No, that’s not a typo – I do mean three years. And that’s precisely what Sean Cooper did: He bought a house in the Greater Toronto Area at the age of 27, and by the time he was 30, it was paid in full and he was lighting a match to the mortgage documents.
In addition to sharing his experience in his new book, Burn Your Mortgage, The Simple, Powerful Path to Financial Freedom for Canadians, Sean tackles all of the steps involved in purchasing a house: from saving for the down payment, finding a place, putting in an offer, getting financing, to closing the deal. Throughout, he gives a pile of creative tips on how to pay off your mortgage quickly.
As a seasoned real estate investor, I was curious about how he pulled it off. Think about the possibilities. Wouldn’t you like to shave years, if not decades, off your mortgage? Just imagine how much money you’d save if you could do that too. We’re talking tens of thousands of dollars, if not more, depending on the price of the house. That’s a lot of cash!
I dug into Sean’s manuscript with a view to answering four questions for my readers:
How did he do it?
Sean gives the details in his book, but it boils down to this: When you earn great money, look for every opportunity to make or save cash, and you develop a laser-beam focus on accomplishing a financial goal, you’ll get it done. But how do the numbers work?
I initially assumed that Sean must have used a very aggressive amortization (i.e. amount of time in which you pay off the mortgage in full) and term (i.e. length of time for which a given interest rate is applied). In fact, he was ultra-conservative, choosing a 5 year term (at 3.09% fixed, closed) and a 30-year amortization. When you consider that he borrowed $255,000 initially (for a house for which he paid $425,000), it’s hard to see how he could pay this off even with accelerated weekly payments, doubling up his monthly payments, and annual lump-sum payments that amount to 15% of the original mortgage amount, without incurring a penalty.
Banks are not in the business of making it easy for you to pay off your mortgage. That’s why they set maximum prepayment privileges. So how did Sean pull it off in three years? We don’t know all the specifics (i.e. how much he paid off per year using which prepayment privileges – amounts paid in prepayments, amounts paid in increased mortgage payments, etc), as those aren’t provided in the book. I reached out to Sean for more details and, to his credit, he sent me a spreadsheet with some of the mortgage payment details, but the information doesn’t start from day one, so the math behind it is still a partial mystery. However, he did manage it and therefore deserves all the kudos he’s received. It’s a huge accomplishment, to be sure, and it sets him up to accumulate significant wealth if he uses the same focus, and the freed-up money, to now grow his investments.
BUT, is this doable by the average person?
No. Sean pulled this off because he has an above-average income from his day job, he has no dependants (or at least none that are mentioned in the book), he was able to live with his parents to save up a massive down payment (i.e. $170,000), he worked an insane number of hours to make additional money beyond his day job, and he was willing to rent out the lion’s share of the house he just bought. I can’t think of a single person, both in my personal or professional sphere, who could pull this off in the same way.
Does that mean that we can’t learn anything from what he’s done? Not at all. His book is packed with clever tips to help you shave many years off your mortgage. How would you like to pay off your mortgage in ten years instead of 25? That is absolutely doable. Imagine what an extra mortgage payment would feel like in your pocket every month instead of the bank’s? That’s worth exploring. And I can tell you from personal experience that paying off your mortgage feels terrific.
What tips does he provide?
Most of us know that we would save a pile of cash, in the end, if we doubled up our mortgage payments, but where do you get the money to do that? This is where Sean’s book shines. He provides dozens of suggestions for ways to create more savings, which can go straight to the principal of your mortgage.
Even though I’ve read many personal finance books, I nonetheless walked away with a couple of gems, one of which is a credit card with no foreign exchange fees. My family travels a lot. This year alone, we have three international trips planned. When you consider that a typical credit card tacks on 2.5%-3% of foreign exchange fees on every international purchase, that can translate to a lot of dollars. Sean suggested saving money by using a foreign fee-free card. That tip alone would save you the cost of his book many times over, assuming you travel outside your country.
Another suggestion has to do with where to get free credit reports – e.g. Mogo or Borrowell. Everyone needs this tip to stay on top of their credit reports without paying $25 a pop to do so. Take the $25 you just saved and tack it onto your mortgage payment. Or round up your mortgage payment – instead of paying $1,614, for example, pay $1,650 every month. It’s a small monthly amount that will have a big impact over time.
There are countless examples just like these on how to free up hundreds of extra dollars each and every month and pay off your mortgage more quickly.
What’s the main value of Burn Your Mortgage?
Perhaps its biggest strength is the A-Z approach on how to buy a house. This book is clearly written by a millennial and is intended for an audience of his peers. I would buy this book in a heartbeat for anyone who is new to home-buying. Sean gives a good overview of the various costs, challenges, steps and requirements involved in buying a home, as well as how to protect it once you are the owner. He clarifies important concepts, like the significant difference between being pre-qualified by a lender, and being pre-approved. Again, this will doubtless prove to be an invaluable book for beginners.
For those who have a home but are saddled with a mortgage, this book provides many ideas on how to get rid of it more quickly than you might think possible.
There are a few spots where I disagree with the information presented:
- In the section on improving your credit score, Sean suggests that it is preferable to have a variety of trade lines in order to build a strong credit score; that a Line of Credit and a credit card are better, say, than two credit cards. That has not been my experience. In ten years of helping families improve their credit files, I have seen multiple examples of people building strong scores, and getting good mortgages, with only two credit cards on file. Stick to the rough rule of two’s – 2 trade lines, held for a minimum of 2 years, with credit limits of $2,000 – and you should be fine.
- In the section on mortgages, Sean says that one of the benefits of using a banker versus a broker is that they provide extra, and more personal, service. I have worked with both bankers and brokers on dozens of deals, and I can tell you that many of the brokers I deal with offer at least as many services as the bankers, and often more. It has also been my experience that brokers offer far more personalized service. My husband and I have been dealing with one of the big 5 banks in Canada for our business for the last nine years. In that time, the person in charge of our account has changed more times than we can remember; it’s been a revolving door of faces and names. By contrast, we’re still dealing with the same brokers with whom we started nearly a decade ago. I never have to re-introduce myself to my broker and remind them of what I have, what I do, and what I need.
- Also in mortgages, Sean states that the advantage of a broker is that they provide unbiased advice as they are paid the same by all lenders. While the basic approach to paying brokers is the same across lenders, brokers have volume bonuses with certain lenders to whom they send a lot of business. There are incentives in this industry just like any other. Honest brokers will focus on what’s best for the client, but not all brokers are equal, and some consider their remuneration before their client’s needs. If they have a juicy incentive from one lender, they may point their client to that lender. The way around this is to talk to a couple of brokers to see what’s on offer and to ensure that you’re getting the best offering.
These are small points in an otherwise good book. If you’re interested in learning how you can chop significant time, and interest costs, off your mortgage, pick up Sean’s book. It’s on sale for 50% off, through Amazon, until March 12th. Just remember to take the $9.90 that you saved and put it towards your mortgage. And by all means, plan a mortgage-burning party when you’re done (love that idea)!