One of the accomplishments of 2008 that I’m most proud of is that my wife and I paid off and extra 15% of our TOTAL mortgage last year. One of our big goals is not to spend our life paying off debt.  For most people the debt they are left with for the longest is their mortgage.

Because of the size of a mortgage, early on in the life of your mortgage regular payments pay very little beyond the interest.  That, plus the fact that the average person moves to a new house (and usually a bigger mortgage) every seven years, means that most people have a mortgage for most of their lives.  As such mortgage fits the words origin: mortgage comes from the French word “mort” which means death, and “gage” which is pledge. As such a mortgage is debt until death.  Unfortunately for many people this rings true today.

Thankfully, it doesn’t have to be that way. The more you pay extra on your mortgage the quicker it will go away.  Extra payments can significantly accelerate your mortgage.  Putting extra on your mortgage early lowers your principle, meaning that you will always being paying less interest because of that extra payment.

Here are the six things we did in 2008 to pay an extra 15% of our mortgage:

1. Set a goal

The starting point for achievement is setting a worthwhile goal that you are truly motivated to accomplish. Our broad goal of paying off our mortgage quickly is a result of our desire to be debt free.  From our broader goal, it was important to set a goal for the year.  In our case the goal was set for us.  Part of our mortgage agreement allowed us to pay up to 15% of our mortgage extra each year as prepayment without penalty.  With 15% being the maximum allowed, it naturally pushed us towards reaching that limit.  Thankfully the 15% was both challenging and yet realistic.  We had to work hard to reach that as a goal, but we were able to do it.

2. Be Frugal

A second tip that helped us pay off our goal was to be frugal. While compared to some we never went to extremes in frugality (we still traveled significantly and enjoyed great vacations), we did make some important steps.  One example is that we did not eat out a lot.  In particular we took our own lunches to work, rather than having to purchase lunch.  We also made very few purchases of “extras” thus saving significant money on the little things.  Further, we never purchased wants impulsively; rather, we let some time go by to see if we still want the purchase.  We also saved a lot of money by buying things used.  We purchase things from garage sales, online classified ads and friends are all great sources for discount purchases.

3. Sell Things

A third thing we did is to sell things.  There are many ways to sell things.  You can clean out your garage or storage room and sell things you aren’t using. You can have a garage sale or sell through Ebay or Craig’s list.  You can also get rid of assets such as a second car that you don’t use very often.  This year, we paid off a mobile home that we had been renting out intermittently.  We were able to use some of the proceeds from that sale towards of our mortgage.

4. Pay off other debts

Another thing that helped us to pay off more on the mortgage was to pay off other debts. Over the past couple of years we have focused on paying off other debts as well as the mortgage.  In 2008 we also paid off my student loan, leaving us with only or mortgage remaining.  Each time we paid off a debt, we would add the previous payment to our extra mortgage payments, thus creating a debt snowball. Dave Ramsey, in his book “Total Money Makeover” (one of my top 10 books), recommends paying off your debts smallest to largest to create momentum for your debt snowball.

5. Find Secondary Sources of Income

A final big factor in paying 15% extra on our mortgage is the flexibility that comes from adding an extra source of income. Our home business affiliate program makes a significant difference.  We build our home business on a very part-time basis around our full-time work schedules.  That of course, means that the money we earn is extra, and is something we are able to use for achieving our goals such as paying off our mortgage!  There are many secondary sources of income that you can find, whether it is by taking an extra job, or starting a home business.

6. Have a Simple Budget

Finally, it is important that in order to achieve a financial goal such as paying off a debt, that you have a budget.  Unfortunately, most budgets don’t work, which is where my simple budget technique comes in.  By having a simple budget you are able to make wise decisions with your money because you always know where you stand.  You are able to make decisions based on what you have and the goals you want to achieve.
What are your goals?  Do you want to pay off extra on your mortgage, or pay off other debts?  What are you doing to make that happen? Share your goals and thoughts below to keep yourself accountable, and for the encouragement of all readers.

Written by:
The Success Professor – Danny Gamache
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Tags: budget, Dave Ramsey, Debt, extra payments, Frugal, Goals, money, mortgage, Total Money Makeover

This entry was posted on Thursday, January 8th, 2009 at 2:44 pm and is filed under Financial Freedom, money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.