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July 20 - Baby step 6

Baby Step 6 - Paying off your Mortgage Early

"Do you not know that in a race all the runners run, but only one receives the prize? Run in such a way as to take the prize.   Everyone who competes in the games trains with strict discipline. They do it for a crown that is perishable, but we do it for a crown that is imperishable.…" - 1 Corinthians 9:24-25

Baby step number 6 is where we start to pile extra cash towards your mortgage in order to pay it off early.

The baby steps can sometimes seem like a Marathon race. By the time you finally get to baby step 6, your muscles have started to seize up and you are about to hit that infamous “wall” that seasoned runners talk about. The “wall” is the point in a race where things transition from being pretty hard to being really, really hard. It is that point where your body and mind are simultaneously tested. It is the perfect intersection of fatigue and diminished mental faculties. It is the point where you look back and realise just how far and how much you have achieved. You have managed to get out of consumer debt, you have saved up 3-6 months of expenses for the emergency fund, you have started to invest 15% of your income for your retirement and you are saving for your children’s college/university fees. Surely you deserve a rest now. Why not kick back and relax. Enjoy the fruits of your labour.

The path to financial freedom is not a 100m race. It is a marathon. Those you finish the race reap the rewards. I am always amazed when I read and listen to the stories of people who have paid off their mortgage early. The sacrifices, the extra jobs or overtime, working 7 days per week, 12 hour shifts etc. It takes a lot of mental will power as well as physical stamina. You will be tempted to relax by the time you have reached step number 6 mainly because by this stage you are in control of your finances and you have even started to build some wealth. But to give up now would be a mistake. You still have a few more miles to go to get to the end of the baby steps. Just 2 more steps and you are done!

 

So why should I pay off my mortgage early?

 

Simply paying an extra £155 per month towards your mortgage could reduce it from a 25 year term to 20 years. On top of that, you could save up to £30,000 in interest.

2. Do you really want to be tied to a mortgage in your retirement years? Your income will be significantly reduced when you get to retirement. Do you think you can still afford to pay £1,265 in monthly mortgage payments when you stop working?

I was blessed a while back. The bank made a mistake and found they needed to give me some money. After giving tithe, something I find easy to do these days, I piled the money, it turned out to be 10% of the mortgage I owed at the time, into paying off my mortgage. As a result I have saved over £1000 in interest I would have paid and now can pay off my mortgage several months early. That means that I can use the money I would have paid on my mortgage on something else.

NB: before you start paying extra on your mortgage, check with your bank/mortgage provider that there won’t be any penalties. Better still, before you sign on the dotted line for the mortgage in the first place, check that there are flexible features that allow you to overpay without incurring any penalties.

Music choice is "He Was There All The Time.  Click on the picture to listen.


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