A 10 year home loan payoff
It might sound unrealistic to many, but in my experience as a mortgage broker – I have seen many borrowers pay off their home loan in under 10 years.
A home loan paid off in under 10 years – yep. Not 30 years, or even 20 years – under 10 years.
To pay off a home loan in under 10 years can free up lots of money that otherwise would have gone towards loan repayments. Ah, the options….
The Australian government website, Moneysmart, is a big fan off home loan reduction highlighting the financial and well-being benefits no mortgage can bring.
My article showing 23 different ways a loan could be paid down quickly, attracts a lot of interested readers.
But now I am taking things further and sharing real borrower stories, the borrower profiles and strategies they used to pay their home loan off in less than 10 years.
Who pays off their home loan in under 10yrs?
I have seen plenty of ‘regular people’ pay off their home loans in under 10 years.
By regular, I mean the ones floating around at school assemblies, shops, beach and gyms with us. Not the people getting papped on a luxury yacht – they probably never needed a home loan.
These people could be your mates or neighbours. They are the ones not usually in a rush. They often drive older cars. And do not usually wear the latest must-have designer clothes.
My observations found these people are willing to do things a little differently. I share there strategies in my free eBook here.
Why pay a home loan off quickly?
Whether the home loan is paid off or fully offset – neither should cost any interest. And given interest can cost $829,039 for a 30yr loan at 6.5% on minimum repayments – it is not insignificant.
If you can pay this same home loan off in eight years you could save $643,738 in interest.
Not having the burden of home loan repayments can free up, well, “a lot” – time and money. And everything else time and money could offer.
That said, there are also reasons not to pay off a home loan – maybe your money is better off used elsewhere – perhaps in a growing business?
I revisited all the home loans I ever wrote
I went into mortgage broking in 2008. And, over the time I have arranged loans for hundreds of borrowers.
Hearing all the talk about mortgage stress, mortgage cliffs, got me thinking. How are my clients going?Are they ahead on their home loans? Are they falling behind?
So, I analysed a list of borrowers I helped since 2008 to see what I could find about their loan behaviour.
In general, borrowers were keeping up with their required repayments.
But something caught my eye – I found many borrowers had paid off their home loan. But these were loans provided over a (mostly) a 30 year term – and I had only been in mortgage broking for 15yrs at the time.
Which meant quite a few borrowers had paid their home loans off in under 10 years.
That impressed me. So, I made 10 years the magic mark and put together a group of borrowers who have managed to pay off their home loan inside that timeframe.
Some started businesses. Others sold investments. Others well, just grinded it out until the home loan was no more – crushed it.
Successful borrower profiles
Given many borrowers cannot imagine a mortgage-free life, I analysed my own client list to shed light on how regular people have managed the great “home loan” escape.
I looked at their initial financial position and put together what I knew about each client journey. I looked at income sources and borrowing ratios.
I even contacted some for to hear more about their road to being mortgage-free.
The result?
I found five different borrower profiles out of those who paid off their home loans in under 10 years.
These borrower profiles are not an exhaustive list, and not ‘the recipe’ for a mortgage-free life – just an insight into to those that did it.
It might help answer some questions around why your next door neighbours always seem to have time on their side.
Profile 1 – Business owners
Business ownership is a prominent borrower profile I see pay off home loans in under 10 years are masters of their own destiny – no one can come and tap them on the shoulder and say their time is up. As a business owner it is up to them react, evolve and grow.
The 2021 Census revealed 13.8% of employed Australians considered themselves owner managers of their business – that is 1.66 million Australians. Many of these business owners use a mortgage broker to advise on how to get a home loan approved.
I introduce self-employed borrowers to licensed mortgage brokers.
The business owners I have seen pay off their home loan in under 10 years have a healthy (not reckless) appetite for risk.
They can own a share of a business or own it outright.
They might operate as a sole trader or run a company turning over millions in revenue.
My article on the different tools and hacks businesses can use to pay off their home loan quickly details how the following can work in their favour:
REAL BUSINESS OWNER EXAMPLE:
7yrs no mortgage | Business supercharges home loan to zero
Profile 2 – Highly incentivised employees
When I say incentivised employee, I mean highly incentivised. These are employees who have taken a risk for the chance of a big financial upside.
Incentives are not guaranteed.
Think start-ups….
This is the type of incentive these borrowers were willing to give up something for. Their reward was life changing.
So, what are they giving up exactly? Usually a higher salary – that is the risk part for the employee.
There is also a large component of sweat, hard work, expertise and pressure a results-based incentive brings with it.
Types of incentive I have seen borrowers use to help pay off their home loan are retention bonuses, share schemes and even an ownership incentive.
The flipside – if you are in an industry or company that is flat and not on a growth trajectory – you could find yourself stuck on a low salary and miss out on some good earning years.
Profile 3 – Ambitious employees
Ambitious employees are a borrower profile that does do not sit in their comfort zone for long. They are usually in an industry that has career progression options – or navigate to one.
They are motivated to take on more responsibility.
They are hard (and smart) workers – somewhat strategic in their approach to each new job. If I dig into questions around employment, they can explain why they are performing their current role and how it is helping them get where they want to go.
These borrowers are often investing in their own training and further education – say a post graduate qualification. It might be self-funded or funded by an employer.
I have seen ambitious employees over the years double and triple their incomes compared to sitting in their comfort zone. Their result is being mortgage-free.
REAL CASE STUDY:
Upgraders pay off home loan in 8yrs | Net worth now $3.1M+
Profile 4 – Investors
When you think investor – you might think Boomer – or maybe Mike Cannon-Brookes.
Having reviewed the financial positions of borrowers for over 15 years, I can confidently say investors are everywhere. They could be your mates, even work colleagues. they are not full time investors – they work – and they invest for the long-term.
They are usually the ones that quietly go about their business. As opposed to those that openly share their winnings on speculative investments.
A side note on speculative investing…. when you hear someone bang on about how much they won (I mean made) on their investment, my guess it was a bet.
When you hear about their winnings (I mean returns) next time they tell you – ask them about their losses and how they are doing overall. The showboating might stop.
Investors can be regular people with long-term aspirations:
- Investment property – From rentvesting right through to property portfolios. They use other peoples money to help may the mortgage.
- Investing regularly – Having share offices for many years with financial planners. I have seen how regular, consistent contributions based on advice works.
I have seen plenty of long-term investors pay off their home loan in under 10yrs.
By long-term I mean a 10 years (plus) horizon. An investment property or three, bought over 10 years ago could help pay off a mortgage today.
There is a saying in property that you make mony by not selling. But in reality, being asset-rich and cash poor is tough. And for some borrowers, it makes sense to sell – take some chips off the table – if you can use you money elsewhere – like pay down your own home loan.
Profile 5 – Balanced borrowers
Sensible home loan exposure is key for these balanced borrowers.
When I met with these borrowers they were never interest in their “borrowing capacity”. There focus was on manageable repayments that they can comfortably cover – some would say they have a conservative approach.
These people are financially confident and comfortable.
These borrowers do not listen to the noise and are willing to compromise on location or house type if it means a smaller home loan.
They do not do what everyone else was doing – otherwise they would still probably owe the bank money.
They do not fall for the shiny things.
They are realistic, sensible and usually apply a big helping of discipline to financial matters.
They understand what they spend each month – they know what they have spare each month.
They are not interested in taking out a 30 year mortgage and keeping it for 30 years.
They take out a 30 year home loan and pay it off in under 10 years.
They are not always the big income earners.
They all borrowed way less than there borrowing capacity indicated.
BALANCED BORROWERS:
How first time buyers paid home loan in 10yrs | Net worth $1.4M
How a 10 year home loan pays off
When I contacted several borrowers who had paid their home loan off, they were very happy to talk about it.
But they were even happier talking about what next.
You see when your monthly home loan commitment is gone – a world of opportunity awaits.
- Travel
- Schooling choices
- Renovations
- Holiday Homes
- Option to work less
I share real client stories detailing the different borrower journeys to mortgage freedom.
Final word
I have seen so many ways to pay down a mortgage early, none of them easy, and none of them the same as the other.
The borrower profiles of those who did pay their mortgage off in less than 10 years are my observations based on over 15 years as a mortgage broker. I hope these insights are helpful to you– a shot of inspo even?
If you have not thought it realistic to be mortgage free inside 10yrs –
REVEALED: Strategies learned from borrowers who have done it in my eBook.
I would love to hear from borrowers on their journey, or those already mortgage-free who might see themselves having a different borrower profile.
Contact me – Share your mortgage-free story
The more we talk about it, the less interest we can collectively owe lenders! And if you are happy to share your story, there are plenty of people willing to listen, learn, and celebrate with you.
IMPORTANT NOTE: You should get professional advice about paying off your home loan or offsetting your home loan balance. It can have different tax and financial consequences depending on your own goals and objectives.
Notes
*Observations based on my personal mortgage broking experience since 2008
Definition of no home loan – follow link
