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  • Budgeting advice for would-be Mortgage Crushers.

    by:
    Laurie Campbell

    For most Canadians, finally paying off a home mortgage ranks among the greatest of lifetime achievements – as well it should. It’s a splendid feat of budgeting. A home mortgage is the single biggest debt most of us take on. On average, we commit 25 years of our lives to paying mortgages off. When at last we can call our homes our own, we come away feeling wonderfully liberated and far more secure materially speaking.

     
    Among us, though, are those who refuse to commit all those years to the mortgage-payment grind. They want to get the job done fast. I call these people the Mortgage Crushers. They employ budgeting techniques to pay off their homes well ahead of most others. But they usually also do so at great personal financial sacrifice. One Torontonian stands out as a good example here.
     

    Sean was 27 when he bought his home. His goal is to pay off the mortgage in four years.

     
    Sean Cooper, who blogs about personal finance at Sean Cooper Writer, is crushing his mortgage big time right now. A while back, he wrote about the matter in an article appearing in The Globe and Mail. Sean said he is on track to pay off his mortgage by his 31st birthday, which I believe is coming up within the next year. Having bought a nice home in Scarborough at age 27, his mortgage will have a total lifespan of just four years.
     
    How is this possible? Well, I won’t get into all the details of Sean’s mortgage-crushing game plan. I encourage readers to read his Globe article, which is most interesting. In essence, to achieve his goal Sean has employed tactics running from saving from an early age and working extra jobs for a hefty down payment ($175,000), to renting out the main floor of his home while he lives in the basement. He also enjoys the advantage of being single.
     

    Frugal living came into play – really frugal living practiced since his college days.

     
    He had a strategy for buying his home, too. Analyzing Toronto’s housing market, and best buys, he said “it took nearly three years of housing hunting and two failed offers before the dream of homeownership became a reality. In June 2012, I purchased a beautifully renovated three-bedroom bungalow for a modest $425,000.”
     
    Frugal living also has figured into the strategy – I mean, really frugal living practiced since his college days. Sean said that he owns neither a cell phone nor a car. He has no cable TV subscription. He shops bargains and discounts endlessly for all material needs. His idea of an annual holiday is visiting the Toronto beaches at the height of summer. On top of all this, I can only assume he earns a good living these days as an able professional.
     

    I applaud Sean for what he’s achieving. But at the same time his situation is atypical.

     
    Sean noted that in response to his Globe article “some people thought I was sacrificing too much, mainly my youth, to be mortgage-free; I see it differently. In only four years I’ll have my mortgage paid off, sooner than a lot of homeowners who hold onto their mortgage for 25 years or longer … A lot can happen in 25 years – with my mortgage fully paid off, I’ll have the financial flexibility to handle any curveballs life throws me – illness, job loss, or otherwise.”
     
    I applaud Sean for what he’s achieving. But at the same time, I see his situation as atypical. Realistically, most Canadians cannot crush mortgages in just a few short years, and in fact according to some financial experts, doing so can be unwise.
     

    As a credit counselling professional, I promote the middle way to mortgage freedom.

     
    If crushing a mortgage means setting aside other very important financial life goals and needs, trouble may be in store down the road. Cutbacks to savings for college education funds, retirement nest eggs, and even emergency funds may set the stage for turmoil later in life that’s simply not worth the sacrifice, many financial experts warn.
     
    For my part as a credit counselling professional well versed in budgeting practices, I promote what I call the middle way to mortgage freedom. That is to say, yes, by all means do all that you can to pay down your mortgage – or for that matter any debt – as soon as possible. But do so in an intelligent way, allocating resources and balancing savings to account for all of life’s most important goals and vital needs.
     

    Would-be Mortgage Crushers should first seek help from a good mortgage broker.

     
    Should you wish to take on the title of a Mortgage Crusher even at a level that’s considerably less ambitious than Sean Cooper’s, I strongly advise getting help from a good financial advisor or a good mortgage broker. You’ll put yourself in the know about all facets of paying down your mortgage faster by getting the best rates, maximizing your down payment, making prepayments, and more.
     
    Of course, it’s all going to cost you more over a shorter term; you will make serious sacrifices; you will need to be frugal and smart in order to create a budget that crushes your mortgage. But in the end, like Sean, you could be looking forward to feeling liberated long before retirement while at the same time saving thousands in mortgage interest.
     
    Just don’t do so by making too many sacrifices. I can’t think of any home that’s worth a half a lifetime of abject self-denial and misery.

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