Finance Magazine

How One Couple Used Home Equity to Pay for Travel

By Kathleen O'Malley @frugalportland

The following is a post by a new friend who reached out to talk about traveling the world and being able to afford it via some unusual methods. I asked for a post with details, and he delivered. Now I have the travel bug (thanks, a lot, dude!) and a new fascinating blog to follow.

Some of this post is controversial (I mean, he talks about “good debt” sheesh!) but I love his idea of a shift in focus. He and his wife sound like the kind of people who look at a situation and figure out how to make it work. They moved into their garage, then they took off on an adventure, and they are using their mortgage (and equity) to pay for travel.

Take it away, Bryan!

My wife and I spent years reducing our debt, minimizing expenses and finding ways to live more simply. They all worked (slowly) and gradually were taking us to a slightly better place than we were before. While the change was all for the better, we still felt stuck and the path ahead still daunting. It was only when we found a way to escape our mortgage that things truly took a turn, and we learned to truly live free.

After reducing our debt substantially we quit our jobs and ran away to reinvent ourselves. We enjoyed a year on the road finding ourselves while driving through Mexico and Central America, and became completely different people. But eventually it happened – we missed home and longed for the life and comforts of urban living in Portland. We were faced with the question of whether to get another job or stay homeless and happy as long as possible.

We analyzed our lifestyle and eventually found a third option. We didn’t need the immense space of our 3br home. We converted our garage into a Portland ADU that was more comfortable than the house itself, and we moved in. Within months, we found ourselves living in our perfect home and with someone else paying our mortgage each month. We had tasted freedom!

Below are nine ways you can use your home and mortgage as centerpiece to your frugal life through a “creative home use” plan:

1. Downsize


Take a step back and look at your life and how it fits into the home you’re living in. When we took a deep introspective view of our home and living habits we realized we had two rooms that almost never got used (but still needed furniture/stuff to fill them and still had to be cleaned (at least occasionally). We didn’t commit right way, but eventually, we rented out our house and moved into a smaller home as an experiment and found we were far happier without the expense, overhead and cleaning that came with the larger house. Over the years we moved into smaller and smaller homes until we finally found the perfect square footage “number” for us.

2. Ask Yourself the “Home vs. Lifestyle” Question


I bought our first home thinking that it was the end goal…that I was finally successful. I had made it and things would get easy from there. In truth, it was just the beginning. After the house came buying the stuff to fill all five rooms inside it (plus the attic and garage), the car loan, the equity line, the investment, and the debt that inevitably follows all those things. It’s truly amazing how much we can expand to fill the space available to us. How easy society makes it for us to “need” that stuff to fill our spaces. The debt that my first mortgage (and all that followed) brought felt more like an anchor around my neck than success.

3. Get out of Debt


We all know there is good debt and bad debt. Most of us also know we have too much of both. When we really started paying attention to how much debt we had accumulated (and how little of it we were paying off each month) we saw how stuck we really were. How far from the freedom we actually were. That’s when we engaged in the deep savings plan. With our goal in mind, we downsized and changed our living, eating and spending habits. We paid off credit card debt, car loan debt, student loan debt and equity lines, and each time we paid off one loan the newfound “extra” money would go straight toward the next one. Eventually, we paid down a substantial portion of our debt, sold everything, quit our jobs, and took off to fulfill a dream of long-term travel.

Note from Kathleen: Debt is not forever. At least it doesn’t have to be. My friend Jackie is pulling together some of the best minds this month to remind you that your debt does not define you, and it doesn’t have to be with you forever.

4. Admit Your Primary Home is NOT an Investment

30 Personal Finance Resolutions for 2015

I read this years ago…but it took a while to sink in. Most of us look at our home as our biggest investment. Sadly in a “traditional” home ownership example, it’s the worst (at least for the first 30 years). If you look at your home in regards to passive income that allows you to live freely, it’s impossible to see it as anything other than an expense.

Luckily (especially in Portland) it is now possible to disprove this theory, but not by continuing to spend most of each paycheck on your mortgage payment.

5. Create your own “Creative Home Use Plan

Portland ADU zenbox

Our mortgage was the one bill that always seemed to shift conversations back to not being able to survive without full-time jobs. We finally found the loophole. A way to have our cake and eat it too. To live in the neighborhood we want to be in, but to allow someone else to pay (or help pay) the mortgage while still living there. At first we discussed living with roommates, but that was never ideal in the past and it certainly didn’t sound “free.” Then it finally hit us. We have a two-car garage that sits empty most of the time! We were used to living in a van and our empty garage was almost 480 sq ft; it would make a perfect home for us while we continued renting the main house.

6. Build/Convert to an ADU

transforming table

The city of Portland is one of the few urban areas in North America that allows each lot to have an Accessory Dwelling Unit built in addition to the primary home. This structure can be used in whatever flexible manner best fits the homeowner and can be changed over time. For example, the owner could choose initially to rent out the ADU to help offset the mortgage. Later in life could move into the ADU so that a renter is paying the entire mortgage. And later still find themselves moving back into the primary house so that the ADU is available as a studio/office, or for an aging parent or adult child returning home to live in.

Often converting an existing attic/basement or garage into an affordable separate living space creates an ADU. In our case, the expense of our garage conversion will be paid off in about 2 years as we live rent/mortgage free in one of Portland’s best neighborhoods. For more info, check out this Portland ADU Guide

7. Get Involved in AirBnB and the Sharing Community


The world around us is changing rapidly as it embraces the sharing community. Portland recently became the first city to legalize short-term rentals of our homes or ADUs. This means that the average homeowner can legally rent out their entire home (or any room within it) on a short-term basis. While you may not immediately think that you want to share your home with strangers, it is a fact that many of your neighbors are making terrific money (or at least helping to significantly offset their mortgage payments) using AirBnB.

Many people in Portland are now building ADUs specifically to rent out short term (all the financial benefits without having to share your home with strangers). For us, once our ADU was completed we found ourselves traveling more often because people kept requesting to stay in our ADU. Suddenly we had someone watching our home while we were away and paying us to do so. Suddenly we were getting paid to travel, and our entire world had changed.

8. Get another Mortgage


I know…that seems less than frugal, but sometimes you have to spend money to make money. If you think mortgage prices have gone sky high, just look at the cost of renting! We happen to live in one of the cities where it can be as cheap to own as it is to rent. Sadly, not everyone can afford the down payment or has the credit history to buy a home. That means that they will inevitably pay rent to someone and help pay off a mortgage that isn’t theirs. Why not yours?

9. Travel More


Seriously. Once you have embraced the idea of your home as a short-term rental, you may soon realize that you make more money when you aren’t home (depending on how frugal your travel habits are). In our case, we have discovered that we actually make more money renting our home for a night than we typically spend a night traveling. That…is a mental shift that takes some getting used to, but depending on your desire for travel can be a complete game-changer.

We are sharing these ideas because we are amazed at how much flexibility and freedom our own creative home use plan has afforded us. We are not experts and certainly don’t have all the answers, but we are passionate about the conversation and happy to talk with anyone looking for ways to find or create a path to their own freedom.

Bryan and Jen (aka the Dangerz)

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