One of the earliest goals I set when I started dividend investing was simple: could my passive dividend income someday cover my mortgage? Fast forward 13 to 14 years of consistent investing and dividend compounding, and that milestone is now reality. My dividend income from my taxable account not only pays the monthly principal and interest on the mortgage, it gives me extra cash each month that I can apply directly to principal to speed up payoff.
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The numbers behind the milestone
Here are the real, concrete numbers I track every month.
Mortgage Background
- Original mortgage: about $214,000
- Remaining balance today: about $185,000
- Interest rate: 3.4%
- Monthly principal and interest payment: $992.92
Dividend Income Totals
- Annual taxable dividend income: $13,445
- Monthly dividend income (13,445 ÷ 12): $1,120.42
Dividend Income Surplus
- Monthly surplus after mortgage P&I: $1,120.42 − $992.92 = $127.50
That $127.50 surplus is key. It means every month my dividend stream covers the mortgage P&I and leaves a little extra I can immediately apply to principal or other expenses.
Small extra amounts add up … FAST
What does $127.50 actually do? If I apply that extra to principal each month, that is an additional approximately $1,530 per year going directly toward paying down the mortgage. Over multiple years, that accelerates payoff and reduces interest paid. Thus, this creates a dividend snowball effect in and of itself. The more you payoff early in your mortgage, the faster you pay off the debt.
Even beyond the direct extra principal payments, the critical leverage is dividend growth. The mortgage payment is fixed, but dividend income tends to increase over time through higher payouts and additional investing.
Projecting dividend growth: a conservative 6% example
To illustrate how dividend growth accelerates mortgage freedom, let us assume a conservative portfolio dividend growth rate of 6% per year. For the sake of the example, lets assume that I do not add new capital to the portfolio . Starting from the current monthly dividend of $1,120.42, the projection monthly dividend income totals look like this:
- After 1 year (6%): monthly ≈ $1,187.65
- After 2 years: monthly ≈ $1,258.91
- After 5 years: monthly ≈ $1,499.67
- After 10 years: monthly ≈ $2,005.47 (annual ≈ $24,066)
That means that in about 10 years, on this conservative path, the dividend stream could produce roughly $24,000 annually from the taxable account. This is MORE than enough to cover the mortgage P&I, property taxes, or to accelerate payoff substantially.
Why this compounds so quickly
- Dividend payouts tend to grow over time through company increases and portfolio yield upgrades.
- Compounding means that existing dividends generate more dividend growth later, even without new contributions.
- Continuing to buy dividend-paying assets speeds the process even more. I am not stopping purchases, so real results are likely to be better than these conservative estimates.
- The milestone matters – personally & financially
When I got my first $1 and $2 dividend checks, I thought, “How cool would it be if one day dividends could cover my mortgage payment?” Getting to this point is validation that consistent investing, patience, and reinvestment work.
“I did what I wanted to when I started this journey… as of today the mortgage is covered.”
That feeling is powerful. It turns a distant dream into a concrete, monthly reality. Crossing off a major goal and milestone validates the journey and motivates me to continue pushing for the next goal & milestone.
Final takeaway
Dividend income can become a reliable cash flow that pays fixed, major expenses like a mortgage. Starting small, staying consistent, and letting dividend growth do the heavy lifting can convert a monthly liability into a covered, and eventually eliminated, expense. You do not need a perfect system or perfect timing. You need persistence, patience, and a plan.
If you want freedom from that monthly mortgage obligation, set a dividend income target, track the numbers, and take the first step. The compounding will do the rest.
Most importantly – stay focused and committed to the plan. Dividend Investing is a long term journey. Stay patient and stay the course. You will enjoy the fruits of your labor for years to come. Your future self will thank you.
Thank you all for your motivation on this journey and pushing me to be the best version of myself. Now, let’s focus on reaching the next goal and reaching financial freedom.
Are you trying to payoff your mortgage early? Or is you interest rate so low that you are making the minimum monthly payments?
Bert
The post Dividends Pay Our Mortgage 💰 Passive Income Is Making Us Debt-Free appeared first on Dividend Diplomats.