One of my biggest goals for 2025 which for many is a major life goal has been achieved and it’s only the first week. That’s right as of today the mortgage on my primary residence has been paid in full. How did I manage to do this in just one week? I didn’t. In fact this goal was 10 years in the making and maybe even longer if you consider the full 25 years of home ownership? This one is about the journey toward mortgage freedom.
It starts with a desire for mortgage freedom.
Many people I speak to don’t see this as being a reality and so they make financial decisions that get in the way of ever getting there. Too many get caught with overwhelming consumer debt which often leads to refinancing their home. That’s a sure fire way to move the goal posts. A desire to get there means budgeting wisely and potentially delaying expensive vacations and fancy cars that will limit your ability.
There is also a group of investors that firmly believe that paying off your mortgage is a the worst idea ever. Michael R. Roberts from the Wharton School of Business in his post “Think Twice Before Paying Off Your Mortgage Early” does a good job of laying out the pros and cons. The thinking is that the extra money is better used for investments for wealth generation. Simple math says that if mortgage rates are 5% and you can get a 10% return then investing is the better route. And it’s not wrong but there are other factors. Interest rates could go up and markets could go down.
Personally, I prefer a balanced approach to wealth generation. Don’t stray too far towards extremes. The reality is that if I really wanted to do I probably could have achieved mortgage freedom even quicker. I could have eaten only kraft dinner, not gone on any vacations, not invested at all. It all comes down to priorities and desire and setting your sites on the goal. A factor that played a big roll for me was the additional monthly cash flow I have. This new cash flow has a big impact on my 2025 goals which I layout at the end of this post.
So how did we do it. Let’s actually go into the details.
House Purchase Details
In 2015, my wife and I bought our 3rd and forever home. I have no desire to move again, moving is miserable and costly. I often joke that my next move will be to a box in the ground. A bit morbid I know. The purchase price was around $740,000 and we had a accumulated about $250,000 of equity from the previous two homes we lived in. The first was a small 2 bedroom townhouse and the second was a small single family home that never felt quite right. Housing prices were actually in decline when we were buying which was good on the purchase side but meant we got significantly less for the house we needed to sell. That left us borrowing exactly $500,000 after closing costs. And something that I’m sure will make current house shoppers angry, our interest rate was an incredibly low 2.36%. That meant our monthly mortgage payment was about $2200 on a 25 year amortization.
The First Five Years – The Lost Years
For the first 5 years of the mortgage we really had no specific plan to pay the mortgage off in any aggressive fashion. The only thing we knew is that we definitely didn’t want to take the full 25 years. We setup semi-monthly payments with a slightly accelerated payment of $1500 to achieve this. I highly recommend people do this when they first setup the mortgage even if it’s just an additional $100/month. Of course this is impossible if you overextend so it starts with buying less house than you can afford. This change reduced the amortization to just under 18 years which is amazing but still felt like a lifetime. Below are the actual numbers from mid 2015 to the end of 2019.
The Raw Numbers – June 2015 – Jan 2020
| Year | Start | Target | End | Diff |
| 2015 (June) | 500K | None | $491K | -$9K |
| 2016 | $491K | None | $475K | -$16K |
| 2017 | $475K | None | $458K | -$17K |
| 2018 | $458K | None | $417K | -$41K |
| 2019 | $417K | None | $391K | -$26K |
You can see from the data that in the first 4.5 years we managed to pay off about 1/5th of the loan. Most would be pretty happy with this and we definitely were. We managed to make a single lump sum payment in 2018 for about $20,000 when I received a payout after the company I worked for sold. I’m also not entirely sure when but over those years I increased the semi-monthly payment to $1700 but on the flip side our interest rate had also gone up to 3.48%. At the time I had wrongly predicted that interest rates would continue rising so we locked in for 5 years. However I was quite wrong and not long after we renegotiated they dropped rapidly below even 2%. So for a few years I felt like a dummy but ultimately I was vindicated in the end when interest rates increased rapidly post COVID. Based on this on January 1st, 2020 we had about 12 years left on our mortgage which had us paying it off sometime in 2032. Not bad I suppose.
The Second Five Years – The Power of Goals
Before this, I did never wrote down specific yearly goals. Based on the data above and the progress I’m sure I had a general idea of where I was trying to get but I never had a defined target.
202o was the first year that I truly started writing down my financial goals and I’ve done it every year ever since. You can read my post on Functional Goal Setting for more info on why I believe that goal setting is so critical to financial health and success. The fact is that the next five years of data clearly demonstrates that when you set a target it accelerates your progress significantly. Goals are the foundation to better financial decisions. Below are the actual numbers from the start of 2020 to week 1, 2025.
The Raw Numbers – Jan 2020 – Jan 2025
| Year | Start | Target | End | Diff |
| 2020 | $391K | $350K | $349K | -$42K |
| 2021 | $349,769 | $300K | $299K | -$50K |
| 2022 | $299K | $250K | $249K | -$50K |
| 2023 | $249K | $200K | $146K | -$103K |
| 2024 | $146K | $90K | $30K | -$116K |
| 2025 | $30K | $0 | $0 | -$30K |
What’s interesting is that you can see in the first 3 years we hit our target almost bang on. We took specific actions to make sure we did. But then you can see in the last few years we overachieved. This came from better planning, less interest payed, and as we got closer to the end our desire to get there increased. Throw in a bit of luck with some additional income and there you have it. Mortgage Freedom!
So what specific actions did we take over the years. Not that most of these actions were planned at the beginning of the year
2020
- Set target to $350,000
- Planned semi-monthly payment increase to $1800 with expected pay raise
- Planned lump sum payment of $15,000 funded by tax return and other savings
2021
- Set target to $300,000
- Planned lump sum payment of $12,000
- Unplanned increased of semi-monthly payment t0 $1900 – unexpected pay raise
2022
- Set target to $250,000
- Planned lump sum payment of $10,000
- Unplanned increased of semi-monthly payment t0 $2050 – unexpected pay raise
2023
- Set target to $200,000
- Planned semi-monthly payment increase to $2100 with expected pay raise
- Planned lump sum payment of $8,000
- Unplanned lump sum of 50k, company vested stock sale and additional contract work income
2024
- Set target to $90,000
- No further payment increases planned as the total impact was not worth it
- Planned lump sum with unspecified amount
- 3 lump sum payments totally the max $70,000 all funded through company stock sales by myself (30k) and my wife (40k)
2025
- Set target to $0
- Planned lump sum payment of remaining amount
Summary and Key Take Aways
That pretty much summarizes how we did it. It started with a desire, and then spent a few years making progress but with no specific plan. Then through mostly planned actions set out in our yearly goals along with some unplanned but highly informed actions we were able to achieve mortgage freedom.
I’m not going to lie, at it’s clear to see that we have had some incredible good fortune over the last couple of years especially when it comes to company stock programs. My company was sold and then went public and my wife boarded a rocket ship of a company who’s stock has absolutely soared. Without these events I think it would have taken us an additional 2-3 years.
Here is what I learned over the years:
Have the desire and a plan
- Budget wisely and control discretionary spending
- Consumer debt is guaranteed to impede your progress
- Set a target each year of what progress you would like to make
- Make sure it is realistic
- Plan that you will make more money in the future
- We generally make more as we get older
- Increased income should be one of your other yearly financial goals
- Mortgage Repayment = Less Total Debt = Higher Net Worth
- Mortgage freedom was a key element in building my net worth
- Early changes have much bigger impacts
- As you get closer to the end, interest rate and monthly payments have limited to no meaningful impact
- Any extra monthly income is better spent elsewhere
- Sometimes you make our own luck
- For us that means that we both found and took jobs in Technology that had the potential for bonuses and upside if the companies did well
Recommended Actions
- Increase the amount you pay monthly right out of the gate or at least ASAP
- $100/month can mean as much as 1.5 years and 25K in interest saved
- Increase your mortgage payment frequency to reduce overall interest
- Weekly Rapid is the best and most extreme
- I went semi-monthly purely for simplified budgeting
- Plan to make lump sum payments however small
- Every little bit helps and can have a big impact on interest especially early on
- Banks will allow you to put between 15 and 20 percent yearly
- Allocate a portion of every raise to increasing your mortgage payments
- Do this immediately before you start spending it elsewhere
- Negotiate the best rate possible
- Honestly, this is one you will have the least control over but a .5% difference can have a big impact over time
- Your credit score will matter to some degree so know it and manage it
- Variable rates can be highly beneficial but carry risk that can work against you
- I personally stuck with fixed closed mortgages of varying lengths purely for risk management and budgeting purposes
- Allocate a portion of any financial windfall to your mortgage
- Tax Rebate, Contract work, Stock gains, Inheritance, Lottery win, you name it
- Sometimes fortune shines on us and we have more money than expected
- Allocate it wisely
I hope this helps some of you get on the path to improved financial health and mortgage freedom.
So Now What
One of the key benefits of paying off your mortgage is that one of the largest monthly expenses is suddenly gone. How do you adjust to the sudden windfall of available income. That can depend heavily on your future goals. Mine is to continue to build wealth and ultimately retire reasonably early. Knowing that I would achieve this milestone early in the year shaped many of my 2025 goals.
2025 Goals
- Mortgage Freedom
- Increase Net Worth by 12%
- Increase Passive Income by 14%
- Investment property #1 mortgage below 215k
- Investment property #2 mortgage below 325k
- 5k balance in chequing account
- Start investing in non taxable margin account (2K)
- Car loan under 35k
- Eliminate RRSP Contribution Space
- Eliminate TSFA Contribution Space
- Savings Ratio > 30%
- Credit Utilization < 20%
My goals continue to focus on building net worth through a combination of tackling other debt and improved saving through saving and investing. Below are the planned actions I expect to take over the course of 2025.
2025 Planned Actions
- Make lump sum payment for balance on Primary Residence in January
- Save $500/month in bank account
- Increase TSFA contribution to $500 per pay in January
- Increase car payment by 500 in January – reduce payments by 1 year
- Increase Investment Property #1 monthly mortgage to $2000 in January
- Increase Investment Property #2 monthly mortgage to $2450 in January
- Borrow off Line of Credit March 1 to max out RRSP contribution room
- Use Tax Return to Pay off Line of Credit (May)
- Remaining Tax Return to TSFA (May)
- Increase Investment Property #1 monthly mortgage to Max in April
- Increase Investment Property #2 monthly mortgage to Max in April
- Reduce work RRSP contribution in April to avoid over contribution
- Reduce TSFA to $290/pay in June to avoid over contribution
- Setup regular contribution to margin account in July
- Upgrade bank account to avoid bank fees on additional services once balance is above 5k in October
Last words
There you have it. It’s a pretty transparent list that gives you a sense of where the extra money will be allocated. Debt reduction will go to accelerating my car loan and also applying some of the same principles used above to the mortgage on investment properties that I own. A big focus now that I have mortgage freedom will be to finally remove all the past years contribution space that has accumulated over the years where I under contributed. I should then have some extra money to start investing in my non-sheltered investment account and build as small nest egg to avoid bank fees on an upgraded bank account that will further save me money. I also do plan to keep a little extra for discretionary spending. I’m sure things will change over the course of the year but all and all it feels right for me.
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