I paid off my mortgage early

A MAN who spent six years prepaying his mortgage explained that he regretted that he no longer had a mortgage.

The 35-year-old man and his wife spent all their savings on paying off their mortgage earlier than expected, hitting their goal two years ago.


Paying off your mortgage could leave you with no money when you need itCredit: Getty

The move freed up money they spent on dining, vacations, and buying a car.

Instead of paying off their mortgage, they were given around £ 900 a month to “live a more carefree lifestyle,” he said in a Reddit post.

But a change in circumstances after the Covid coup left him regretting to repay the loan earlier.

The couple, who now have one child, have nothing to fall back on as all their money is tied up in the property.

Sharing on the UK Personal Finance forum, the anonymous owner said: “We moved to a larger property in March of this year and again took out a relatively small mortgage.

“My wife was laid off during the first Covid lockdown and decided to try and become independent.

“Having had our first child in August, living on a single salary plus SMP [statutory maternity pay] with a mortgage, I wish we had been more financially savvy and invested a greater proportion of our disposable income.

“At the end of the day, we currently end up with no real savings and a small monthly deficit.”

Looking back, he thinks they would have been better off investing some of the money after fixing their mortgage rate for two years at just 1.69% interest.

He did not specify the amount of the mortgage or the value of the property.

Previously, they had taken out a five-year fixed contract in 2012 at 4.99%, but paid back most of the money when they were at the lowest rate.

“There are certainly a lot of people in a much worse situation than us, but at the same time, we would probably be much better off on our own if we hadn’t paid our first mortgage so aggressively.” he said.

“Life is quite difficult right now so it might not be necessary.”

He added that he probably would have “taken a slightly different path” if he had spotted some of the advice on the forum about “paying off debt and investing your savings.”

“All that being said, we could get out of the current financial crisis by freeing up equity in our current property, but we haven’t,” he added.

“Maybe deep down, even though I know the best financial option is probably to invest, I want to be mortgage free again.”

Should you pay your mortgage in advance?

Anyone planning to pay off their mortgage sooner should think about it carefully and follow a few golden rules, said Laura Suter, personal finance manager at AJ Bell.

She said: “The great thing that you have to keep in mind is that after the mortgage is paid off it is quite difficult to get that money back, you will have to take out a new mortgage to release that money from your house – so think through it before you make the decision. “

Homeowners must first pay off other expensive debts, such as credit cards, overdrafts, and bank cards.

When paying off debt, it’s a good idea to pay off the ones with the highest rates first so you don’t waste money on interest.

It’s also a good idea to save a jar of money for emergencies.

Working couples should have at least £ 11,000 in savings to survive six months of unemployment, experts have warned.

Homeowners should also check that they are getting the lowest mortgage rate possible, even if they plan to pay it off sooner.

For those who decide to run out of mortgage, having a low rate means that the overpayments will go to pay off the actual debt, rather than the interest, Ms. Suter said.

“Once you’ve met all of these needs, you need to decide whether your priority is to get out of the mortgage or if you want to accumulate additional savings,” she said.

“With mortgage rates so low right now, it’s likely that you’re not paying very high interest on your debt, so you might decide that you can make more money by investing the money.

“Conversely, you might think that the no-mortgage milestone matters more to you.

However, savers should be wary of keeping all of their money in cash, as interest rates on savings are at record highs while inflation is above 5% which can eat into your money as you go. time.

If you don’t invest the money, you’re probably better off paying off your mortgage debt.

Plus, over longer periods of time, those who invest the money benefit from the beauty of the compounding, which means that the interest earned may exceed the interest you’ll save by paying off your mortgage sooner, said Mrs. Suter.

What to check before paying too much for your mortgage

If you decide to pay off your mortgage, there are a few things to check first.

Most mortgages have rules about how much you can overpay – and they could even be a penalty if you do it wrong.

It’s best to check the terms of your mortgage or ask the lender before you start overpaying.

“Most mortgage companies allow you to pay off up to 10% of the outstanding balance per year, although some allow more. You should also check that your overpayments will pay off your mortgage debt, and not just reduce your mortgage debt. monthly payments, ”Ms. Suter said.

She added that another option if you have to renew your mortgage anyway is to “shorten the term of your mortgage, which increases your monthly payments and effectively blocks an overpayment and reduces the overall interest you pay.” .

“Anyone who chooses this path must be sure that they won’t need to access the money for anything else. “

Overpaying your mortgage by just £ 50 per month could save you thousands of pounds in the long run.

MoneySavingExpert’s free online calculator can help you determine how much you could save if you overpay on your mortgage.

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