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April 22, 2020

Pay Off the Mortgage Early or Invest More? Why We Chose a Mortgage-Free Life

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Should we pay off the mortgage early or invest extra? That is a question that many homeowners find themselves asking. There are certainly benefits to investing more, and there are also benefits to being mortgage-free. It's a major personal finance decision, which is why it is important to hear different the thought processes behind different people's journeys.

I sat down with Kevin Hooper to learn more about his decision to pay off his mortgage early instead of investing more. Specifically, Kevin Hooper and his wife made the decision to become mortgage-free in a Chicago suburb with two young children. They did it in just five years.

In this interview, Kevin shares why they wanted to become mortgage free and details their unique mortgage payoff process. Plus, he also offers a peek inside their lives now when he shares what they are doing with the money they freed up paying off the mortgage early.

Why They Wanted to Pay Off The Mortgage Early

Kevin says that he and his wife Amber were both driven from the start to be debt free. Once they started looking at their first few mortgage statements and running the numbers, they realized they could be mortgage free much faster than they thought. Not long after buying their Oak Park home, Kevin and Amber decided to buckle down and see how quickly they could become debt free.

What Mortgage Freedom Meant to Them 

Mortgage freedom would offer them the comfort of knowing that they owned their home outright. Kevin says this was particularly satisfying after a painfully long housing search that almost ended in them throwing in the towel. Once they finally found and bought their dream home, they wanted it to truly be theirs. 

After they realized how little they were gaining on the interest by making the regular payments each month, they decided to do more. Knowing that they could pay off their home faster and push themselves toward financial freedom was a momentum builder. They saw becoming mortgage free as a way to invite more happiness and flexibility into their lives and plans. Mortgage freedom would free up more money for them to save, spend, and invest. This would allow them to enjoy life more now and also support their children as much as possible. 

Making the Decision to be Mortgage Free 

Kevin admits that he can’t pinpoint the exact moment in their relationship that he and Amber decided they wanted to be mortgage free. Even though he doesn’t know who blurted it out first, he does know that they came to the decision together. Kevin says that he has a finance-trained brain thanks to his background in corporate banking and as a credit analyst. While he might be more excited about finance sheets than Amber, they both were equally committed to paying off their house early. 

Of course, Kevin acknowledges that differences existed and money arguments did happen along the way. Still, Kevin and Amber were determined to make it work. They both made compromises to keep the focus on their shared goals.

Couple Discussing Finances

Why Pay Off a Mortgage Early Instead of Investing Extra

With a background in finance, Kevin knows the math. That means he understands why some people argue the math behind investing instead of putting extra toward your mortgage.

To make his own decision, he worked through a pro and con list for an early mortgage payoff. He also listened to other people who shared their mortgage journey on the show.

Ultimately, he said it is unmistakable. He heard it in others and felt it in himself. The idea of not having a liability hanging over their heads would allow him to feel so much more secure. He says it is impossible to put that into a calculator. For him and his family, the emotional side won over. He says that the freedom that comes from being mortgage-free might be the ultimate intangible. 

How They Did It In Five Years

Most people find themselves accepting either 15-year or 30-year terms for paying off their mortgage. Instead of following the trajectory of their loan, Kevin and Amber decided to pay off their mortgage early. Though they started with a 30-year loan, they decided to pay it off in five years. Here's how they did it:

Finding a Forever Home

In December 2015, Kevin and Amber bought their dream house. Just west of Chicago, their Oak Park dream house had a selling price of $400,000. In that area, real estate values are high, Kevin says. Plus, Illinois has some of the highest property taxes in the country. Still, it remains their dream home. They live close to where they were born and raised, plus they have easy access to Chicago and other suburbs. Plus, they love their schools and their community.

Not a Forever Mortgage

Just because they felt like they found their forever home didn’t mean that they wanted to pay the mortgage for that long. In fact, they were committed to paying off their mortgage in five years. That meant that they were going to tackle the remaining principal balance of $285,000 and still maintain a 6-month buffer for emergency spending. 

A Unique Process to Pay Off a Mortgage Early

Kevin and his wife tackled their mortgage payoff in a unique way. After calculating how much money they needed to set aside out of their biweekly paychecks, they set it aside. However, instead of adding it to the principal each month, they put their extra savings in a high-yield savings account.

Kevin says he wanted to put it somewhere secure for a short-term. That ruled out a taxable account. Instead, he put it in a high-yield savings account. That meant that they earned a bit extra through interest. They also had the added flexibility of knowing they could divert the money elsewhere if there was a major disruption in their plans. 

It seems like their system was fine-tuned, but Kevin actually said the five years they worked on paying off their mortgage was a financial roller coaster. Amber opted to a take a year leave with the birth of each of their two children. That means there were huge fluctuations in income. 

Though they typically aimed to put half of their after-tax income toward saving and investing, they made sure to leave some room for fun. They knew if their plan was going to work for five years, they had to find a way to control expenses and still enjoy life. Most importantly, they wanted to be able to take care of their family. 

How They Celebrated with Their Family

At the end of January 2020, Kevin and Amber were ready to make their final payment. They took their family to a historic bank in the heart of their downtown. After sitting down with a banker and making the final payment, they celebrated in the bank. They celebrated again over milkshakes at Potbelly’s, a family-favorite restaurant.

Kevin is glad that they made it a family affair. Getting the whole family involved made it more memorable. Plus it's a great way to stoke their kids' interest in money. Kevin says that his six-year-old was really fascinated by the process. 

What They Are Doing With Their Money Now

Kevin and his family also just took their first trip to Disney this year. That trip offers excellent insight into how they are spending their extra money now.

It isn't about splurges or vacations for the sake of taking a vacation. Kevin and Amber are focused on supporting their family as best as they can. That plan starts with college and works back through all the summers leading up to it.

Kevin and Amber participate in the Bright Start program in Illinois. That means that they have 529 plans for both of their kids. They use the different tools on the platform to approximate how much college will cost. They are putting a plan into place now to make sure their 529s will be ready, says Kevin.

In addition to continuing to invest toward retirement and in 529 plans for their children, Kevin also says that they are willing to splurge a bit more on travel. Kevin and Amber are intent on cherishing the time they have with their kids. Kevin explains further by saying he read an article about only having 18 summers with each child and that really struck him. That means that they are prioritizing making special memories with both kids while they are home. Now that he and Amber are mortgage-free, they can budget more for trips and travel. 

Key Takeaways to Pay Off a Mortgage Early

If you want to be mortgage free and aren’t sure where to start, Kevin has fantastic advice. Keep the process simple and focus on your family. Kevin says there is so much societal pressure pushing us to spend money in ways that don’t align with our goals. Instead, work toward your individual goals. 

Start by having those important money conversations and review your budget. Then, start to piece together a plan of action. As work to become mortgage-free, you can find support in the free Thriving Families Facebook community.


Are you working on becoming mortgage free?

Please let us know in the comments below.


Pay Off Mortgage Early Family

Andy Hill

Andy Hill is the host of the Marriage, Kids and Money Podcast which focuses on helping young families build wealth. This 5-star rated podcast was nominated as "Best New Personal Finance Podcast" by Plutus. Andy's advice and personal finance experience have been featured in major media outlets like Business Insider, MarketWatch and NBC News.

2 Comments

  • Hey Andy, I’ve really enjoyed reading through your blog! Kevin’s story is very inspiring for sure. My wife and I decided in August to accelerate our 15-year mortgage payoff when our balance was down to $100,000. Our goal is total debt freedom by the end of 2022 at the age of 36. The families you have interviewed as part of the mortgage freedom series have kept us excited and motivated to hit the mark! We can certainly identify with the emotional factor over the math when it comes to paying off the mortgage faster at the expense of investing less in equities for a relatively short time. Having a paid-for home and no debt sets such a strong foundation for financial freedom!

    Reply
    • Wow Jon! That’s a huge plan for you and your family.

      Please stay in touch as I’d love to feature you and your wife when you hit this big milestone.

      I’ll keep the interviews coming! Your note just fueled my fire to keep it as a continuous segment 🙂

      Reply

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