Secrets to paying off a mortgage in 10 years

Katie and John Johnson

Katie and John Johnson have taken a huge step toward achieving financial security by paying off their mortgage early.

How early? The Salem, Oregon, couple paid off two home loans — including a 30-year, fixed-rate mortgage — just 10 years after they borrowed the money.

Their secret: Katie, 37, and John, 51, aggressively worked to pay off their loans by using salary increases to boost mortgage payments — and by living well within their means.

"Everything fell in line," says Katie, a civil engineer for the state of Oregon. "No issue required us to get off our plan. Everything worked for us."

Here's how the Johnsons achieved their goal.

In August 2003, the couple borrowed $205,000 to purchase a 3-bedroom, 2½-bathroom ranch-style home.

They immediately began paying more to their lender each month than they were required, increasing the extra amount and contributing lump-sum payments toward the principal whenever they were able.

Pay early, save big on your $200,000 home loan

Extra annual payments Interest paid Savings Payoff time
$0 $154,197 $0 30 years
$900 $130,873 $23,319 26 years, 1 month
$1,800 $113,946 $40,251 23 years, 2 months
$2,700 $101,030 $53,167 20 years, 9 months
Interest.com mortgage calculator; 4.25% interest rate.

Beginning in 2010, Katie and her husband, a federal aid highway program construction specialist with the state, paid $3,100 a month toward their mortgage — $2,200 more than they were required.

Katie admits money was tight a few times because of those increased payments, but they pushed through knowing the situation wouldn’t last forever.

"It just seemed like a good thing to do even if you’re going to have some discomfort," she says. "Now it feels good."

The Johnsons initially had two mortgages.

Since their down payment — from the sale of a house John owned before they married — was less than 20% of the sale price of their new home, their lender would have required private mortgage insurance. The second mortgage allowed them to avoid paying PMI.

The first mortgage was a 30-year, fixed-rate loan for $173,000 that carried an interest rate of 4.5% and a monthly payment of just over $900. Their second mortgage, a 15-year balloon loan for $32,000, charged 8% interest and a monthly payment of about $200.

"We attacked that one aggressively," Katie says.

She admits the thought of being stuck with a large payment at the end of the balloon loan made her nervous.

The Johnsons immediately began paying an extra $110 a month toward the balloon loan’s principal, which they bumped up to an extra $350 a month in 2004.

Later that year, they made a lump-sum payment of $4,000 and also increased their monthly payment to an extra $512 a month.

At the same time, the couple began paying an additional $85 a month on their 30-year loan.

Katie and John were able to increase their monthly payments after they paid off an auto loan and when they each earned cost-of-living raises.

The Johnsons figured they were already used to living without the extra income so wouldn’t miss the additional cash.

They also made lump-sum payments from savings, since their regular contributions weren’t earning enough interest to justify maintaining a large balance.

By 2006, the Johnsons were paying an extra $862 a month on the 15-year balloon loan, and that December made a lump-sum payment of just over $5,000 to pay it off.

They rang in 2007 with only their 30-year loan and — again applying their we-won’t-miss-what-we-never-had principle — began paying an extra $1,200 a month, for a total payment of $2,100.

In 2010, they added another $1,000, for that final monthly total of $3,100.

To stay motivated, Katie created an amortization chart and crossed off each month after they made their payment.

"It was pretty cool to cross off that last (entry on the chart)," she says. The Johnsons made their final mortgage payment in May 2013.

Their goal achieved, the Johnsons didn't abandon their thrifty ways.

Instead, the next month they deposited $3,100 into their savings account.

Although they already had an emergency savings fund, the amount of their liquid, easily accessible savings wasn't where they wanted it to be.

They also began saving to upgrade their home’s heating and cooling system. For 10 years, they’d endured electric baseboard heaters, which Katie didn’t trust, and no air conditioning.

Installing a ductless system was a top priority — and one that came with a significant price tag of $13,000.

"It was pretty major," says Katie, who noted that she and John waited until they could comfortably pay cash before having the system put in. They also took advantage of their electric company’s rebate program and tax credits for increasing the energy efficiency of their home.

Upcoming on their to-do list: a retaining wall, a kitchen renovation and hardwood flooring.

The couple would eventually like to build a new house. For now, they're being smart about making upgrades that they’ll enjoy and that also will add to their home’s value.

"We're happy where we’re at now," Katie says. "It's probably a couple years off before that next step."

3 free ways to pay your mortgage faster

3 free ways to pay your mortgage faster:

These strategies can can shave years off your home loan and save tens of thousands of dollars in interest charges. All you need is a little bit of self-discipline. But if you’re positive you can swing it, shortening the time of your mortgage can be the shortcut to huge savings — even the day you own your home free and clear.

Living mortgage-free also means the Johnsons can step up contributions to charities they feel strongly about, such as the Humane Society, their local food bank and a nonprofit supporting paralyzed veterans.

Other than that, their spending and saving habits have remained largely unchanged.

Katie and John both max out their retirement savings plans, like they always have.

While the Johnsons use credit cards, they pay the balance in full every month. They also save up for big purchases, like vacations, instead of charging them.

In addition, they eat at home the vast majority of time, and avoid paying for a gym membership by running outside for exercise.

"Our standard of living is really comfortable," Katie says. "We don’t go without anything, and we do have those times when we have fun."

The Johnsons’ tips for paying off a mortgage early: