Many mortgage borrowers overpaying

robrooo

wotsthat wrote: »

http://www.bbc.co.uk/news/business-20701746 maybe it's the feeling of freedom they seek rather than worrying about the absolute best financial course to take?

I think you are right about it being somehat about the feeling you have when you have paid off your mortgage, but also overpaying is easier when rates are low, because you could keep your payments equivalent to the higher rate, i.e. at a level you were used to before rates dropped, and so won't "miss" the extra money you are paying in. Then there is the credit crunch and recession factor. If things are less certain over the long term, do you want a long term debt?

While not exactly a recent borrower, I paid off my mortgage last week, 14 years early.

I was lucky to be on a CAT standard mortgage, so no exit fee, and no limit on overpayments.

I started to overpay about 7 years in, around the time of the credit crunch, when I felt the future of the industry I work in was not looking so bright, and I decided I would like to be completely debt free, and maybe leave the rat-race altogether to do something more worthwhile.

My overpayments went into a fund which I could dip into, and which earnt interest at the mortgage rate. I did dip into this fund a couple of times for major purchases, then about 2 years ago I started to overpay very aggressively, paying in 5 times what the "normal" payment would have been. Luckily I could afford that level of overpayment: I bought a modest house with a large deposit and only borrowed 1.2x my salary, and also cut my other outgoings to focus on the mortgage. Also I see my house as a home not an investment vehicle, and have avoided the opportunity to "trade up".

Anyway, three weeks ago that overpayment fund was just about the same as the outstanding mortgage, so I decided to pay it off. It took me a couple of weeks to decide. With the fund there I felt I had something to fall back on if things went wrong - I have next-to-no other savings. But even though rates are very low, I decided to pay it off and I am now completely debt free and feel I have more options now.

I'm looking forward to starting 2013 by saving (I need an emergency fund!) and investing my spare income, and in the medium term switching/downshifting to a job with no exhaustingly long hours, less stress, hopefully no 2.5hr commute, no inane management, free from the threat of off-shoring to India and in a field that I would consider more worthwhile, even if I expect to earn only a fraction of my current salary.

So I guess its about lifestyle choice, and if you have no other debts why not pay it off and simplify things.

On overhearing my conversations to my bank on the phone regarding my mortgage, my work colleagues are now all starting to think the same way. We do work in a well paid industry, and they have got used to a high disposable income, with which to get the latest gadgets, flat screen TVs, cars, exotic holidays and keeping the other halves in Louis Vuitton. I was the same a few years ago, but now I cringe when I hear about their latest expenditure and realise how leveraged they are, and appear happy to have thier debt hanging over them for the next 15 to 20 years. I'd rather keep my options open.

exarmydreamer

robrooo wrote: »

While not exactly a recent borrower, I paid off my mortgage last week, 14 years early.

Well done in paying off your mortgage. :T

So I guess its about lifestyle choice, and if you have no other debts why not pay it off and simplify things.

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Absolutely, I used to have a love of designer bags etc. Not a new bag etc in 7 yrs lol. A house is a home and should not be a shackle in your life.

Radiantsoul

wotsthat wrote: »

http://www.bbc.co.uk/news/business-20701746

Don't know how true this is (the BoE don't agree) but it's always seemed clear to me that there are a number of avid mortgage overpayers working towards being mortgage free.

I am sure some people do pay off their mortgage quicker. But the main reason mortgage debts are falling is because of fewer houses being built.

Almost everytime a new house is built a mortgage will be acquired and this will increase mortgage debt. Movers do not often increase their debt by as much, and at the top of the chain will be people who sell to rent or who have died. They will therefore repay all mortgage debt. The removal of newer houses has shrunk the amount of new mortgage debt being created.

The baseline used by the CML is against the normal mortgage repayment, arguably it should be against normal repayments plus "normal" overpayments. I am sure lower interest rates have encourages some extra overpayments, but £31billion is too high.

HAMISH_MCTAVISH

The one third mentioned have overpaid by more than five thousand pounds.

Another one third have also overpaid, but by less than five thousand pounds.

Does seem that most people with mortgages are taking advantage of these low rates to pay down debt and reduce lifetime housing costs.

Mallotum_X

I overpay mine, currently putting in just over double what the basic amount was. The net result will be the mortgage is cleared over 12 years early (Summer 2014).

Whilst it could be argued there would be better investments to make with the money we want the freedom and security that not having a mortgage brings. In this period of financial uncertainty we could stop paying for a while without any real problems.

Percy1983

I plan to overpay in the future, still doing work on the house so thats eating all the money for now.

roswell

robrooo wrote: »

I think you are right about it being somehat about the feeling you have when you have paid off your mortgage, but also overpaying is easier when rates are low, because you could keep your payments equivalent to the higher rate, i.e. at a level you were used to before rates dropped, and so won't "miss" the extra money you are paying in. Then there is the credit crunch and recession factor. If things are less certain over the long term, do you want a long term debt?

While not exactly a recent borrower, I paid off my mortgage last week, 14 years early.

Well done,

I found the less debt i had the less emergancies i suffered ;-) I have modest savings being a few k, my plan now is to shelve the savings and start investing rather then saving and use a credit card as my "Emergancy fund"

crash123

Became mortgage free in 2006 after 13 years of paying. Could have been quicker but we like our holidays and we also bought commercial property with cash, no mortgage.
It has given us the freedom to both work for ourselves. Best thing we did was overpay.

doire_2

We bought our first house in August. We overpay each month and God willing plan to have it paid in 13 years (instead of 25). It would be madness not to overpay.

vivatifosi

We've knocked 1/3 off our mortgage term (years) by overpaying. That was on a shorter than normal term anyway. Our logic is that it is cheaper now than it has ever been so why wouldn't we? Every £10k off the mortgage and we go out somewhere special to celebrate the milestone.