Has anyone paid off their mortgage quickly?

yupya1

True, I would presume the consumer price index could be relatively accurately used to see value difference on the repayment amount over previous blocks of time.

My guess is that paying off your mortgage early would not represent value due to inflation.

Cyrus

yupya1 wrote: »

True, I would presume the consumer price index could be relatively accurately used to see value difference on the repayment amount over previous blocks of time.

My guess is that paying off your mortgage early would not represent value due to inflation.

maybe im thinking about this too simplistically, but unless annual inflation is higher than your mortgage interest rate you will be better off making the payment on a certain part of the mortgage at least.

yupya1

Cyrus wrote: »

maybe im thinking about this too simplistically, but unless annual inflation is higher than your mortgage interest rate you will be better off making the payment on a certain part of the mortgage at least.

I think the difference is that inflation is compounded year on year where the interest rate is a fairly consistent percentage on a static repayment amount.

Cyrus

yupya1 wrote: »

I think the difference is that inflation is compounded year on year where the interest rate is a fairly consistent percentage on a static repayment amount.

some guy discussing the exact concept here

http://www.heracliteanriver.com/?p=478

yupya1

Cyrus wrote: »

some guy discussing the exact concept here

http://www.heracliteanriver.com/?p=478

Great thanks for that, its been bugging me for years while being too lazy to work it out.
So yes if anybody is on a tracker or interest rate lower than 3% (probably higher for Ireland) do not pay off your mortgage early as you are losing value.

yupya1

yupya1 wrote: »

Great thanks for that, its been bugging me for years while being too lazy to work it out.
So yes if anybody is on a tracker or interest rate lower than 3% (probably higher for Ireland) do not pay off your mortgage early as you are losing value.

I'd disagree, I'd rather pay it in say 15 years than 25 years (random number) meaning an extra 10 years where you have the mortgage payment as disposable income every month. Being mortgage free is far more than just highly convulated calculations based on a large amount of guess work.

yupya1

Kaiya Victorious Unicorn wrote: »

I'd disagree, I'd rather pay it in say 15 years than 25 years (random number) meaning an extra 10 years where you have the mortgage payment as disposable income every month. Being mortgage free is far more than just highly convulated calculations based on a large amount of guess work.

Fair enough, it is up everybody to manage their finances as best suits them or their psyche.
However convoluted calculations are not a negative, and quite often necessary in this type of thing and I'd disagree it is based largely on guess work.
We know inflation always rises in the long term.

You could have those extra payments you make now as disposable income now, and in 15 years the monthly repayment would be a much smaller percentage of your wage leaving you with more disposable income anyway.

I'm not that old but I remember getting 5 pints for my £10 in the 90's and can barely get two for €10 (about 12/13£'s) now

yupya1

yupya1 wrote: »

Fair enough, it is up everybody to manage their finances as best suits them or their psyche.
However convoluted calculations are not a negative, and quite often necessary in this type of thing and I'd disagree it is based largely on guess work.
We know inflation always rises in the long term.

You could have those extra payments you make now as disposable income now, and in 15 years the monthly repayment would be a much smaller percentage of your wage leaving you with more disposable income anyway.

I'm not that old but I remember getting 5 pints for my £10 in the 90's and can barely get two for €10 (about 12/13£'s) now

You don't know what interest rates will be like either or can you predict what your work situation will be. Also maybe you want to retire early, work in an easier job (thus lower pay), work part time, live on one income etc etc etc. Being mortgage free give you far more options.

You are also saving 10's of thousands in interest no matter how you dress it up vs inflation etc you are still saving an awful lot of money by pay down your mortgage faster.

Graham

Kaiya Victorious Unicorn wrote: »

You don't know what interest rates will be like either or can you predict what your work situation will be. Also maybe you want to retire early, work in an easier job (thus lower pay), work part time, live on one income etc etc etc. Being mortgage free give you far more options.

I don't know that it gives you more options, it definitely opens up different options though. There's undoubtedly sacrifices to be made for most people who choose to prioritise clearing their mortgage above other things.

This is one of those things that there's no 'right answer' to, it's entirely personal preference and circumstance.

beertons

Literally just fixed our interest rate, 3% for 3 years. We were on 4% variable.

Just be careful if you try to over pay, while in a fixed term. I can't find the paperwork now, but you'll owe the bank the difference of what they should have gotten, to what they got.

Graham

Graham wrote: »

I don't know that it gives you more options, it definitely opens up different options though. There's undoubtedly sacrifices to be made for most people who choose to prioritise clearing their mortgage above other things.

This is one of those things that there's no 'right answer' to, it's entirely personal preference and circumstance.

I agree and I certainly wouldn't be one for making major sacrifices to standard of living to pump every penny into the mortgage though I think if you are in a position to overpay without too much impact on your lifestyle then it's a good idea.

rustynutz

Cyrus wrote: »

some guy discussing the exact concept here

http://www.heracliteanriver.com/?p=478

That is very interesting, I never thought about it like that. I'm on a tracker and am exactly half way through it ( twelve and half years) into it, I built the house and am lucky enough that my monthly payments are less than 20% of my income, I could overpay but would rather spend money on living now, and having some savings in case the economy goes tits up again. Reading that makes me feel a lot better about that decision, the future is guaranteed for nobody, the present is!

screamer

You are basing your ability to repay on static things. Life is not static a job loss a long term illnesd a couple of kids and you'll see how that impacts on finances. For what its worth don't rearrange the term the banks will not give you back your current term. In fact they are very hesitant to help at all if you need help even with extending the term. on a small mortgage which was 50 percent paid back they turned us away when we asked for a term extension. So hold onto it overpay what you can while you can and have some fall back in case your ability to pay ever diminishes.

SozBbz

rustynutz wrote: »

That is very interesting, I never thought about it like that. I'm on a tracker and am exactly half way through it ( twelve and half years) into it, I built the house and am lucky enough that my monthly payments are less than 20% of my income, I could overpay but would rather spend money on living now, and having some savings in case the economy goes tits up again. Reading that makes me feel a lot better about that decision, the future is guaranteed for nobody, the present is!

Well TBF, I don't think any one is advocating paying off a tracker early, the cost of that finance is so low that it wouldnt be worth while versus inflation.

If however you've money sitting in savings and at the same time are on a mortgage rate of 3-4%, thats a whole other conversation.

AlmightyCushion

yupya1 wrote: »

Fair enough, it is up everybody to manage their finances as best suits them or their psyche.
However convoluted calculations are not a negative, and quite often necessary in this type of thing and I'd disagree it is based largely on guess work.
We know inflation always rises in the long term.

You could have those extra payments you make now as disposable income now, and in 15 years the monthly repayment would be a much smaller percentage of your wage leaving you with more disposable income anyway.

I'm not that old but I remember getting 5 pints for my £10 in the 90's and can barely get two for €10 (about 12/13£'s) now

The inflation argument only really works if the rate of inflation is lower than the interest rate of your mortgage.

yupya1

Kaiya Victorious Unicorn wrote: »

You don't know what interest rates will be like either or can you predict what your work situation will be. Also maybe you want to retire early, work in an easier job (thus lower pay), work part time, live on one income etc etc etc. Being mortgage free give you far more options.

You are also saving 10's of thousands in interest no matter how you dress it up vs inflation etc you are still saving an awful lot of money by pay down your mortgage faster.

You would be more flexible if your wealth is not tied up in a property but that is a lifestyle choice rather than a cost analysis.

Also it is not me dressing it up, this is a real life occurrence, money decreases in value so you may save the number of 10's of thousands but the value of those thousands will not be the same.

yupya1

AlmightyCushion wrote: »

The inflation argument only really works if the rate of inflation is lower than the interest rate of your mortgage.

But it is not just an argument, money always devalues in the long term so it is more a question of how much V's long term interest rate. Also it works better for you if inflation is higher than you interest rate.

I'm am not trying to tell anybody how to manage their finances everybody has different priorities I was just trying to highlight there are other considerations to the old line that paying off your mortgage early is best.

If the Banks were losing out they would not be so happy to see people paying off their mortgage early.

tommythecat

yupya1 wrote: »

If the Banks were losing out they would not be so happy to see people paying off their mortgage early.

Hang on a sec. This is not a true statement. Banks facilitate overpayments. They don't advertise it. That is all. To say that banks are "so happy" to take overpayments is simply not true.

rsynnott

yupya1 wrote: »

I'm not that old but I remember getting 5 pints for my £10 in the 90's and can barely get two for €10 (about 12/13£'s) now

While drink definitely has gotten more expensive (at a greater rate than general inflation, I think), 10 euro is about 7.80 Irish punts.

yupya1

tommythecat wrote: »

Hang on a sec. This is not a true statement. Banks facilitate overpayments. They don't advertise it. That is all. To say that banks are "so happy" to take overpayments is simply not true.

It is hardly the crux of the debate but I have direct experience and can confirm they are happy to see overpayments.

They dont need to advertise it, even though they will all have sections on their website saying they allow it, their focus is on getting every standard payment.

pwurple

yupya1 wrote: »

If the Banks were losing out they would not be so happy to see people paying off their mortgage early.

Banks are service providers... a means to an end, not a big baddy to be outwitted.

And from my own experience, every time I paid off a mortgage, I went right back again within a short space of time and got another one.

vmb

tommythecat wrote: »

Hang on a sec. This is not a true statement. Banks facilitate overpayments. They don't advertise it. That is all. To say that banks are "so happy" to take overpayments is simply not true.

Could I have a *too good* credit score if I am doing huge overpayments?

tommythecat

yupya1 wrote: »

It is hardly the crux of the debate but I have direct experience and can confirm they are happy to see overpayments.

They dont need to advertise it, even though they will all have sections on their website saying they allow it, their focus is on getting every standard payment.

You were using a completely unsupported statement to try to prove your point so it is important in this context. I'm not sure how you can have direct experience of every banks attitude to overpayments?

yupya1

pwurple wrote: »

Banks are service providers... a means to an end, not a big baddy to be outwitted.

And from my own experience, every time I paid off a mortgage, I went right back again within a short space of time and got another one.

Nobody made that arguement as I agree, this is about personal money management and the fact that overpaying on your mortgage may not best long term plan for some people.

yupya1

tommythecat wrote: »

You were using a completely unsupported statement to try to prove your point so it is important in this context. I'm not sure how you can have direct experience of every banks attitude to overpayments?

It is not "Completely unsupported" as I have experiance in a number of Banks.

How do you support your statements?

I'm not trying to prove my point with that either, my point is pure maths not some emotional argument.

tommythecat

yupya1 wrote: »

It is not "Completely unsupported" as I have experiance in a number of Banks.

How do you support your statements?

I'm not the one who made the comment!! I don't need to prove anything! The fact the banks don't advertise overpayments as a big thing proves that they are not "so happy". It's up to you to prove otherwise.

yupya1

tommythecat wrote: »

I'm not the one who made the comment!! I don't need to prove anything! The fact the banks don't advertise overpayments as a big thing proves that they are not "so happy". It's up to you to prove otherwise.

Well yes you do, if you are accusing some person with direct experience of situation that their statement is unsupported you need to support that statement.

And if your only support is that they dont spend money to advertise something that is not essential to their business even though it is on their websites and they allow it almost unconditionally, I don't think that is proof.

This is not the point of this thread or anything I have been posting

tommythecat

yupya1 wrote: »

Well yes you do, if you are accusing some person with direct experience of situation that their statement is unsupported you need to support that statement.

And if your only support is that they dont spend money to advertise something that is not essential to their business even though it is on their websites and they allow it almost unconditionally, I don't think that is proof.

This is not the point of this thread or anything I have been posting

Sure it's just two randomers on the internet arguing. I could just as easily say I have direct experience of the banks not wanting to take overpayments. Why would I believe you without some proof?
Show me some actual proof that they are "so happy" that you overpay. The burden is on you to back up your claims. End of.

yupya1

tommythecat wrote: »

Sure it's just two randomers on the internet arguing. I could just as easily say I have direct experience of the banks not wanting to take overpayments. Why would I believe you without some proof?
Show me some actual proof that they are "so happy" that you overpay. The burden is on you to back up your claims. End of.

See that's the difference I'm not here to argue with some randomer on the internet with no experience or knowledge of what they are arguing about, ignores valid points made to their argument and demands hard "proof" when they have no response on what was a minor side point to the main discussion.

However the "End of" made me realise you are actually right. So you won we can stop now.

tommythecat

yupya1 wrote: »

See that's the difference I'm not here to argue with some randomer on the internet with no experience or knowledge of what they are arguing about, ignores valid points made to their argument and demands hard "proof" when they have no response on what was a minor side point to the main discussion.

However the "End of" made me realise you are actually right. So you won we can stop now.

LOL. You're rambling now. You had a point but tried to use a strawman argument to further your case. I never disputed the validity of your main point. But it's important to call out BS when it's put out there. Sorry if that doesn't suit you.