Written by Sarah Cocchimiglio
Thirty years ago, Ingrid Schwarz and her husband bought a home with a 15-year, fixed rate mortgage. Only four years later, while still in their 20s, the Schwarzes owned their home outright.
The key was making a large down payment and paying up to two years worth of monthly mortgage payments in a single month. At times, the Schwarzes were contributing 80 percent of their monthly income toward the mortgage on their Southampton, Pa. home, and living extremely lean to make it happen.
“Not to say that at times, in the beginning, that left much in the bank,” Schwarz said. “But it worked. Four years later we were mortgage-free.”
The Schwarzes were motivated to pay off their home because they had a high interest rate—10 percent—and they wanted the security of knowing they wouldn’t lose their home in tough times.
“The peace of mind that came with the final payment was worth its weight in gold,” Schwarz said.
Because of those sacrifices and her commitment to live well within her means (no fancy vacations or extravagant purchases and nothing that wasn’t absolutely necessary), the family was mortgage-free, and Schwarz achieved her dream of staying home with her son for eight years. Later, she was comfortably able to afford to go back to school and to start her own business as a personal assistant and concierge.
Schwarz, now 50, and her husband could comfortably afford to retire, but they plan to keep working because they feel too young to stop working. She does, however, have plans to renovate her kitchen, paying cash for all the labor and materials.
Despite her family’s financial stability today, Schwarz said they have maintained their lean, frugal ways.
“We live within our means and now that I could have those special extravagant wishes, I prefer peace of mind, good friends, and just enjoying life without worrying where the next penny is going to come from,” Schwarz said. “I don't feel I am sacrificing anything since I was never of the mindset that the material is of utmost importance.”
Here are Schwarz's tips for how to live frugally and pay down your mortgage quickly:
- Live within your means. “My parents paid their bills and lived a life without material possessions that were unnecessary,” she said.
- Have a will and life insurance. “A will and trust are important, [especially] to avoid probate and to allow your heirs to keep more of your money,” she said. She believes in term life insurance to cover expenses for children until they’re out of college. However, she doesn’t believe that life insurance should be used as a savings tool.
- Start saving early for higher education tuition costs. “Start saving for your child’s education when they are born, and over time those dollars will grow in order to help fund higher education,” Schwarz said. Her son, now 22 and pursuing a bachelor’s degree, has his own business and will graduate with no debt.
- Make one extra mortgage payment a year. If you make a 20 percent down payment and make one extra mortgage payment a year over 12 months, you may be able to pay off your mortgage six to eight years early. On a $200,000, 30-year mortgage, making an extra $50 principal payment each month could save you three years and more than $27,000 in interest over the life of your loan. Don’t forget always to specify that any extra payment should go toward the principal.
- Buy your cars. Schwarz and her husband drive a car for 14 years, on average, before trading it in. “Keeping [our cars] maintained and washed regularly—we do that ourselves—helps keep more money in our pockets,” she said.
- Take advantage of free money. If your employer offers a 401k plan, contribute the maximum allowable (and affordable). “My theory is if it doesn’t touch your hands, you will not miss it,” Schwarz said.