How to Payoff a Mortgage in 10 Years or Less

Payoff a mortgage in 10 years or less and live the rest of life free of debts.

The capability to payoff a mortgage on a home in ten years or less is not going to be feasible for all individuals or families. However, if you are looking to decrease the amount you pay to your bank in interest over the life of your mortgage, the quickest way to do so is by rapidly overpaying your monthly mortgage payment. This article will provide step by step instructions first on how to choose a home that you can payoff in 10 years or less, and then on how to actually setup the mortgage payments so it is paid off in that time.

Instructions

1. 

   First, to payoff a mortgage in ten years or less, you are going to need to ignore conventional mortgage wisdom when it comes to shopping for a home. The normal rule of thumb in determining how much house you can afford is that your total monthly mortgage payment should not exceed 1/3 of your total monthly gross income. If you desire to payoff a home in ten years or less, you will need to change that to 15% of your monthly gross income, not 33%. This strategy is only effective if you have a stable, reliable income stream.

2. 

   As an example, if your current, reliable gross income is $100,000 per year, then you are receiving $8333 per month in gross income. If we take our $8333 and multiply by .15%, then we know our monthly mortgage payment on a 30 year, fixed rate loan should be no more than $1250. At this point, it is worth saying, that you will be paying much more than $1250 per month. This step is to help you determine affordability.

3. 

   Now, use the mortgage calculator in the resources section at the bottom of this article to help you determine how much house you can buy if you desire to payoff a mortgage in ten years or less. As an example, if you can get a 5.5% rate right now, we know that our payment on a 30 year mortgage will be near $1250 if the purchase price of the home is $220,000 (assumes no downpayment, which is unlikely). Notice that this is roughly double your income.

4. 

   To payoff a mortage in ten years or less, we have now established our own rule of thumb - do not spend more than double your gross annual income on the purchase price of a home.

5. 

   Now it is time to structure your payments. This is extremely easy to understand - you are going to pay two times your required monthly mortgage. In the example, we will send the bank or have them automatically withdrawal $2500 per month. Your extra payment will all go to reduce the principal amount owed on your home. As the principal decreases, the amount of interest you pay the bank each month will also decrease. This will greatly accelerate your mortgage payoff time. With our example, you can use the same calculator to see that by paying $2500 per month, we will payoff the 5.5%, 30 year mortgage, with no downpayment in 9 years and 4 months.

6. 

   It is preferable for you to use a 30 year loan to payoff a mortgage in ten years or less. The reason for this is because if something tragic were to happen to your income stream, you may still be able to afford the standard monthly payment on the 30 year loan, rather than a 15 year loan. Also, with how quickly you were paying down principal, you may be able to refinance to save your home. Again, since your income is extremely reliable, this should not be a problem.

7. 

   Owning a home is excellent for your overall financial situation, this allows you to accomplish that financial goal much quicker. It also keeps you from living in a home that is not reasonably affordable for you and your family.

Tips & Warnings

• When using the calculator, remember that a downpayment of at least ten percent will likely be required. Therefore, know that you must have that amount of cash available and that you should reduce the purchase price by that amount when determining the affordable monthly mortgage payment.

Resources

• Mortgage Affordability Calculator