How to Buy a Home WITHOUT a Mortgage

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I think you’ll agree with me that making a house payment each month sucks.

There was a time that I didn’t even think it would be possible to buy a house without a mortgage. I thought the only way I will ever own my home is to borrow money.

Man, was I mistaken! Looking back at all of the interest I have paid to banks makes me sick. I knew there had to be another way, and there is.

Here is an example of how you could actually make buying a home in cash a reality.

How You Can Buy a Home Without a Mortgage

Let’s start with a hypothetical scenario of a young couple who want to pay cash for a home purchase.

John and Kristy get married at 22 years old. John has a job paying $40,000, and Kristy is a teacher making $30,000. So, combined, they have an income of $70,000 per year.

They decide to live as cheap as they can until they can afford to buy a house with cash. They rent an apartment for $600 per month and decide to take very inexpensive vacations over the next five years.

In addition, they implement a challenge everything budget and maximize frugal living. By doing this, they are able to live on $40,000 per year, which allows them to put about $30,000 into savings each year.

So in five years, they can save up $150,000 and pay for a house with cash!

And that doesn’t include their interest earnings on their savings! If you open a high-yield savings account, you could increase your savings with a 2% rate of return or more – all insured by the FDIC.

John and Kristy have accomplished a lofty goal. At age 27, they own a paid-for house and are completely debt-free.

Living La Vida Frugal

But wait, how can I live on $40,000 per year with taxes, rent and everything else I have to pay??? Glad you asked, here is a breakdown of what that would look like:

  • Rent: $7,200/year ($600 per month)
  • Food: $3,000/year ($250 per month)
  • Utilities:  $1,800/year ($150 per month)
  • Vehicles: $4,800/year ($400 per month)
  • Entertainment: $1,200/year ($100 per month)
  • Misc: $3,480/year ($290 per month)
  • Giving: $7,000/year ($583.33 per month)
  • Taxes: $7,440 (Marginal Tax rate of 15% with average of 10.6%)
  • Total: $40,000

If you think that couples story is crazy, check out people that are living on even less:

  • Jason and Danielle live on $14,000 per year.
  • Jacob lives on $7,000 per year. Check out how at his site Early Retirement Extreme.

Now, no one said it’s going to be easy to live a super frugal life. You’ll have to find free things to do on nights and weekends.

You will also have to work hard to save money on groceries.

Also, you’ll have to find somewhere to live for cheap.

A $600 rent payment is a lofty goal – especially in geographical areas like the East or West coasts. You might have to room in someone’s basement or pay rent to the bank of mom and dad for a time.

But in the end, we think you’ll find it’s worth the sacrifice.

Why Should You Pay Cash for a Home?

It might sound crazy to save up cash to buy a home without a mortgage. However, have you ever thought about the total interest that you would pay if you took out a 30-year mortgage?

Think about this from a math perspective: If you borrowed $250,000 at 4% interest on a 30-year note, you would pay $179,673 in interest! That is $10,000 per year in interest for roughly 18 years.

I don’t know about you, but I would rather backpack Europe every year for 18 years than pay a bank that much interest.

What could you think of to do with $180,000 besides pay it to your local bank? I could think of a few things:

  • take awesome vacations regularly
  • save up for a cabin or vacation home
  • start a business or ministry
  • achieve financial independence and retire early

Your list of what you would do with $180k might look different than mine, but I bet you can think of something.

Well, that is great, but I already have a mortgage. What should I do?

Don’t worry; I have you covered. Check out this mortgage calculator to see what your savings would be if you had a shorter term.

Then make a plan. Here are some things you can do to get extra cash to put toward paying your mortgage off faster.

Related Post: Disadvantages (and Advantages) of a Reverse Mortgage

How to Pay Your Mortgage Off Fast

Implement one or more of these ideas to get your mortgage paid off fast. Remember to clarify when making extra payments to your mortgage company that you want them to go toward your principal balance.

Get a Side Hustle

A side hustle is an extra source of income. We’ve got a list of dozens of side hustle ideas for you.

But here are some quick ideas. You could get a second job delivering pizzas, waiting tables or working in retail. Or you could start your own side hustle business.

How about:

  • Freelancing with a skill you have, such as writing or graphic design
  • Starting a handyman or lawn mowing business
  • Babysitting for kids or pets
  • Doing tasks for people with companies like TaskRabbit
  • Driving with Uber or Lyft
  • Renting out a room in your house on Airbnb

It’s easy to find ways to make extra money. The key is committing to putting all of that extra money toward your mortgage balance.

Cut Your Expenses Drastically

If you’re willing to start living very frugally, you could save hundreds or even thousands of dollars per month on your expenses.

Cut costs on groceries. Use less electricity. Drive less or trade your expensive car in for cheaper transportation.

Go through every line item in your budget and find a way to reduce or eliminate it. Then use the money you save to put toward your mortgage payoff.

Downsize

If you really want to fast track to a life with no mortgage, you could consider downsizing. Is it possible for you to find a cheaper house and immediately get you a lower mortgage balance?

Only you can decide whether downsizing is the right move for you. But it is one way to get a mortgage-free life faster.

Refinance Your Mortgage

If you have a higher interest rate or a longerterm left on your mortgage, refinancing might help you pay it off faster.

Doing so could save you thousands in interest and in the time left on your mortgage loan. Contact a loan officer for more information.

Summary

Buying a home with cash is a valid and achievable goal. So is paying off your house early if you already have a mortgage. With a little ingenuity and hard work, you can be mortgagefree.

Yes, doing so will take some planning, hard work and sacrifice. But the work will be worth it when you’re living in your home and owning it outright.

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