Paying off a 30 Year Mortgage in 5 Years

(Scroll down to the bottom to see Mortgage Goal Progress)

UPDATE: We ended up selling this condo on April 19, 2019. You can read about it in the April 2019 Update here.

I set a goal to pay off the mortgage by 2020. Now it’s time to think about what it’s really going to take, and how I’m going to do it.

First, let me address something briefly.

Doesn’t investing provide a better return on investment than paying down the mortgage?

Yes, it usually does. I’ve read plenty of personal finance books, websites, blogs, etc. I understand that expected returns for investing are north of 8%, 10% or even 12%. I understand that I’m only getting a return of less than 3% by paying down the mortgage, once you factor in the tax deduction for mortgage interest. I understand that I am potentially “missing out” on 6-10% compounding over 5 years on over $100,000. I should be investing instead of paying down the mortgage.

But let me explain why I won’t be doing that. Expected returns aren’t guaranteed returns. As such, I will be taking a lower-risk approach by both investing AND paying down the mortgage.

Think of it this way. You are completely debt-free. Would you borrow $178k at 3.25% so you could possibly gain about 8-12% on it? For most, the answer would be a resounding “YES, PLEASE! WHERE DO I SIGN?!” For me, the satisfaction of being completely debt-free is worth much more to me than taking on debt to potentially have an additional few thousands of dollars.

I’m not saying this is the correct way or best way. In fact, most people in finance will strongly disagree with my approach, and I understand exactly why. But I do believe my approach takes on less risk, and it is an approach I am comfortable with.

The rich rule over the poor, and the borrower is slave to the lender. -Proverbs 22:7

With that being said, I want to say that I do believe in investing. All of my retirement accounts as well as my wife’s retirement accounts are invested in the market (stocks and mutual funds/ETFs). We continue to invest a good portion of our income plus employer match into retirement accounts. I’m just saying I don’t like to use what I consider high levels of debt as a tool to invest. I think debt reduction and investing should happen concurrently, with a goal to eventually eliminate most or all debt. Yes, leverage (debt) can magnify returns, but it also magnifies losses.

What will it take to pay off the mortgage in 5 years?

It’s February 2016, and the mortgage balance is currently $178,304. I have to pay it off in 58 months to reach my goal by 12/31/2020.

$178,304 / 58 = $3074.21, and that’s not factoring in interest.

The current principal and interest payment (P+I) is $827.76. According to the amortization estimator I’m using, if I pay an additional $2,500 in principal every month in addition to the regular monthly payment, the last payment will be due on 12/1/2020.

In addition to the big goal I set, I’ve set some intermediate goals to ensure I’m on pace for achieving the goal.

I’ll keep track of my goal of paying off the mortgage below. The negative number in green in the far right column is the amount of principal paid down in that month.

Month	Months left	Intermediate goal	Actual balance	On pace for goal (amount paid off)
2/19/2016	58	$178,304	$178,304	Yes
3/18/2016	57	$176,700	$174,480	Yes: -$3,824
4/19/2016	56	$173,600	$169,993	Yes: -$4,487
5/17/2016	55	$170,500	$167,000	Yes: -$2,993
6/20/2016	54	$167,400	$159,900	Yes: -$7,100
7/19/2016	53	$164,300	$158,000	Yes: -$1,900
8/22/2016	52	$161,200	$157,000	Yes: -$1,000
9/20/2016	51	$158,100	$156,597	Yes: -$403
10/27/2016	50	$155,000	$156,193	No: -$404
11/21/2016	49	$151,900	$155,789	No: -$405
12/19/2016	48	$148,800	$155,000	No: -$789
1/19/2017	47	$145,700	$154,000	No: -$1,000
2/17/2017	46	$142,600	$153,589	No: -$411
3/17/2017	45	$139,500	$152,177	No: -$1,411
4/19/2017	44	$136,400	$145,745	No: -$6,432
5/15/2017	43	$133,300	$143,909	No: -$1,837
6/19/2017	42	$130,200	$143,471	No: -$438
7/17/2017	41	$127,100	$142,472	No: -$999
8/21/2017	40	$124,000	$137,000	No: -$5,472
9/19/2017	39	$120,900	$129,416	No: -$7,584
10/19/2017	38	$117,800	$124,000	No: -$5,416
11/20/2017	37	$114,700	$123,504	No: -$496
12/19/2017	36	$111,600	$123,010	No: -$494
1/19/2018	35	$108,500	$122,516	No: -$494
2/19/2018	34	$105,400	$122,020	No: -$496
3/19/2018	33	$102,300	$121,523	No: -$497
4/19/2018	32	$99,200	$120,524	No: -$999
5/19/2018	31	$96,100	$119,523	No: -$1,001
6/19/2018	30	$93,000	$118,019	No: -$1,504
7/19/2018	29	$89,900	$117,510	No: -$509
8/20/2018	28	$86,800	$115,001	No: -$2,510
9/19/2018	27	$83,700	$107,972	No: -$7,029
10/19/2018	26	$80,600	$107,573	No: -$535
11/19/2018	25	$77,500	$106,900	No: -$537
12/19/2018	24	$74,400	$106,362	No: -$538
1/19/2019	23	$71,300	$105,822	No: -$540
2/19/2019	22	$68,200	$105,281	No: -$541
3/19/2019	21	$65,100	$104,739	No: -$542
4/19/2019	20	$62,000	$0	Yes: -$104,739
5/19/2019	19	$58,900
6/19/2019	18	$55,800
7/19/2019	17	$52,700
8/19/2019	16	$49,600
9/19/2019	15	$46,500
10/19/2019	14	$43,400
11/19/2019	13	$40,300
12/19/2019	12	$37,200
1/19/2020	11	$34,100
2/19/2020	10	$31,000
3/19/2020	9	$27,900
4/19/2020	8	$24,800
5/19/2020	7	$21,700
6/19/2020	6	$18,600
7/19/2020	5	$15,500
8/19/2020	4	$12,400
9/19/2020	3	$9,300
10/19/2020	2	$6,200
11/19/2020	1	$3,100
12/19/2020	0	$0