Mortgage-Burning Parties

November 2010 was special for Sharon and Tom Kellig of Lancaster. It was "mortgage-free month" — the month they celebrated paying off their 30-year mortgage by hosting a party for friends and family. The party was held at the most practical location they could think of — their house, of course.

"It was paid for, so why not use it?" Sharon said. "It wouldn't have made sense to rent a place for the party. We wanted to enjoy our accomplishment with our friends and families in our home."

While a person may have secured a 15- or 30-year mortgage, there are a multitude of reasons that may keep him or her from paying it off in that amount of time, according to Fairway mortgage consultant Megan Brunner.

Dan Ranck, a mortgage banker with Guaranteed Home Mortgage Co., has seen his number of mortgages get secured, but he has yet to see one get paid off.

"I know there is a small percentage of people who actually pay off their mortgage," Ranck said. "I have worked in the mortgage business for eight years and have yet to see someone do it."

"Of course, the economy has made it difficult to pay down mortgages as many people have less money in their pockets," Brunner said. "On the other side, the economy is the reason the interest rates have gone so low and have remained there for such an extended period of time."

The Kelligs, who have been married for 33 years, paid off their $102,000 mortgage in 27 years by paying a little extra each month.

"We knew it would save us money in the long run," Sharon said. "When you think about what you spend money on, it's actually very easy to put a little extra in the payment every month."

Brunner said that by paying even just a little toward the principal each payment, you can shave time off of the original mortgage's life.

Brunner gave the following as an example:

"If you have a mortgage of $170,000 at 4 percent for 30 years, your principal and interest payment is $811.61 per month. If you divide your payment by 12 (for 12 months) and round up to the nearest dollar, you have $68," Brunner said. "If you pay an extra $68 each month when you make your mortgage payment, your mortgage will payoff in 26 years and you will save $19,000 in payments. With mortgage rates so low, the benefit of paying extra is diminished as the cost of interest is already so low."