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Your Invitation To Pay Off Your Mortgage - Quickly!

Did you know that last year DIY stores sold thousands of drills to people who didn't want them!

Think about the truth of the above statement. What those customers really wanted was a hole! The same is true for your mortgage. You didn't want that, either. What you wanted was a house - but to get a house, you first had to get a mortgage. If you're like most people, you hate your mortgage, and you'd love to get rid of this 25 year millstone around your neck just as soon as possible!

So you've taken the leap and decided to buy a home. After signing a mountain of paperwork, you are now the proud owner of your own residence. Thirty days later, when the first mortgage payment becomes due, you are hit by the reality of what you have done. You have taken on 25 years' worth of massive payments in an economy that makes no promises about long-term job stability.

Let’s call a spade a spade! A mortgage is one of life's necessary evils. You probably can't get onto the home ownership ladder without one, but it's likely to be the biggest debt you'll ever have and a massive amount of your time, energy and money will be dedicated to paying it off.

It makes sense to get rid of your mortgage as quickly as possible. Doesn’t it? Well, let’s deal with that one right up front, just in case you have any doubts or have bought into some of the stuff going around about how great it is to keep your mortgage going.

 

How much will your mortgage really cost you?

Imagine for a moment that you’ve just bought your first house. The asking price was £130,000 (ok, it’s a little out in the sticks!). You negotiated hard and got your offer accepted at £120,000. You are understandably over the moon about this and pretty proud about telling everyone what a great deal you got.

You’ve also prepared well and you’ve managed to save a £20,000 deposit so you only need a mortgage of £100,000. You looked around and got the best deal you could find at the time. So you are all set with your new home and 25 year repayment based mortgage loan.

This is where the “fun” starts because over the 25 year life of this mortgage interest rates will fluctuate. We are at historically low interest rate levels now but it would be unwise to assume they’ll always stay down here (remember 15%?). So let’s say that over the life of this mortgage you will pay an average rate of 7% interest, which is still on the low side.

Let's look at a simple example.

Do you know how much a £100,000 mortgage over 25 years, repaid at an average rate of interest of 7% (over the life of the mortgage) will really cost you?

 

A whopping £215,000!

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What that means is that you’ll end up paying for your house and the house next door, then some more on top of that as well.

But wait! Even that’s not the end of the story.

If you are earning £30,000 per year do you know how much you will have to earn in AFTER TAX MONEY to pay off this mortgage?

 

An even more whopping £294,000!

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You might as well have bought the street!

Because the true cost of this mortgage to you – is just about every penny you will earn from every working day of your life for the next 10 years!

OK – Have I made my point? Well there is good news. It doesn't have to be this way.

So the first and most obvious reason to pay off your mortgage as soon as possible is that it will save you tens of thousands of pounds in interest payments.

But this isn't the only reason. Here are several more reasons why you should kill your mortgage:

·         You want the peace of mind that comes from owning your own home and being 100% debt-free.

·         With a lower monthly expenditure requirement, you are not so vulnerable to economic downturns. If you lose your job you can afford to take a job that pays less without any concerns about losing your home.

·         You want to retire early. With no mortgage payment, you can save up for retirement faster and quit sooner.

·         You want a guaranteed rate of return. Paying off your mortgage guarantees you that savings rate. Investing in the stock market can never guarantee you anything.

·         You live in the U.K. or perhaps another country where there is NO tax benefit to carrying a mortgage.

·         You are disciplined enough that once you have paid off your mortgage, you will invest the same payments into a retirement fund until you have enough to meet your retirement needs. (You should do everything possible not to allow your home mortgage payments to continue past your retirement age.) Remember, with no mortgage, your required retirement income will be greatly reduced.

Despite this, some people still argue that paying off your mortgage is a bad financial move!

They will do their best to convince you that you will get a higher return in the long run if you invest your money instead. While there is some chance that you will achieve such a feat, there's also a BIG chance that you won't. Given the choice between a guaranteed savings of say 5-7% interest on your mortgage (compounded for 25 years), or the possibility of achieving some other rate of return (which may be higher or lower), the wise decision may be to be conservative and opt for the safe bet.

Of course, the entire argument is moot when you truly look at the facts of the situation. Most people buy a home so they have a place in which to live. Even if it doubles or triples in value, they aren't going to sell it, and if they do, it will take every penny they earn to buy a comparable home in the same neighbourhood. Besides, since you can't live in an investment fund, you probably didn’t buy your home with one eye on beating the return of the FTSE 100.

At the end of the day, the decision to keep pay your mortgage over a normal term or to apply strategies to aggressively clear it is up to you. However the arguments for eliminating your mortgage as soon as possible are compelling. If you agree, this next part is must reading.

So just how do you pay off your mortgage quickly? Basically, the key to paying it off is simple: pay your lender more money!

But of course, there is much more to it than that. You do need a mixture of common sense and shrewd strategies. We suggest that you should take professional advice from a qualified mortgage advisor who can assist you to evaluate your overall financial situation. 

However, remember that most of these don’t advise you to get radical with your mortgage and have probably got long-term mortgages themselves. You might just want to make sure you speak with someone who feels as strongly about rapid mortgage elimination as you do.

Here are some ideas, which may, or may not be possible, according to your specific circumstances and the features of your current mortgage:

  • Save as large a deposit as you can. While financial institutions will usually lend up to 100% of the purchase price of a property (or more in some circumstances), this will leave you paying more interest and benefiting less from the equity growth in your property. If you can save a 10-20 per cent deposit you'll put yourself in a much better position from the outset.

  • Choose the right mortgage. The residential mortgage market is one of the most fiercely competitive in the country and there are new products hitting the streets every week. Some deals seem attractive at first glance, but watch out for hidden costs - in addition to interest rates you need to find out about arrangement fees, redemption penalties, loan establishment fees, monthly fees and any other expenses.

  • Make sure you have a daily interest or at least a monthly interest mortgage so that your interest is recalculated the day an extra payment hits your account. Some mortgages still calculate interest on an annual basis. Avoid or change these if at all possible.

  • Make extra repayments. If you do this consistently you will obviously pay your loan off faster than if you only meet the monthly minimum payment. You will also cut down on the amount of interest you are paying. However, you need to take into consideration any other debts you might have, as these may need to be cleared first.

  • Some mortgage plans offer a bi-monthly payment schedule, which results in one extra payment per year. It's a great strategy, unless there is a fee associated with it. If there is, simply set aside some cash and make an extra payment on your own.

  • If your career advances over the years, put those pay increases and bonuses to work by sending them to the mortgage company. They tend to just “disappear” into unspecified expenditure, which achieves nothing for you in the long run. Just think, you were doing just fine without that money, and you won't miss it if you don't get used to having it in your budget.

  • Keep an eye on interest rates and, if they fall, don’t reduce your monthly payments.

  • If you have an uncompetitive mortgage now, consider remortgaging. If you can reduce your interest rate, shorten the term of your loan or both, remortgaging can be an excellent strategy.

 

Get Started Now!

There really is no time like the present to begin your quest to pay off that mortgage. Start by reading your mortgage repayment (amortization) schedule. Once you see exactly how much of your monthly payment goes to interest, and what a tiny portion goes toward paying off the principal, you will realize that every extra pound you send reduces the portion of your payments that services your interest expense. It's a powerful motivator for financially savvy individuals.

If you focus your efforts on the task at hand, you will be surprised at how quickly you can eliminate a mortgage. With that mission accomplished, you will find that the comforts of home are even more pleasurable when it is you - not the bank - who owns the home.

We'd like to emphasize again that it might be best to take financial advice before embarking on a rapid mortgage elimination programme or in assessing how the above points apply to you.

We would want to make sure you are financially secure, with no other significant debt, and have money in reserve for emergencies. As qualified Mortgage Advisers we would be more than happy to assist you to review your situation, without obligation.

The best way to reach us is by completing our simple personal enquiry form. We'll contact you by return and you'll also receive a special free report: "Seven Ways To Kill Off Your Mortgage And Build Your Own Wealth Instead".  This report could save you tens of thousands of pounds of mortgage costs.

Get Your Copy Of This Powerful Free Report Today

Alternatively call us on 08454 174425 or 07966 842293

 

Home Our Services Concrete (PRC) Houses Pay Off Your Mortgage Contact Us
The Mortgage Co UK is an appointed representative of Genesis Home Loans Plc, which is authorised and regulated by the Financial Services Authority for the conduct of non-investment insurance and mortgage business. Second charges, commercial loans and buy-to-let mortgages (where the resident is not related to the borrower) are not subject to Financial Services Authority Regulations. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage. Genesis Home Loans PLC is entered on the FSA register (www.fsa.gov.uk/register/) under reference 305920. The advice and / or guidance contained within this site is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK. Genesis Home Loans and The Mortgage Co UK are not authorised by the FSA to give investment advice. The information on this website is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK.

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