Paying off your mortgage
Discussion
DJC said:
Mine is due to be paid off in Summer 2017, I'll be 32. This is fluid though so it may be sooner or later depending on what happens over the next 5 years!
How am I doing it?
Firstly, I've settled for a smaller property and therefore a smaller mortgage: I could have borrowed ~£250-300k but decided to borrow half that. I'm not at home much and when I am it is just two of us and we don't plan to have children so there is no real need for a big(ger) house.
Secondly, I have overpaid the mortgage from day one which makes an enormous difference. I'm also putting money aside every month to make large 'one off' payments over the term.
Thirdly, I am quite restrained with my spending. I live a very enjoyable life and don't skimp in any way whatsoever, but we in effect live on one salary and the rest goes on the overpayments or savings to make lump sums.
I have friends who are my age (27) who spend an enormous amount - probably equal to or more than our annual savings/overpayments - on holidays, cars, going out etc - And good for them! Everyone has different priorities and I don't try and force my priorities on others or begrudge their priorities.
My own plan is to 'splash out' a little once the mortgage has been paid, probably with a 4 week holiday to the Maldives (We've done 2 x 2 weeks there and the idea of a month is just
) . In today's money, we will be able to live as we do on 0.5 of one current full-time salary so in effect we'll have 1.5 of a decent salary every month to spend/squirrel away as we see fit at the time.
Longer term, I intend to retire early and the rental income from the property will form part of my retirement income, the rest coming from savings/investments from the above until pensions kick in.
If theres no plans for kids, thats all fine and well but what happens if you need to upsize? How am I doing it?
Firstly, I've settled for a smaller property and therefore a smaller mortgage: I could have borrowed ~£250-300k but decided to borrow half that. I'm not at home much and when I am it is just two of us and we don't plan to have children so there is no real need for a big(ger) house.
Secondly, I have overpaid the mortgage from day one which makes an enormous difference. I'm also putting money aside every month to make large 'one off' payments over the term.
Thirdly, I am quite restrained with my spending. I live a very enjoyable life and don't skimp in any way whatsoever, but we in effect live on one salary and the rest goes on the overpayments or savings to make lump sums.
I have friends who are my age (27) who spend an enormous amount - probably equal to or more than our annual savings/overpayments - on holidays, cars, going out etc - And good for them! Everyone has different priorities and I don't try and force my priorities on others or begrudge their priorities.
My own plan is to 'splash out' a little once the mortgage has been paid, probably with a 4 week holiday to the Maldives (We've done 2 x 2 weeks there and the idea of a month is just
) . In today's money, we will be able to live as we do on 0.5 of one current full-time salary so in effect we'll have 1.5 of a decent salary every month to spend/squirrel away as we see fit at the time.Longer term, I intend to retire early and the rental income from the property will form part of my retirement income, the rest coming from savings/investments from the above until pensions kick in.
My daughter has paid £30K off her mortgage while the interest rates have been so low, partly through offsetting her savings but also by tipping in any money left at the end of the month. She doesn't live the high life (still driving the 2003 Audi, buys any expensive clothes second hand on Ebay, holidays with her dogs in the UK or in a friends apartment) and doesn't have expensive tastes generally. She says she isn't financially motivated but she has a picture of living on the coast with enough space for her dogs.
I paid off my mortage in 2005 and used the saved money to build up savings to buy my new house (now back on the mortage treadmill). It was nice not to have that nagging, but to be fair with interests rates so low now it wasn't so much cash in hand that I would be getting out the new car brochures.
I guess it is down to the picture you have for your later life and how important having that latest model/holiday/night out/shoes matters to you in comparison to that?
I paid off my mortage in 2005 and used the saved money to build up savings to buy my new house (now back on the mortage treadmill). It was nice not to have that nagging, but to be fair with interests rates so low now it wasn't so much cash in hand that I would be getting out the new car brochures.
I guess it is down to the picture you have for your later life and how important having that latest model/holiday/night out/shoes matters to you in comparison to that?
I have a picture that i'll be living in a 3-4 bed detached house, in a fairly nice area which isnt too far away from town or country. I've got the idea for that, and know where it would be but the houses are just out of reach financially at the moment. For that reason, I'm heavily overpaying so that I can realise that dream in the next couple of years. Its nothing too extravagant nor ambitious, but it would be more than enough of a home to raise a family.
UK mortgage rates are VERY low at the moment, but so are savings rates - although more than I can achieve in Luxmebourg, where I live.
I took out a hefty 6 figure mortgage 8 years ago and it will be paid off early next month - just in time for me to borrow another hefty 6 figure amount so I can move closer to the city where I work!
For me, paying off the mortgage as quickly as possible was really a no brainer, i.e. mortgage rate went from 3.2% to 5.9% in a matter of 2 years, meanwhile my savings were earning 1%, and still only earn 1%, although the mortage rate's down to 2.45%.
Whilst upto €6k/year mortgage interest was tax deductible, and I got a rebate of 38.9% on that, I'd rather not have to pay the interest in the 1st place, hence ploughing all extra cash, bonus payments, stock option payouts, etc., to cover my mortgage.
If was more of an incentive for me to do so when I can see my mortgage as an overdrawn balance online or when I receive my quearterly statements!
So, with my 2011 bonus due at the end of this month, the mortgage will be paid off, and I'll be €2k/month better off. Now, what toy to buy....
I took out a hefty 6 figure mortgage 8 years ago and it will be paid off early next month - just in time for me to borrow another hefty 6 figure amount so I can move closer to the city where I work!
For me, paying off the mortgage as quickly as possible was really a no brainer, i.e. mortgage rate went from 3.2% to 5.9% in a matter of 2 years, meanwhile my savings were earning 1%, and still only earn 1%, although the mortage rate's down to 2.45%.
Whilst upto €6k/year mortgage interest was tax deductible, and I got a rebate of 38.9% on that, I'd rather not have to pay the interest in the 1st place, hence ploughing all extra cash, bonus payments, stock option payouts, etc., to cover my mortgage.
If was more of an incentive for me to do so when I can see my mortgage as an overdrawn balance online or when I receive my quearterly statements!
So, with my 2011 bonus due at the end of this month, the mortgage will be paid off, and I'll be €2k/month better off. Now, what toy to buy....
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