him to save up the money for a down payment. Honestly, if I were buying a house at the time that we did, I wouldn’t have been prepared for a down payment on my own. He was though—so I have to give him all the credit there. While he was still young and didn’t have great credit yet, but he was able to pay down 20% as a down payment and was approved for a conventional loan based on credit references and that down payment. By having the 20% down payment, we were also able to avoid PMI fees (private mortgage insurance).
4. The fourth thing I would love to highlight is that when you’re paying off your home early, you’re investing into your assets. I think this is important, because when we decide to buy a new home or build a new home, or whatever the next steps in our journey look like, we have options for our current home. We could make an income off of it through rentals, or sell when the market is high and make a profit, or we can just stay here, enjoy the home we love, and travel.
As we approach a full year of not having a house payment, we’ve been able to invest in travel, build up our savings, and dream about the next steps in our financial journey.
Right now, our opportunities are wide open — obviously they’re not endless and making big financial decisions is still tough because the unknown is always there.
For me, I think the biggest shift in what has happened over the last year, was that I officially took my business full time… I’d been an entrepreneur for nearly 10 years, side-hustling since college, and growing a brand, but opportunities were presented last year that guided me away from my full time role and I truly believe that having the weight of a house payment gone encouraged the decision on my part.
I remember getting a call in July of 2020, where my 40 hour a week role was no longer secure. I was being cut down to 20 hour because of the pandemic and I had to find a way to make up that income to keep bringing in what we were used to living on.
It’s ironic, because our goal was to pay the final payment on our house was at the beginning of August 2020. It wasn’t a typical monthly payment, it was a big chunk of money.. But that was the goal. 5 years after buying our house, to the date, we wanted to pay it off—that payoff date was just two weeks after getting the call that I’d be losing the majority of my full time income. We went ahead with the payoff, because we’d set aside the money and we knew we’d adjust and budget if I couldn’t find the work to replace that income.
With the weight of a house payment gone and the fact that we now owned officially the house that we live in, meant I didn’t necessarily HAVE to replace that income.. So I started exploring what I could book as business—and thankfully before the final house payment ever left our accounts, I’d booked the clients I needed to replace that income.
For me, the stars aligned to allow us to have financial freedom, allow me to take my business full-time, build a flexible business of my own, and not have to worry about finances when a pandemic caused me to lose half of my full time income.
Now, there is so much more I want to cover on this topic of how financial freedom has allowed me to explore my creativity, so I’ll be sharing more about this in an upcoming episode! Until then, I’d love to know your questions about this topic. Whether it’s mindset related, or maybe you just need to know why, or want to share your own journey, I would LOVE to hear from you! Head over to instagram and find me at hayleegaffin and shoot me a DM!
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