I will be updating this page with my progress regularly so check back often to look for updates.
Most people don’t realize this, but when you get a $300,000 mortgage for a new house, you are actually paying more like $500,000 when you include loan interest. When we signed for our mortgage, we learned that we would be paying over $250,000 in interest over the life of our 30 year loan. That is almost double of our loan amount!
My wife and I decided to refinance to the lowest rate possible and use Velocity Banking to pay off our $282,000 mortgage in 7 years, saving over $200,000 in interest over the life of our loan. Our loan started January 1st, 2019. To prepare for Velocity Banking, we spent our first year making extra principle payments to gain equity in our home. With some equity built, we were able get a good Home Equity Line of Credit, or HELOC for short. Check out our Getting Started page or the 10 Steps to Prep for Velocity Banking.
The HELOC allowed us to borrow a large some of money to put towards the principle of our mortgage without touching our emergency savings.
WE SHAVED OFF JUST OVER 11 YEARS AND $54,000 IN INTEREST IN 2020, OUR FIRST YEAR OF VELOCITY BANKING!
Check out our Net Worth Growth Strategy
Below you will find our annual mortgage pay off update using Velocity Banking.
| Year | Ending Balance | Interest Paid | Interest Saved over Life of Loan |
|---|---|---|---|
| 2019 | $278,079 @3.875% | $12,474 Loan | $5,501 in extra monthly principle payments of $155 $67,000 in 3.875% Refi |
| 2020 | $225,568 @3.875% | $8,951 Loan $73.88 HELOC | $54,328 in Velocity Banking |
| 2021 | $175,763 @2.5% | $5,574 Loan $198.47 HELOC | $20,921 in 2.5% Refi $40,429 in Velocity Banking |
| 2022 | $159,997 @2.5% | $4,133 Loan $159.10 HELOC | $6,050 in Velocity Banking |
| 2023 | $153,793 @2.5% | $3,602 Loan $0 HELOC | $725 saved through one additional principle payment of $1,203 |
2019
My wife and I learned about the Velocity Banking Strategy. We knew that we wanted to save up to 6 months of our expenses for an emergency and we knew we needed equity in our home to apply for a HELOC and start Velocity Banking. Shortly after purchasing our house, we refinanced from 4.875% to 3.875%, saving us $67,000 in interest over the life of the loan. We also made extra principle payments at $155 per month to build up some equity.
2020
We applied for a HELOC at 2.99% fixed for 3 months, then variable after. We started Velocity Banking in chunks of $15,000. This allowed us to bring our mortgage balance down by over $52,000 in 2020 alone. The HELOC cost us less than $150 in interest in 2020, but saved us over $54,000 in mortgage interest over the life of the loan.
2021
We refinanced one last time from 3.875% to 2.5%, saving us at least $20,920.73 in interest over the life of the loan. I don’t recommend refinancing when you are already 5+ years into your loan, however it makes more sense early in your loan term. In 2021, we delayed velocity banking until May 1st to make sure we had enough money to pay for taxes and refi closing costs. We decided to chunk a higher than usual $25,000 to make up for the long wait in refinancing, then we scheduled a $20,000 chunk for September 1st to close out 2021.
2022
Due to several factors, we had to take a pause on Velocity Banking in 2022. In total, we paid an additional $9203 in principle to get our mortgage down to $159,997. Unfortunately, inflation and medical bills hit us hard and we ended up depleting our emergency savings. We are currently focused on building up our emergency savings account back to a 6-month level. Originally, we had planned to be down to a $140,000 mortgage balance by the end of 2022. We missed our target by $20,000.
PRO TIP: YOUR MORTGAGE IS DUE ON THE 1ST OF THE MONTH. MAKE YOUR “ADDITIONAL PRINCIPLE” PAYMENT SEPARATELY BEFORE THE MORTGAGE DUE DATE. THIS WILL LOWER YOUR ENDING BALANCE THUS REDUCING YOUR INTEREST PAYMENT ON THE 1ST.
2023
Our financial challenges continued from 2022. While we would love to pay off our home as soon as possible, we decided to build up our emergency savings and max out our Roth IRA’s and HSA’s. In addition to inflation, we had a few major financial challenges in 2023. First, we had to plan around saving money on our daughter’s summer camp. This was about $2,000. Second, we had a family trip to Portugal. Third, we welcomed our second daughter into our lives and my wife started her 3-month unpaid maternity leave. All of this slowed down our mortgage pay-off progress. We ended the year with a remaining balance of $153,794 and 3 months of emergency savings.
2024
While our monthly costs have increased by 50% in 2023, I am optimistic that we can restart Velocity Banking in the second half of this year to get our mortgage balance down to $145,000. We are also considering recasting our mortgage to lower our minimum monthly payment.
Track your Velocity Banking Loan Amortization Spreadsheet with my template.
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