Has anyone paid off their mortgage quickly?

bmwguy

Tigger wrote: »

Even after dirt ? What percentage are you getting ?

It's varied over the last few years but it has been up well over 10% a few times. Last year I know was 5.6% I just got a statement recently and that was the lowest.

I don't know what purpose I will use it for in the end but it's definitely far outperforming overpaying my mortgage at the moment. Certain element of risk involved though.

bmwguy

wordofwarning wrote: »

Except CGT is 33%. If your mortgage is 4%, you need to be returning 5.32% per year to make it on par with overpaying your mortgage. There is the risk the market tanks like in 2008 and there is several years of your investment being significantly less if you choose to pay off your mortgage.

Look at this way, paying off your mortgage is 5.32% risk free return.

My mortgage is 3% I don't know what OP is paying.
Yeah I considered that mortgage overpayment is risk free return but the fund is returning well in excess of that. I'm not sure what the eventual.use for it will be but some of it will be to clear the mortgage at some stage well in advance of its normal term

the-island-man

Not directly associated with paying down a mortgage early but one small piece of advice would be not to have the mandatory mortgage protection cover/life assurance policy with the Mortgage provider. It reduces the hassle of changing to another mortgage provider with a lower interest rate if that scenario were to make financial sense.

pwurple

Yup, we have paid down two mortgages, currently working on our third. As the others said, Overpay, and also, don't be afraid to move banks and get the house revalued for better interest rates.

As the boom progressed the last time, we changed mortgage providor to get a tracker (these don't exist anymore but you can move for better rates) and also submitted evidence to change the Loan to value ratio..

In a rising market like currrently, watch for your LTV changing interest rate bracket based on the values of nearby homes. You can bring the rate right down, which means you pay off more capital.

LimeFruitGum

Deleted User wrote: »

Ok all excellent advice. For anyone who did pay it off early they either overpaid/had a short term. Any other advice? Were you very frugal paying it intensively for the first while or is it possible to do with an ok standard of living? I hate feeling weighed down by debt so want to make good choices.

I changed jobs last summer, so I can comfortably put a good chunk of money away for overpayments now. When I was in my previous job and bought my flat, I was saving 300/month because I moved closer to my job and my mortgage was cheaper than the rent I paid on my previous place. So it worked out well for me on a bog-standard office salary.

Caliden

Might be a silly question but when you overpay, is this overpayment deducted from the principal ?

Mickiemcfist

Caliden wrote: »

Might be a silly question but when you overpay, is this overpayment deducted from the principal ?

Interest is calculated on the interest also, so it doesn't matter where it's deducted from.

scargill

This is a very useful mortgage calculator:
https://www.drcalculator.com/mortgage/

PhoenixParker

Caliden wrote: »

Might be a silly question but when you overpay, is this overpayment deducted from the principal ?

It can be done in three ways and which way it happens will depend on the specific terms and conditions of your mortgage and/or your instructions to the bank.

It can be paid off the principal. In this case the term of the loan will remain the same but the direct debit amount for all future payments will be reduced.

It can be paid off the term. In this case you're effectively making the last few payments on the mortgage. Your direct debit will remain the same but you have fewer payments to make.

It can be treated as an advance payment. In this case your direct debit payments are suspended until the value of the overpayment is used up.

crkball6

Deleted User wrote: »

Sorted I'll have it paid off in no time if I cut back on those!!

While I appreciate the reference and the joke.

A take out coffee a day over the life time of your mortgage adds up to 38,000e

That's just 1 coffee, there's no point looking at easy ways to do what you want to do.

In order to put a big dent into it you need to do a _lot_ of small things.

Reduce spending / increase income.

You need to make a huge amount of sacrifice over a very long sustained period of time which is very hard, which is why most people don't do it.

Scoffing at not wasting money on take away coffee's is one of the reason's most people will fail to do what you want to do.

If giving up a coffee would be hard, imagine cancelling the family holiday, or not buying the car, cycling to work. One family I saw recently in the guardian who weigh food etc to avoid waste in order to pay the mortgage off quicker.

It's hard, really hard. If you're looking for a quick fix. You might be easier looking into knocking off a rich relative.

pwurple

Removing direct debits is a big one, subscriptions for sky, gym membership you never use etc... and actually, paying down your mortgage may not be the best financial thing to do if you have high debt elsewhere.

It almost goes without saying, but always make sure you pay off the highest interest loan first. So if you have a credit card debt (I sincerely hope no-one has!), then that's probably the most expensive. Prioritise getting rid of that. Then any term loans, like car loads, credit union loans, old student loans etc.

THEN, when everything else is clean, start working on the mortgage.

As well as ditching the little luxuries if you want, there's savings to be had with keeping an eye on utilities and providers.

Tracking your money can be a useful tool, seeing where your outgoings are, and thinking about what you might want to adjust.

If you're looking for ideas on that, swapping to an electric car was easily our most significant saving notion in the last few years... Hundreds per month saved there with the cheap tax, uber-low maintenance cost (no engine = no spark plugs, no oil changes yippee) and not having to pay for fuel anymore.

lolli

I have mine from the credit union and I pay a bit extra every week into it, when I have more I can increase the direct debit and reduce it back down when things are tighter.

I find it handy having it through the credit union because I can do that as I want to but I guess its not as easy through the bank.

Raoul

pwurple wrote: »

Removing direct debits is a big one, subscriptions for sky, gym membership you never use etc... and actually, paying down your mortgage may not be the best financial thing to do if you have high debt elsewhere.

It almost goes without saying, but always make sure you pay off the highest interest loan first. So if you have a credit card debt (I sincerely hope no-one has!), then that's probably the most expensive. Prioritise getting rid of that. Then any term loans, like car loads, credit union loans, old student loans etc.

THEN, when everything else is clean, start working on the mortgage.

As well as ditching the little luxuries if you want, there's savings to be had with keeping an eye on utilities and providers.

Tracking your money can be a useful tool, seeing where your outgoings are, and thinking about what you might want to adjust.

If you're looking for ideas on that, swapping to an electric car was easily our most significant saving notion in the last few years... Hundreds per month saved there with the cheap tax, uber-low maintenance cost (no engine = no spark plugs, no oil changes yippee) and not having to pay for fuel anymore.

What electric car did you get?

brendan86

lolli wrote: »

I have mine from the credit union and I pay a bit extra every week into it, when I have more I can increase the direct debit and reduce it back down when things are tighter.

I find it handy having it through the credit union because I can do that as I want to but I guess its not as easy through the bank.

You can do all that with a bank, Doesn't make any sense to have your mortgage with credit union unless you were refused by a bank.

Your basically throwing extra to your loan and losing out in interest. What % credit union offer out of curiosity and if you want to disclose the sum and term.

lolli

Hmm I don't know the interest rate off hand to be honest (something is telling me its 6.9%)

Im paying it back over 10 years so its not too bad

brendan86 wrote: »

You can do all that with a bank, Doesn't make any sense to have your mortgage with credit union unless you were refused by a bank.

Your basically throwing extra to your loan and losing out in interest. What % credit union offer out of curiosity and if you want to disclose the sum and term.

CelticRambler

Way back in the last century, I did a financial management/investment course which started with words to the effect of "most people with ordinary jobs will earn well over a million pounds in their lifetime" and went on to discuss strategies for keeping hold of that million.

For the most part, it was doing exactly this:

pwurple wrote: »

Removing direct debits is a big one, subscriptions for sky, gym membership you never use etc...

... make sure you pay off the highest interest loan first. So if you have a credit card debt (I sincerely hope no-one has!), then that's probably the most expensive. Prioritise getting rid of that. Then any term loans, like car loads, credit union loans, old student loans etc.

THEN, when everything else is clean, start working on the mortgage.

As well as ditching the little luxuries if you want, there's savings to be had with keeping an eye on utilities and providers.

As far as possible, I've stuck to those principles over the last twenty years, and although I don't (yet! ) have a million pounds or euros stuffed in a mattress, about a decade of living with expenses pared to the minimum means I now have more disposable income than my "rich" siblings with their 6-figure mortgages, and a heck of a lot more holiday in which to enjoy it.

dubrov

I'm going to play devils advocate here.

Mortgages are pretty cheap borrowing. People always quote huge amounts of interest being saved when paying off a mortgage but due to inflation that interest saved will buy you a lot less in 35 years.

Be prudent but i wouldn't be killing yourself saving in your 30s/40s and then find you have loads of money in the bank at 65 but nothing to spend it on

OU812

My best advice (what I wish had been told to me several years ago) is to average out your mortgage payment to weeks instead of months & pay weekly. On a five week month you'll pay a little extra toward the mortgage & this builds up quite fast. We also increased our payments a little.

E.G.

Mortgage is €10,000 a year = €833.33 a month
broken down weekly = €192.30 a week

Increase this to €250 a week - nice steady affordable amount. Allows for fluctuations if you're on flexible so that you're prepared for an increase if it comes, if a decrease comes (unlikely) keep paying the same amount to take advantage of it.

€250 per week = €13,000. You're now overpaying your mortgage by almost a third every year. For every three years, you're paying off four for the guts of €50 extra a week.

The overpayments are normally put against the principle borrowed & the interest is reduced. It also gives you a little buffer should something unexpected happen and you can't make a month's payment.

You're normally allowed make two overpayments a year, so you can put this off the principle taking down the interest paid, keeping the term the same length which will in turn lower your mortgage payment & increase the amount you're overpaying by.

You could then wait until the amount owed = the amount you've overpaid by & cancel out the mortgage.

AndrewJRenko

lolli wrote: »

I have mine from the credit union and I pay a bit extra every week into it, when I have more I can increase the direct debit and reduce it back down when things are tighter.

I find it handy having it through the credit union because I can do that as I want to but I guess its not as easy through the bank.

brendan86 wrote: »

You can do all that with a bank, Doesn't make any sense to have your mortgage with credit union unless you were refused by a bank.

Your basically throwing extra to your loan and losing out in interest. What % credit union offer out of curiosity and if you want to disclose the sum and term.

Credit unions don't do mortgages - loans secured on the property. You might have a loan from your CU, but it is not a mortgage, unless your CU is very, very unusual (and possibly illegal).

mydarkstar

AndrewJRenko wrote: »

Credit unions don't do mortgages - loans secured on the property. You might have a loan from your CU, but it is not a mortgage, unless your CU is very, very unusual (and possibly illegal).

My credit union started doing switcher mortgages last year at 2.9%. It is secured on the property, it isn't simply a CU loan. It's not common but it's not illegal! I don't qualify for it yet but it's a decent deal if you meet their criteria regarding term, LTV and mortgage balance.

bmwguy

pwurple wrote: »

Removing direct debits is a big one, subscriptions for sky, gym membership you never use etc... and actually, paying down your mortgage may not be the best financial thing to do if you have high debt elsewhere.

It almost goes without saying, but always make sure you pay off the highest interest loan first. So if you have a credit card debt (I sincerely hope no-one has!), then that's probably the most expensive. Prioritise getting rid of that. Then any term loans, like car loads, credit union loans, old student loans etc.

THEN, when everything else is clean, start working on the mortgage.

As well as ditching the little luxuries if you want, there's savings to be had with keeping an eye on utilities and providers.

Tracking your money can be a useful tool, seeing where your outgoings are, and thinking about what you might want to adjust.

If you're looking for ideas on that, swapping to an electric car was easily our most significant saving notion in the last few years... Hundreds per month saved there with the cheap tax, uber-low maintenance cost (no engine = no spark plugs, no oil changes yippee) and not having to pay for fuel anymore.

I hope you didnt change from an old car to an electric car JUST to save money? They are the future without a doubt but you are probably paying a few hundred a month on payments in line with how fast it is depreciating

If you chose a new electric car over a new combustion engine car becuase you wanted a new car then thats possibly a good move. Buying new cars is rarely a financially sound move for most people but it is nice to have a new car all the same.

crkball6

crkball6 wrote: »

While I appreciate the reference and the joke.

A take out coffee a day over the life time of your mortgage adds up to 38,000e

That's just 1 coffee, there's no point looking at easy ways to do what you want to do.

In order to put a big dent into it you need to do a _lot_ of small things.

Reduce spending / increase income.

You need to make a huge amount of sacrifice over a very long sustained period of time which is very hard, which is why most people don't do it.

Scoffing at not wasting money on take away coffee's is one of the reason's most people will fail to do what you want to do.

If giving up a coffee would be hard, imagine cancelling the family holiday, or not buying the car, cycling to work. One family I saw recently in the guardian who weigh food etc to avoid waste in order to pay the mortgage off quicker.

It's hard, really hard. If you're looking for a quick fix. You might be easier looking into knocking off a rich relative.

I'm sorry tone doesn't come across well in text format...I wasn't being sarcastic I was saying yes I do spend a lot in takeout coffee. Sorry for misunderstanding it is something that does add up and advice I will take on board. I have no rich relatives to knock off unfortunately (!).

mydarkstar

mydarkstar wrote: »

My credit union started doing switcher mortgages last year at 2.9%. It is secured on the property, it isn't simply a CU loan. It's not common but it's not illegal! I don't qualify for it yet but it's a decent deal if you meet their criteria regarding term, LTV and mortgage balance.

What credit union are you with?

mydarkstar

Deleted User wrote: »

What credit union are you with?

Cana Credit Union, it's for Revenue staff. Family members can open accounts too.
www.canacu.ie

mydarkstar

mydarkstar wrote: »

Cana Credit Union, it's for Revenue staff. Family members can open accounts too.
www.canacu.ie

Cool I'm going to look into it that's a great interest rate. Thanks for advice.

Oh sorry it's only for staff ah no typical!

manonboard

Hi OP

I was pretty successful at this so I would like to offer you the meager advice i found useful.

I paid about 80% of my mortgage in about 30% of the time. I've saved a whooper long term on interest.

Few tips:
It took time for me to realize that mortgage is cheap borrowing. The reason why i mention this is many fold.
Obvious ones. Pay off all interest loans before it that are higher in the interest.

My mortgage is 4%. I make about 8-10% on my money when i'm paying attention.

It was odd mentality for me, an ordinary irish guy purposefully not paying off a loan. However money in investments made me more than paying it back. It makes financial sense. So if you are any use at investing, or not, learn to be. Although it lacks the security feeling of paying off a mortgage. You are creating more wealth for yourself, and its also actually safer given that you can get that money in cash far faster than selling a house. This is important if you ever need to help yourself in an emergency.

If you are not going to invest and are going to pay it off. Try pay every 4 weeks. Especially if you earn a weekly wage of some sorts. Its an extra payment per year, and it adds up.

Any impulse buying over say 500-1k. I looked up how much time that added to my mortgage, and also my interest. To find out what it was really going to cost me.. It quickly made some impulses go away.

There is also the rewards of potentially renting it out after pay off whilst you travel off the rent money. It is nice to have positive rewarding visuals or feelings to stay on track.

Switching mortgage is also a great option. Keep an eye on the market. You can switch even within the same bank onto other products sometimes.
That keeps costs way down.

ct5amr2ig1nfhp

This is a good idea in theory. But what savings product do you have that is returning "well in excess" of 3%?
And is that after DIRT?

bmwguy wrote: »

Would you consider building a fund through saving? If you can get a return in excess of the mortgage rate and don't mind investing it's an option. I have one going now a few years and it's returning well in excess of the 3% interest rate I have on the mortgage. So I think my money is better off going there. I reckon in 12/15 years time it will be enough to clear my mortgage if the markets go well meaning a 35 year mortgage will be cleared in 18 years or so.

brendan86

lolli wrote: »

Hmm I don't know the interest rate off hand to be honest (something is telling me its 6.9%)

Im paying it back over 10 years so its not too bad

6.9% is quite a difference over the 10 years. I take it your LTV on property would be like <50% and you should be able get 3% if you took out a mortgage..

I dunno how much the loan is for but say its for 100,000 @ 6.9% the overall interest you pay over the 10 years is 38,700.

Now if you were with a bank and 100,000 @ 3% over the 10 years total interest you pay is 15,800.

That's over 110% of a difference which is quite a difference. You are paying a extra 22,900 over the 10 years by going with credit union.

If your loan is for 50k just half the figures I put in total interest and its still a significant saving had you taken out a mortage.

lolli

Umm yes they do?

AndrewJRenko wrote: »

Credit unions don't do mortgages - loans secured on the property. You might have a loan from your CU, but it is not a mortgage, unless your CU is very, very unusual (and possibly illegal).

Mrs OBumble

dubrov wrote: »

I'm going to play devils advocate here.

Mortgages are pretty cheap borrowing. People always quote huge amounts of interest being saved when paying off a mortgage but due to inflation that interest saved will buy you a lot less in 35 years.

Be prudent but i wouldn't be killing yourself saving in your 30s/40s and then find you have loads of money in the bank at 65 but nothing to spend it on

That's true. But it depends on what you want to do with your life.

I saved very hard during my 30s, and was able to take an extended holiday in my 40s due to that. The sort of extended holiday that I might well not be able for once I'm retired. Effectively the usefulness of the interest saved is a lot more to me now than it will be in 20 years time, even if the monetary value ends up being less.

Everyone's circumstances are different, so its very hard to give advice.

But reducing debt is almost always a good idea.