Pay Off Your Mortgage in Two Years

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Pay Off Your Mortgage in Two Years
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Penny Outskirts

Joined: 18 Sep 2005
Posts: 23385
Location: Planet, not on the....

Posted: Tue Jan 03, 06 8:29 pm Post subject: Pay Off Your Mortgage in Two Years

TV program on BBC2 this week:
Thu 5 Jan, 8:00 pm - 9:00 pm

"Eight households were recruited from all over Britain - just ordinary people from all walks of life - to do what most can only dream of; pay off their mortgages in full in just two years.

We meet the Casey Poole family. Sean and Anne Marie both work for banks, but they're big spenders. How far do they get after one year of the challenge? "

Looks interesting - heard the man who made the programme on the radio today, speaking some very downsizery words......

sally_in_wales
Downsizer Moderator

Joined: 06 Mar 2005
Posts: 20809
Location: sunny wales

Posted: Tue Jan 03, 06 8:34 pm Post subject:

I'm effectively doing this, but aiming to get all our debts including the mortgage paid in three years. Its nothing particularly complicated, just a case of working out which debt needs paying off first taking into account cumulative interest, then as one vanishes ploughing the money into the next one. You sort of snowball the money, so as more gets paid off teh rest shrink faster, but never using any more money than you were paying originally.

Treacodactyl
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 25795
Location: Jumping on the bandwagon of opportunism

Posted: Tue Jan 03, 06 8:49 pm Post subject:
Should be interesting. Took me a little longer and a job that I hate but it can be done. The next step of saving in order to afford a smallholding can be just as painfull but at least there's light at the end of that tunnel.

jema
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 28233
Location: escaped from Swindon

Posted: Tue Jan 03, 06 9:15 pm Post subject:

We have been making it a priority, and with a lot of luck on the business front this year might get into that sort of territory albeit complicated by endownments that are not due to underpay out for years.

I hate the mortgage, it is such a large item that you simply cannot opt for a way of life with much less income. I really look forward to a day where the bulk of what we spend is what we can make choices about.

Behemoth

Joined: 01 Dec 2004
Posts: 19023
Location: Leeds

Posted: Wed Jan 04, 06 9:33 am Post subject:
It's our priority as well, no other major debts fortunately so we're lining up a couple of long term plans and clearing the mortgage. It's more efficient in the medium to long term to clear debt quickly than to short term invest, if you've go the spare cash.

judith

Joined: 16 Dec 2004
Posts: 22789
Location: Montgomeryshire

Posted: Wed Jan 04, 06 9:48 am Post subject:
We did it at our last house and hope to do it again here. Not sure if we will make it in the next two years - that will depend whether OH is willing to carry on working away in IT, rather than being a sparkie around here - but we will get there early. And the sense of freedom you get when that last payment is made far, far outweighs any belt-tightening that has to be done to get to that point.

barefoot_boo

Joined: 06 Aug 2005
Posts: 399
Location: Wiltshire

Posted: Wed Jan 04, 06 10:02 am Post subject:
We're also doing the 'snowball' thing sally mentioned. But the size of our debts & mortgage mean that its still going to take several years until we have absolute freedom. Our aim is to be completely debtfree by 2016. Which is quite a depressing thought....but better than if we didn't 'snowball' and just kept plugging away making the regular payments for the next 25yrs!

Goxhill

Joined: 27 Mar 2005
Posts: 245
Location: Lincolnshire

Posted: Wed Jan 04, 06 2:22 pm Post subject:
One of mine could do with something like that to pay off her student loan before she will even consider getting a mortgage!

marigold

Joined: 02 Sep 2005
Posts: 12458
Location: West Sussex

Posted: Wed Jan 04, 06 3:11 pm Post subject:

jema wrote:

If you haven't already done so it's worth finding out how your endowments are actually performing - those "if it increases by 4%, 6%, 8% per annum it will pay out �nnnnn" illustrations are pretty meaningless and give the illusion that it must be increasing by a minimum of 4%.

Two years ago I rang one of my providers to find out how much my policy had actually increased the previous year. With a bit of pressure they told me how to work it out from the annual bonus statement. My policy had increased by less that 2.5% for the previous 5 years and the last year was less that 2%.

So, unless I got an enormous terminal bonus, it looked like paying out less that the worst I was expecting. And I had no faith that terminal bonuses would acually be paid in 2011....

I'd already reduced my mortgage and changed to repayment, and needed the money for living expenses (not working due to ill health). I tried auctioning them on one of the "sell your endowment" sites and the fact that there were no takers seemed another sign that they were a bad investment, so I cashed them in. Paid off part of the mortgage and survived the worst of my illness without going into financial meltdown.

My circumstances are a bit different to most, but I'd encourage anyone working to really thoroughly investigate what their policies are really worth - cashing them in, reducing the mortgage and using the endowment payments to overpay the mortgage might be a better option than keeping them. Or, if allowed, making the policy "paid up" (if that preserves bonus rights and life-assurance) and simply diverting the payments to the mortgage might make sense - you will still get a lump sum at the end of the policy, but obviously smaller.

Having said all that the stockmarket is performing better these days, so endowments might be improving too.....

If you want to pay off a mortgage early it's also important to look for a really flexible deal when you take out your mortgage or re-broke it. Don't be seduced by the lowest interest rate if it doesn't allow overpayments, lump sum payments etc.

tawny owl

Joined: 29 Apr 2005
Posts: 563
Location: Hampshire

Posted: Wed Jan 04, 06 3:47 pm Post subject:

[quote="marigold"]

jema wrote:

If you want to pay off a mortgage early it's also important to look for a really flexible deal when you take out your mortgage or re-broke it. Don't be seduced by the lowest interest rate if it doesn't allow overpayments, lump sum payments etc.

And especially the so-called 'flexible' mortgages that don't allow you to take the money out again if you need it. There's no point putting all your savings into a mortgage and then having to get an overdraft to tide you over a bad patch.

Jb

Joined: 08 Jun 2005
Posts: 7761
Location: 91� N

Posted: Wed Jan 04, 06 4:14 pm Post subject:

[quote="tawny owl"]

marigold wrote:

jema wrote:

That's what I use at present and it works very well. By the time the overheads of having a mortgage and paying off the capital are considered you can almost treat it as a deposit account paying 7% net (try getting that from a normal deposit account!). You may also want to check just how one goes about drawing down funds from the mortgage. In my case it can take a fortnight which is not a problem as long as you know that it can take that long.

jema
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 28233
Location: escaped from Swindon

Posted: Wed Jan 04, 06 4:29 pm Post subject:

I think that for most people sticking with an endowment to the bitter end is probably going to be the best bet. As you will be penalised for cashing in.

I have taken the attitude that the best I can do is simply shovel money into the mortgage plus other forms of saving (though at this stage I think I have actually overpayed beyond what you are allowed to, though as I have never chosen to make the extra payments a part repayment, they are probably just as confused as I am

)

In a sense it all amounts to the same thing, once you have the resources to own what's over your head, you have managed to get off the Hampster wheel at least to come degree.

sally_in_wales
Downsizer Moderator

Joined: 06 Mar 2005
Posts: 20809
Location: sunny wales

Posted: Wed Jan 04, 06 4:51 pm Post subject:

We remortgaged a couple of years ago to specifically get a flexible mortgage. In the process we borrowed a couple of grand more to do things to the house, but managed to reduce the terms of the mortgage from 20 yrs to 15 at no higher monthly repayment just as a result of getting a better deal, so we cut 5yrs off in one fell swoop without doing more than moving the mortgage. Agree its very important to check what you can and cant do though. Ours allows us to 'withdraw' our overspend if needed, which is good to know, though we hope not to need to do it.

wellington womble

Joined: 08 Nov 2004
Posts: 15051
Location: East Midlands

Posted: Wed Jan 04, 06 9:37 pm Post subject:

This year is make or break for our mortgage, its either going to get reduced to silly or increased to silly. I'm not sure which is for the best, so have left it to fate to see where we end up.

If we downsize to a house in the country, the mortgage will go up correspondingly, as its a much bigger house, but we have to fit some small people in somewhere, and I'm told you're not allowed to keep them in drawers and cupboards these days.

ele

Joined: 05 Sep 2005
Posts: 814
Location: Derby

Posted: Wed Jan 04, 06 9:40 pm Post subject:

jema wrote:

I think that for most people sticking with an endowment to the bitter end is probably going to be the best bet. As you will be penalised for cashing in.

we've got an endowment too (with CGNU), though we're fortunate not to have a mortgage any more. I see the endowment as a sort of retirement fund now, which is a bit mad really

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