July 24, 2024
Mortgage

Frugal Living YouTuber Kate Kaden: 7 Mistakes To Avoid When Paying Off Your Home Early


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Popular YouTube personality Kate Kaden is known for her candid and helpful videos on all things frugal living. In a recent upload, she outlined common mistakes to sidestep when trying to pay off your mortgage ahead of schedule. Kaden draws directly from financial experts like Dave Ramsey as well as her own experiences as a single mom and homeowner in mapping out pitfalls that can undermine early repayment success.

Here are 7 mistakes to avoid when paying off your home early.

Not Paying Off Other Debts First

As an avid follower of money guru Dave Ramsey’s “baby steps” approach, Kaden strongly advises fully paying off any outstanding credit card, student loan and vehicle debts before focusing efforts on attacking your mortgage principal. She notes that Ramsey’s debt paydown method makes perfect logical sense to her as the right roadmap to follow. In Kaden’s view, other unsecured consumer debts with higher interest rates should take priority over paying extra toward your likely lower-interest mortgage. This debt snowball approach keeps you motivated by giving you small, early wins that build momentum for tackling larger debts.

Not Having an Emergency Fund

Kaden shared that she wouldn’t prioritize basically anything — including paying off her mortgage  — over first having a strong emergency cash cushion. “[Experts] recommend three to six months’ expenses tucked away to make sure that you are covered in case stuff happens,” she said. 

This backstop will give you peace of mind and help you avoid further debt by covering surprise costs. Kaden emphasized just how valuable maintaining this financial safety net is both psychologically and practically. She has devoted several other videos to emergency fund strategies, reflecting how important this is.

Not Specifying Extra Payments Go to Principal 

When you make additional mortgage payments that go beyond your minimum monthly amount due, be sure to clearly earmark on bank paperwork or online that the extra funds should specifically be applied to reducing the loan principal. If unspecified, banks may put added funds toward the interest rather than shortening the lifetime of the loan by lowering the overall amount owed. 

Always designate extra to principal to accelerate your debt paydown. If you’re confused about how to do so, call your mortgage provider and have them walk you through it so you’re guaranteed to get it done correctly. 

Not Checking for Early Repayment Penalties

Kaden warned viewers about a common trap — prepayment penalties. These fees can undo all your efforts to pay off your mortgage ahead of schedule. If your loan terms include fees for paying more than the minimum due, this can obviously undermine the whole goal of early repayment. Always double check your mortgage contract verbiage to ensure no such penalties exist. While Kaden’s own situation had no such clause, she cautioned viewers to beware hidden prepayment fees.

Not Investing In Retirement Alongside Mortgage Goals 

While you’re planning to put any windfalls toward paying off your mortgage, it’s crucial not to lose sight of investing for the future, too. Kaden shared that her greatest regret was not focusing earlier on retirement savings vehicles like 401(k)s and Roth IRAs that harness the immense power of compound growth over decades. Kaden warned against focusing too much on being debt-free if it will rob you of the ability to retire securely. Balance your priorities by continuing to make retirement contributions.  

Not Considering Other Major Life Expenses 

Kaden reminded viewers that while they’re making plans to pay down their mortgage, keep an eye on the horizon for any high-ticket costs that may arise, such as needing a replacement vehicle, supporting kids through college or major home repairs. If you consistently have big irregular spikes in spending, it may affect your capacity to keep making your mortgage payments larger than the minimum. Keeping your complete financial picture in mind will help you avoid frustration, said Kaden.

Not Going For It When the Opportunity Presents   

However, if you do get in a position to pay off your mortgage quickly, by all means go for it, said Kaden. All her research indicates that no one ever regrets the relief and sense of accomplishment of being debt-free sooner rather than later. When you have no more monthly mortgage liability, your new cash flow will give you unlimited potential to pursue other financial objectives or lifestyle upgrades.  

At the end of the video, Kaden reminded viewers that she’s still on her own journey working towards early repayment while juggling the realities of being a single mom. It’s not an easy goal, but a worthy one — especially if you don’t make the above mistakes. 

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