Has anyone paid off their mortgage quickly?

vmb

Sono wrote: »

I think you'll find it has everything to do with what you earn. Fair play though that's a hell of a lot of money to be overpaying.

Obv it depends on income, but for some part of past year we were doing it with a net income of 3600 + about 800 Euro from savings per month.

Those are my numbers, for others with different mortgages or incomes, numbers will be different, but the idea is the same, to prioritise repayments before other things. By the way, we haven't bought a car yet. We could, but it hasn't been our priority

What I mean is that it has been is a personal decision, to reduce our debt has been our first priority.

RoboKlopp wrote: »

Very good advice

+1000. Flexibility is a must

Some great help on this thread thanks so much for all the advice everyone.

thierry14

vmb wrote: »

Software engineer, both me and my wife.

Is not about what we earn, is more about what we spend. With our incomes, we could spend like like there is no tomorrow, but I (we) prefer to be debt free asap

Alot is down to luck too and stages in life

I am mortgage free at 30 and wife is 27

I have been earning decent money for the locality ( 45- 50k) for 6 or so years now, luckily neither of us were affected by the recession an young so didn't have kids ( have now) so we lived on my salary, saving my wifes for 5 years straight, circa 150k saved, bought 4 bed house for 120k in Limerick co.

We are pretty happy to be mortgage free so young, but we don't kid ourselves, we were very very lucky and fortunate.

I would advise taking a small mortgage/loan though if someone is thinking of buying with all there cash

We didn't and in hindsight having no real savings now, has left us a bit vulnerable

Cyrus

Cyrus wrote: »

Surely it depends on how the pension goes ?

Also you are only deferring tax with pension contributions

The pension or investment v paying off mortgage early is always a good chat
So many variables it can be quite hard to actually work out which is the better option.

Using crude enough figures....invest €6k/annum at 6% average growth and after 12 years you have €102k gross after throwing in €72k. That's without doing anything to avail of the €1270 CGT annual allowance thing or considering dividends and applicable income tax. A €30k return (gross)

If you had 20 years left on a 4% variable rate mortgage with €150k outstanding and started overpaying by €500/month you'd save €32k ish in interest and the mortgage would be paid in 12 years

Even doing the investing in a pension medium (fund charges etc and perhaps tax although the lump sum option can be availed of) I'd still reckon the extra mortgage payments are more worthwhile.

NewCorkLad

brendan86 wrote: »

Im going with the facts here and now. No one can tell who will be best in 2 years.

Thats my point nearly everyone taking out a mortgage with BOI at the moment is fixing, as they are encouraged to by the bank at fairly decent interest rates, and who is to say if BOI or KBC will be giving better rates in 2/3 years.

Graham

NewCorkLad wrote: »

Thats my point nearly everyone taking out a mortgage with BOI at the moment is fixing, as they are encouraged to by the bank at fairly decent interest rates, and who is to say if BOI or KBC will be giving better rates in 2/3 years.

While a fixed rate does give welcome certainty, the fact that the bank are encouraging people to fix could also be an indicator which way they expect interest rates to go in the short-term.

Mickiemcfist

NewCorkLad wrote: »

Thats my point nearly everyone taking out a mortgage with BOI at the moment is fixing, as they are encouraged to by the bank at fairly decent interest rates, and who is to say if BOI or KBC will be giving better rates in 2/3 years.

Current market Outlook would say they probably won't be giving better rates. We're in an upturn, (with certain exceptions) so you'd expect ECB interest increases unless something destabilizes the European economy (I.e. brexit) but most still have a relatively positive outlook

Graham

Mickiemcfist wrote: »

Current market Outlook would say they probably won't be giving better rates. We're in an upturn, (with certain exceptions) so you'd expect ECB interest increases unless something destabilizes the European economy (I.e. brexit) but most still have a relatively positive outlook

To counter that, we already have interest rates far in excess of most other European markets and there's political and increasingly competitive pressure to bring them back inline.

Cyrus

Graham wrote: »

To counter that, we already have interest rates far in excess of most other European markets and there's political and increasingly competitive pressure to bring them back inline.

yes and i think they will do that when the base rates increase

so there margins will shrink a little but i dont think we will see much below 3% one way or the other

Graham

Graham wrote: »

While a fixed rate does give welcome certainty, the fact that the bank are encouraging people to fix could also be an indicator which way they expect interest rates to go in the short-term.

Graham wrote: »

To counter that, we already have interest rates far in excess of most other European markets and there's political and increasingly competitive pressure to bring them back inline.

Indeed, I reckon BOI shall be dropping their variable rate in the near future (reluctantly of course) .......... their "attractive" fixed rates may not look so great in a while.

vmb

Graham wrote: »

To counter that, we already have interest rates far in excess of most other European markets and there's political and increasingly competitive pressure to bring them back inline.

I completely agree, our current rates are way too high. Bank market in Ireland is quite poor

The case of BOI is ridiculous - cheating uninformed people with the 2% return and the massive APR after the fixed period.

kyeev

The advantage of paying off your mortgage early, rather than investing in your pension, is that you suddenly end up with a huge increase in your spending power which is at your complete discretion (that could be good or bad!).
With the pension, its locked away, and if you die as a singleton at the age of 66, the pension is gone (Spouse keeps half if have a spouse).
(Correct me I'm wrong here, I went to a pension talk a few weeks ago and was shocked to learn your pension disappears into thin air when you die, your estate can't claim anything)

Cyrus

vmb wrote: »

I completely agree, our current rates are way too high. Bank market in Ireland is quite poor

The case of BOI is ridiculous - cheating uninformed people with the 2% return and the massive APR after the fixed period.

anyone who stays on with BOI after fixed on that variable rate needs their head examined

SozBbz

vmb wrote: »

I completely agree, our current rates are way too high. Bank market in Ireland is quite poor

The case of BOI is ridiculous - cheating uninformed people with the 2% return and the massive APR after the fixed period.

You can just fix again or move your mortgage. Anyone who stays on BOI's variable rate wants their head checked, but its easy to avoid.

Cyrus

kyeev wrote: »

(Correct me I'm wrong here, I went to a pension talk a few weeks ago and was shocked to learn your pension disappears into thin air when you die, your estate can't claim anything)

only if you purchase an annuity, most pensions are transferable if planned properly

Tombo2001

bmwguy wrote: »

"Tombo2001;103989325&quot wrote:

No disrespect to any of the ace investors out there but here are the regarding asset market returns at present:

(I) Returns on (close to) zero risk investments, such as cash on deposit, are close to zero.

(II) People saying that they've found funds that have done brilliant should caveat that with "Investment prices can fall as well as rise".






I definitely put that caveat in my posts it is not without risk to my capital what I am doing. I'm not savvy at all I did consider choosing my own investments in stocks but wouldnt have the patience or attention to detail to do it so i went down the managed fund route.
Although stock market returns long term have been very positive over 100 years. I do see some short term risk to capital but not worried long term. Even the 2008 crash was recovered in 3 to 4 years whereas housing hasn't.

Sorry for divergence but these are the reasons I don't think paying off a mortgage at low interest rates is a good idea when there is better use for
My cash. In my opinion anyway. As I said earlier I will probably use it to knock last 10 years off my mortgage.

Tombo2001

The other point regarding the question is this:

Has anyone paid off their mortage quickly - is a bit like asking - has anyone run a marathon quickly.

You need to qualify that
If you are 25, male, running regularly, under 11 stone, non smoker - of course you can run a marathon quickly.
What if you are 45, overweight, smoking like a fish etc....

As per the question
@Yes I paid off the mortgage quickly@ - BUT hypothetically

I bought the house for 40k in 1992
The mortgage was 30k
Interest rates falling to zero were massively to my advantage
My wages doubled between 1995 and 2005

People will ignore all that and say....yep, paid off the mortgage quickly....definitely do it, worth the extra.....

You need to ask the right question .....

The right question is
If I buy this house, with this mortgage, at this interest rate, with this salary - how should I approach mortgage payments.

berettaman

Tombo2001 wrote: »

The other point regarding the question is this:

Has anyone paid off their mortage quickly - is a bit like asking - has anyone run a marathon quickly.

You need to qualify that
If you are 25, male, running regularly, under 11 stone, non smoker - of course you can run a marathon quickly.
What if you are 45, overweight, smoking like a fish etc....

As per the question
@Yes I paid off the mortgage quickly@ - BUT hypothetically

I bought the house for 40k in 1992
The mortgage was 30k
Interest rates falling to zero were massively to my advantage
My wages doubled between 1995 and 2005

People will ignore all that and say....yep, paid off the mortgage quickly....definitely do it, worth the extra.....

You need to ask the right question .....

The right question is
If I buy this house, with this mortgage, at this interest rate, with this salary - how should I approach mortgage payments.

This is spot on. There are horses for courses and while clearing a mortgage is always something to be aspired to the circumstances must be right.

Met a lady with a small win on the lotto. She was very determined to lob it off the mortgage -which was a tracker.:eek:

I asked her what other debts she had..she said credit card 24% and car loan 8.65% and house improvement loan 8.5%.

I explained my donut principle..Outer ring with the highest interest, you bite that off first while the inner part with the hole you leave till last.i.e. the tracker mortgage with the cheapest money you will ever get.

She reluctantly cleared these loans first and knocked a bunch of dd's on the head. She really wanted to take the mortgage option...mad I thought but funny how people think..

ginger_hammer

On this topic we are just now increasing our monthly payments from 1500 -> 2k on the remaining 25 years of a 30 year mortgage (an extra 250 each per month).

This will take 8.5 years off the duration and save ~50k in interest. Should have done it earlier to be honest!

https://www.ccpc.ie/consumers/tools-and-calculators/mortgage-calculators/extra-mortgage-payments-calculator/

berettaman

berettaman wrote: »

This is spot on. There are horses for courses and while clearing a mortgage is always something to be aspired to the circumstances must be right.

Met a lady with a small win on the lotto. She was very determined to lob it off the mortgage -which was a tracker.:eek:

I asked her what other debts she had..she said credit card 24% and car loan 8.65% and house improvement loan 8.5%.

I explained my donut principle..Outer ring with the highest interest, you bite that off first while the inner part with the hole you leave till last.i.e. the tracker mortgage with the cheapest money you will ever get.

She reluctantly cleared these loans first and knocked a bunch of dd's on the head. She really wanted to take the mortgage option...mad I thought but funny how people think..

It could be argued that if things go belly up for you that owning the house outright is of much more benefit as they can't repossess what you spent your credit card balance on etc.

To a degree I agree with what your saying but on the other hand I personally have taken out loans (for cars mostly) where I could have paid in cash but I'd place more value on having the cash in the bank and paying a bit of interest on a loan than getting than having an empty bank account.

pwurple

Kaiya Victorious Unicorn wrote: »

It could be argued that if things go belly up for you that owning the house outright is of much more benefit as they can't repossess what you spent your credit card balance on etc.

To a degree I agree with what your saying but on the other hand I personally have taken out loans (for cars mostly) where I could have paid in cash but I'd place more value on having the cash in the bank and paying a bit of interest on a loan than getting than having an empty bank account.

It depends on your perspective and situation really.

If you are 1 paycheque away from going bankrupt, barely scraping by with no spouse for backup if you lose your job, then maybe. But for wealth maximisation, getting rid of the higher loans first is preferable.

Also, cash in a current account is earning you nothing, saving you nothing. I keep ours close to zero.

There is no interest from a current account, (so a net loss based on inflation and spending power) and transaction fees associated with using it. Our balance in a joint current account hovers between 50 euro and 300 euro. I have a pre-arranged overdraft facility, for emergencies, but everything else either gets tucked away in a savings account, or is paying down the latest mortgage. Setting up your mortgage account up online so you can transfer in and see the balance change, is a very handy mechanism.

pwurple

pwurple wrote: »

There is no interest from a current account, (so a net loss based on inflation and spending power) and transaction fees associated with using it. Our balance in a joint current account hovers between 50 euro and 300 euro. I have a pre-arranged overdraft facility, for emergencies, but everything else either gets tucked away in a savings account, or is paying down the latest mortgage. Setting up your mortgage account up online so you can transfer in and see the balance change, is a very handy mechanism.

I actually meant in a savings account not a current account, though the interest is so low in savings accounts its almost worthless too.

Ardennes1944

Kaiya Victorious Unicorn wrote: »

I actually meant in a savings account not a current account, though the interest is so low in savings accounts its almost worthless too.

Same here in Switzerland, 0.25% interest is the highest i found on a savings account

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This post has been deleted.

Ardennes1944

Ardennes1944 wrote: »

Same here in Switzerland, 0.25% interest is the highest i found on a savings account

Its a joke, one of my accounts the rate was 1.5% less than two years ago and has been reducing ever since. Just got a mail this week to notify me that the next reduction will take it to 0.15% another account dropping from 0.4% to 0.2% soon :mad:. Then what little bit you get nearly half is gone in dirt.

fran426ft

If anyone was considering a mortgage with KBC, which requires you to have your salary mandated to a KBC current account to get their discounted rates, you could consider getting one of their Extra current accounts. This also gives you access to their Extra regular saver account which has a interest rate of 3% up to €40,000. Yes interest is subject to DIRT but if you wanted to have a small rainy day fund instead of putting everything into overpaying you mortgage it looks like one of the better options.

You could even consider this if you don't have a KBC mortgage if you were willing to go through the hassle of opening an account with them.

https://www.kbc.ie/our-products/kbc-current-account/current-account/extra

Disclaimer - I've no affiliation with KBC but have applied to them for a current mortgage application.

yupya1

Has anybody ever done or seen the calculations between the purchasing power of money V's paying off the mortgage early to avoid some interest.
As the majority of interest is paid back at the start there could be the possibility that paying off early is false value or am i missing something?

Cyrus

yupya1 wrote: »

Has anybody ever done or seen the calculations between the purchasing power of money V's paying off the mortgage early to avoid some interest.
As the majority of interest is paid back at the start there could be the possibility that paying off early is false value or am i missing something?

thats the whole point your extra payments are directly off the principal so you are saving the interest that would have accrued.

yupya1

Cyrus wrote: »

thats the whole point your extra payments are directly off the principal so you are saving the interest that would have accrued.

yes but you are paying off that principal with money that is worth a lot more now than it would in 20 years.

The question is, does the principal and interest accrued on it at the later time of the mortgage equate to the reduced purchasing power of the same amount of repayment

Cyrus

yupya1 wrote: »

yes but you are paying off that principal with money that is worth a lot more now than it would in 20 years.

The question is, does the principal and interest accrued on it at the later time of the mortgage equate to the reduced purchasing power of the same amount of repayment

depends on the discount factor that you apply i guess.