My husband and I have a dream to own our first home completely debt free! Our dream was born a couple of years ago, and has continued to take shape over time as we’ve crafted our debt-free home plan. It’s a plan that we’re working hard to turn into a reality.
I know that the concept of owning a home completely debt-free sounds odd to some people, and understandably so. It’s a huge goal!
Sometimes, it feels insurmountable and a bit crazy. But even though it’s requiring a lot of sacrifice, we keep working hard toward it because we know that it has the power to change the entire course of our family’s future!
To clarify, when I talk about owning a completely debt-free home, I’m referring to home ownership with no banks or lenders as part of our lives every month. We want to be mortgage free!
I want to use Penny for Your Dreams to tell the story of our journey to a debt-free home. And not only do I want to share the high points with you, but the struggles and difficulties as well.
Life is full of ups and downs, and I think it’s important to highlight both. You definitely won’t find perfection here!
My hope is that the lessons we learn along the way will encourage you as you walk your own path.
JOURNEY TO A DEBT-FREE HOME
Benj and I have gotten a lot of questions since we started talking about debt-free home ownership, so I thought it would be a great time to write a series about our journey to owning our home completely debt-free!
If you have any questions for me, just leave them in the comments section below. I’d be very happy to answer them!
I’m planning to start with a 5-part series. I will add more installments as I receive more questions and as we have life updates to share with y’all.
- The Plan (You are here!)
- The Why
- Making Debt-Free Home Ownership Happen
- Important Budget Categories
- Why We Plan to Build Instead of Buy
A LITTLE BACKGROUND
Benj and I started planning our life together before were even engaged. Our relationship thrived on long walks, and we talked about pretty much everything, including our finances and home ownership.
It was on one of these long walks that our dream began to come to life. We started asking, “What would it be like to have no mortgage payment or rent to pay every month?”
Neither of us had ever given it any thought before, but the more we talked about it, the more excited we became.
Once we were married, we began formulating a written plan for our financial future. Part of this plan included steps for owning our first home completely debt-free!
THE GOAL
Our goal is to own our first home completely debt-free by Benj’s 30th birthday, on October 27th, 2019.
THE PLAN
A man’s heart plans his way,
But the Lord directs his steps.–Proverbs 16:9
Having a big dream is great, but you also need action steps to go with it! Plans help us to accomplish our goals and see them to fruition. Writing them down on paper is especially important.
Benj and I spent a lot of time working through different scenarios, variables, and “what-ifs”. We created a lot of spreadsheets and entered a lot of data. We’re geeky like that, guys. This is the sort of thing we do for fun!
*insert nerd face emoji here*
Planning 4 years out is planning a fairly long time in advance, so we wanted to allow for setbacks and detours along the way. We also wanted to make sure our plan was achievable, not fanciful.
These 3 steps make up the plan we’re following that will enable us to own our home completely debt-free, Lord willing.
STEP 1: SAVE A LARGE DOWN PAYMENT
This is the step we are currently on.
As of right now, we’re planning to purchase a home in the $160,000 – $170,000 price range, so the number we’ve used in our plan and calculations is $170,000. It’s a seller’s market right now, so we can’t bank on getting the deal of the century!
Our goal is to have between 65% – 70% saved as a down payment by the time we’re ready to buy.
When we budget every month, we put a predetermined amount of money into our house fund. This is a hefty percentage of our take-home pay, so we often have to sacrifice in other areas.
Budget categories such as clothing, dining, entertainment, fun money, and vacation often take the hit. Sometimes, we’ll also tighten our grocery budget for the month, which can be challenging. Getting creative is key!
STEP 2: BUY A HOME
Benj and I are so excited for this step!
We’ve been renting an apartment since we got married 2 years ago. Apartment life is definitely not for us long-term. We figured that out pretty quickly! We’re excited to find a home where we’ll be able to put down roots and that we’ll be able to make our own.
That said, we are certainly thankful for our current 2-bedroom space. Living here has enabled us to save money more quickly.
Once we’re in a position to buy a home, we’ll take all of the money we saved in Step 1 and put it toward the purchase price.
We aren’t afraid of buying a home that needs some love. In fact, as long as it’s not too much of a fixer upper, we’d be happy to purchase a house that needs some renovating. Doing so would allow us customize it more to our personal taste, and sweat equity would help to increase the value.
Another option we’re considering is purchasing a lot or small piece of land and building a modest custom home. My dad actually used to be a custom home builder, so he would be able to be our contractor if this scenario worked out!
However, we’re not sure if this would be doable in our price-range. Several things would have to come together for us to be able to build.
STEP 3: PAY OFF THE MORTGAGE FAST
Our final step will be to take out a 15-year fixed mortgage and pay it off as quickly as we can. Ideally, this will be before Benj’s 30th birthday on October 27th, 2019.
Each month, we will put as much money as possible toward paying off our mortgage. This includes:
- the amount we were previously saving toward our down payment while renting
- the difference between our previous rent payment and our current mortgage payment (e.g. If our rent costs $1150, and our mortgage payment ends up being $500, we would take the $650 difference and put it toward paying off the house.)
- paying the mortgage itself
We originally considered forgoing a mortgage and saving 100% cash for our home. However, having to pay out that much money in rent as we continued saving for our home would lengthen the timeline. We would also end up putting out more money overall.
Instead, we’ll be able to put the money from our rent payment and our house savings toward the mortgage. Doing it this way will speed up the whole process quite a bit.
MOVING FORWARD with out Debt-Free Home Plan
That’s it! Our debt-free home plan consists of just those 3 simple steps. They aren’t complicated, but they do require a lot of creativity, sacrifice, and hard work.
Benj and I are getting close to finishing Step 1. We will likely start looking to purchase a home sometime in the next year, which is very exciting!
Don’t forget to leave me your questions in the comments section below so I can answer them in subsequent posts.
Read Part 2: The Why
