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 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:

  • cheri wade

    pay every two weeks and u will save years of payments.

  • Julie L.

    We have 3 kids and will pay off our 15 year mortgage 8. Set a budget in writing and stick to it.

  • herbgal1

    Everyone's thoughts echoed's easy without children....but definitely not worth it My life has been greatly enriched by both my children and grandchildren.
    With that said, my mortgage has a interest rate below 5% and will get paid off.

  • geri

    hooray for them! they should be so proud of themselves, kids or no kids, one can do it, if only they would not buy so much " junk" for their kids, i know, i stopped getting those burgers or those i want i want stuff, i let my kids go outside and play just like the good old days, no junk! just fresh air , running dog, walking, free swings at park, you get the picture. I do not use my kids as an excuse, for saving, if one cannot afford kids don't have them.

  • Retail

    Great job!! We did everything we wanted with children, now they are grown we are close to retirement age and need to get rid of this debt. We will try this again while we still have time. Motivated. Congratulations

  • paul

    refrain from spending on non-essential items, put money into mortgage. the feeling of paying it off early is UN-describable to debt holders. paid off my home and child support, a house will never abandon you.

  • Matt

    If I paid the EXTRA $2,200 per month that they are It would cost the entire household income. Yeah...that seems practical. I will pay off the mortgage in ten years but I won't have eaten in that same time frame.

  • gail

    What an awesome and inspiring story. God Bless this couple as they embark on their next endeavor.

  • Shari

    Hats off to them. The most important point to take here is to have a plan and work that plan. Unfortunately, too many people are addicted to the instant gratification of credit cards and can't even tell you what they spend all their money on. Katie & John will have the security of "owning" their home.

  • Micah

    Secrets to paying off a mortgage in 10 years?

    Try no kids and a two state jobs.

  • Cheryl

    Has anyone done the math on what losing the mortgage interest deduction will do to their taxes? Seems like paying higher taxes for the next 30 years might make paying off the mortgage look a little less enticing.

  • Len Lewicki

    But I wonder about their retirement savings....if they stinted on their retirement savings while essentially putting all that money into the house, they'll never catch up.

  • Kent

    There are some in the finance industry right now who are not touting paying off a loan this radically--with the continuing instablilty in how homes will increase in value or won't some are saying there are "better" investments. that said, I am paying down a 15 year fixed with extra payments each month to bring it to a 12.5 year loan.

  • Jeff

    It helps to think of it in terms of how much you'll save in interest rather than how quickly the home is paid off. Several websites let you punch in "what-if" stats to see how much you could save by paying more now. For my home, paying just an extra $200/month will save me more than $40,000 in interest over the course of the mortgage. I doubt I'd see such a return on my 401k.

  • Peter Jennings

    Get real. Who else has two state gov't jobs, two state gov't pensions, no kids, and no college tuition? Here that sound? It's the fiscal cliff coming ....

  • mario

    that's just wonderful, it makes me so happy to know that we're paying taxes sufficient for two government workers to pay off their mortgage in one-third the time. We should all be so proud of ourselves.... what a joke