Has anyone paid off their mortgage quickly?

Has anyone here worked hard at paying their mortgage off early and if so have you any advice on how you did it? I hate the thought of all the interest building over 35years and would prefer to be frugal and get it paid off as soon as we can or at least make a good dent in it. We are on two average salaries so maybe 70k between the two of us max yearly income.

tedpan

julie101 wrote:

Has anyone here worked hard at paying their mortgage off early and if so have you any advice on how you did it? I hate the thought of all the interest building over 35years and would prefer to be frugal and get it paid off as soon as we can or at least make a good dent in it. We are on two average salaries so maybe 70k between the two of us max yearly income.

Definitely switch down to a 20 year. The interest on 35 is just nuts.

tedpan

tedpan wrote: »

Definitely switch down to a 20 year. The interest on 35 is just nuts.

Ok thank you great advice these are the common sense things I need help with thank you. We are working on getting house finished first so can afford to bring down from 35 years in about 2/3 years time once we have house to a liveable standard.

Mrs OBumble

Yes.

By using a revolving credit mortgage. Not available here unfortunately.

tedpan

tedpan wrote: »

Definitely switch down to a 20 year. The interest on 35 is just nuts.

Definitely don't switch to a 20 year. Keep the 35 year and over pay on it at the rate of a 20 year mortgage but if something unforeseen happens you can always fall back to the lower repayment of the 35 year mortgage.

Always take a mortgage for the longest term they will give but overpay on it at what every amount you can comfortabley do.

tedpan

Caroline Attractive Goat wrote:

Definitely don't switch to a 20 year. Keep the 35 year and over pay on it at the rate of a 20 year mortgage but if something unforeseen happens you can always fall back to the lower repayment of the 35 year mortgage.

You can change the term during the mortgage if you face issues. The difference in the 15 years is usually not as large on a monthly basis than people think. And the difference in interest is usually well over 50k

how.gareth

Kaiya Victorious Unicorn wrote: »

Definitely don't switch to a 20 year. Keep the 35 year and over pay on it at the rate of a 20 year mortgage but if something unforeseen happens you can always fall back to the lower repayment of the 35 year mortgage.

Always take a mortgage for the longest term they will give but overpay on it at what every amount you can comfortabley do.

Sorry for the thread hijak! If I was paying a thousand a month for a 30 year mortgage how much extra would I need to pay per month to reduce it by 5 years?

Kaiya Victorious Unicorn

Kaiya Victorious Unicorn wrote: »

Definitely don't switch to a 20 year. Keep the 35 year and over pay on it at the rate of a 20 year mortgage but if something unforeseen happens you can always fall back to the lower repayment of the 35 year mortgage.

Always take a mortgage for the longest term they will give but overpay on it at what every amount you can comfortabley do.

Ok does this work out better than reducing to 35 year? And if we reduced to 20 year and tried to overpay would that be better again? I'm really bad with money just want to get a handle on things as it's stressful not having a plan for someone like me who worries!

tedpan

julie101 wrote:

Ok does this work out better than reducing to 35 year? And if we reduced to 20 year and tried to overpay would that be better again? I'm really bad with money just want to get a handle on things as it's stressful not having a plan for someone like me who worries!

I'd suggest speaking to the bank. Arrange a meeting to look at options. They will confirm whether or not you can change the term and how they receive additional payments. It won't take long to weigh up the options.

tedpan

tedpan wrote: »

I'd suggest speaking to the bank. Arrange a meeting to look at options. They will confirm whether or not you can change the term and how they receive additional payments. It won't take long to weigh up the options.

We definitely won't be able to make any more payments for the next 2/3 years until house is fully finished but I know when we got mortgage they said would be no issue with changing term or overpaying.

Sausage dog

Be careful if changing term from 35 to 20 years. Don't assume it will be just as easy to revert to a longer term in the future if needed.

Sausage dog

Sausage dog wrote: »

Be careful if changing term from 35 to 20 years. Don't assume it will be just as easy to revert to a longer term in the future if needed.

Thanks sausage dog. Keeping the longer term and overpaying might be the safest option. Now just to figure out how to save money so that we can overpay!!

bmwguy

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

how.gareth wrote: »

Sorry for the thread hijak! If I was paying a thousand a month for a 30 year mortgage how much extra would I need to pay per month to reduce it by 5 years?

Its hard to do calculations without your interest rate and mortgage value but I've put together one for a example

200,000 mortgage @ 3.5% over 30 years

Your payment is 900euro per month

Now if you want to reduce mortgage by 5 years you have 200,000 mortgage @ 3.5% over 25 years

Your payment is 1,000 per month

You save 23,000euro interest over the term of your mortgage by paying the extra 100per month for 25 years

Mickiemcfist

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.

Depends on your attitude to risk, I'd advise only investing what you can afford to lose. A lot of ifs & buts in your assumption.

randomname2005

Sausage dog wrote: »

Be careful if changing term from 35 to 20 years. Don't assume it will be just as easy to revert to a longer term in the future if needed.

This.

Also, depending on institution and mortgage type you may have a penalty if you change. For example, some institutions offering a percentage back in cash locked in a time before you could change. If you are on a fixed rate you will pay a penalty for paying off early.

You can also do lump sum and monthly overpayment contributions on some mortgages. See which works best for you.

We were in the same boat, long mortgage, don't want to be paying for every and had work to do on the house. Once settled we added a little to the monthly payment. Won't reduce the term massively but every little helps.

https://m.drcalculator.com/mortgage/

Is a good resource and will show you what even a few quid now will do later

Magilla Gorilla

Deleted User wrote: »

Has anyone here worked hard at paying their mortgage off early and if so have you any advice on how you did it? I hate the thought of all the interest building over 35years and would prefer to be frugal and get it paid off as soon as we can or at least make a good dent in it. We are on two average salaries so maybe 70k between the two of us max yearly income.

Enter your current arrangements in to one of the many mortgage calculators
available. Then have a go at varying some or all of the variables (interest rate, extra payments, shorter term etc.). It's a real eye-opener....

wordofwarning

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.

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.

LimeFruitGum

Once the house is done up, do you plan to rent out a room for a year and put that money towards the overpayment fund? (But keep paying your mortgage as usual)

I would have gone for a 10 year mortgage if I could, but I didn't qualify at the time. I'm on a 15 year term instead.
I started to save a monthly sum into a savings account last summer and the plan is to push that into the mortgage once a year, as I want to keep the breakage fees down. My annual saving lump sum should equal 6+/- months mortgage payments.

I would question with the bank if there is some clause about having to stick to the length of the agreed term, even if you're paying tiny monthly amounts for the last remaining years. IIRC, I have such a clause with my mortgage.

James Forde

Is it better to over pay monthly or save up a lump sum and pay a large amount off the mortgage?

CelticRambler

Paid mine off (really) early, but that was accompanied by a complete change of lifestyle - sold a charming but totally unsuitable-for-family house in a rising market, paid off the 27 years remaining in full, then bought another much more suitable house for cash ... in a completely different country.

Now fifteen years mortgage-free and it's been great.

brendan86

James Forde wrote: »

Is it better to over pay monthly or save up a lump sum and pay a large amount off the mortgage?

Pay monthly, the sooner you pay them the less interest your charged.. Considering you have enough in savings for a rainy day keep putting the extra to mortgage monthly what your comfortable with.

There is no point paying extra to a mortgage if you have other loans, you should pay off any personal loans, car loans, credit cards, credit union first as all them are a higher %

tedpan

Sausage dog wrote:

Be careful if changing term from 35 to 20 years. Don't assume it will be just as easy to revert to a longer term in the future if needed.

As I said, just confirm the implications with the lender. Simple

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.

PokeHerKing

tedpan wrote:

As I said, just confirm the implications with the lender. Simple

You can't confirm that with them. They'll reduce it no bother.

Then in 5 years time if you wanted to increase the term it would be a new mortgage application.

Never reduce the term. It makes zero sense. There is literally no upside to it.

Tigger

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.

Even after dirt ? What percentage are you getting ?

Beanybabog

Those cashback deals that tie you into not moving bank were deemed contrary to some EU competition regulation. I don't know the ins and out of the case but I know its unenforceable because I got one last year with PTSB at 4.2% and when I saw the article in the paper about the bank of Ireland cashback clawback being unenforceable we decide to try move. We paid a bit off to get us to 80% LTV (were nearly there anyway with CB rules) and got a 3.1% rate elsewhere. We remortgaged within the first year and knocked 5 years and €200 a month off by moving.

Edit- sorry I should have quoted! I was referring to randomname2005's post

Samuel T. Cogley

PokeHerKing wrote: »

You can't confirm that with them. They'll reduce it no bother.

Then in 5 years time if you wanted to increase the term it would be a new mortgage application.

Never reduce the term. It makes zero sense. There is literally no upside to it.

+1 on this and what been said above, you never know what's down the line, keep the longer term and simply over pay. I don't see it happening but it's not unimaginable that attitudes to repossessions might change and policies regarding terms can certainly change. What happens if you're on a 20 year term and the interest rates jumps to 10% and you're refused an increase in term. Okay granted if that happens we're all fecked but I just don't see the upside to a reduced term, other than forcing you to pay each month - which you can do yourself.

tedpan

tedpan wrote: »

You can change the term during the mortgage if you face issues. The difference in the 15 years is usually not as large on a monthly basis than people think. And the difference in interest is usually well over 50k

Overpaying on the 35 year mortgage is the same as reducing the term without the risk of being stuck on the higher repayment.

Shapey Fiend

Everybody is forgetting to mention the most crucial aspect of paying off a mortgage.

You must never, ever, eat smashed avocado toast or drink takeaway coffees.

Shapey Fiend

Shapey Fiend wrote: »

Everybody is forgetting to mention the most crucial aspect of paying off a mortgage.

You must never, ever, eat smashed avocado toast or drink takeaway coffees.

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

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.