Paying off your mortgage

[Feakins]

Yeah you have got a good plan there as long as you pay it in, in 3 years which I'm sure you will.

 

Isn't this the same as the old endowment mortgages, paying interest only, trying to get a better return by investing extra savings each month and then paying off the mortgage at the end of the term. A lot of the money was poorly invested and people had a shortfall and couldn't pay off their mortgage.

 

All you need to do is work out how much you would pay off on a repayment mortgage in 3 years and if you've saved money with your plan go for it.

[Jurgen-Jm-Imports]

you are borrowing a fixed amount, that amount stays still (i.e. it is not repayment). You have to pay interest on the loan to keep the loan amount...

 

for me the flexibility was a big bonus + I can up the payments in the future if it is not on track. Like for like it made a cheaper mortgage per month + an isa set up in this way came with life insurance etc as well

 

if the interest rates went crazy, I could put a freeze on paying into the isa, simiarly if I do well I can boost it up with additional payments. Works for me because the money in the isa really is cash I could take at any time (not that I probably would but who knows what the future may hold...), so it's a nice flexible setup

 

so basically what i suggested i can do providing every 3 years on renewal pay 15k technically knocking it down to 185k 3 years later 170k... this works if its a interest only mortgage

 

 

am hoping you say yes lol as this is the way i want to do it til aout 60k left then take capital and interest

[Jurgen-Jm-Imports]

Yeah you have got a good plan there as long as you pay it in, in 3 years which I'm sure you will.

 

Isn't this the same as the old endowment mortgages, paying interest only, trying to get a better return by investing extra savings each month and then paying off the mortgage at the end of the term. A lot of the money was poorly invested and people had a shortfall and couldn't pay off their mortgage.

 

All you need to do is work out how much you would pay off on a repayment mortgage in 3 years and if you've saved money with your plan go for it.

 

yer looked at repayment and at 200k nothing gets payed off over 3 years lol so i thought why not save 150 a month and invest over 3 years = 5400 so in 3 years time even if i dont add any more savings to it i still can take 5400 of 200k to make it 194600 which is better than paying more each month and still owing on the fixed loan....

 

 

of course this system only works if your carefull and do save or invest it..

 

 

thanks all for the advice want to make sure it was a good idea

[lambertpig]

over the last 5 years lots of people have made lots of money buy ing interest only then investing the spare cash in other property on mortgage with the big house price hike giving them a big return.i unfortunatly did not do this even though i could have done, im a bit gutted now as i thought about it a lot back then

[chilli]

doing it over a span as short as 3 years may not be cost effective unless you pick the right mortgage lender that doesn't sting you with fees... that's the key. A 5 year plan might be more sensible.

 

I looked at mine, approx 5 years in and it is worth a good 5th of the mortgage, it's nice to have that clear cut visibility of the money.

 

It is like endowment but you don't trust the money to dodgy investers lol and can monitor and adjust it at every step of the way

 

to be honest I'm no expert, I just have what works for me at the moment.

 

the way I look at it, minimise your replayments per month/maximise what you can buy because the biggest win is to be a good way up the property ladder and cash in on the house price rises (or invest in multiple properties, I would of but I was not that brave at the time)

[Feakins]

http://www.yourmortgage.co.uk/08calculators/08_calculators2.htm

 

If you go there and click on the mortgage calculator you can see an example on a graph.

 

One thing I don't understand is...if you borrow 200k at 5.5% over 25 years it will cost you 1228 a month repayment and 916 a month for interest only.

So interest only saves you 312 a month. If you saved up that every month in 25 years you would only have 93600 and not enough to pay off the mortgage. But I guess this doesn't include any interest you would have got on those savings.

 

This is harder to work out than I thought.

[chilli]

tax free interest on the savings make a big difference, and they are cumulative if you dont touch the money, thats the thing...

[Jiversteve]

Paying off your mortgage is a wonderful thing. Less stress and worries. Especially great if you keep an endowment running and then buy a supe on the proceeds when it matures.

[tbourner]

Also remember that you never make or lose money on your own property (you can't sell it unless you intend to rent until you die, so you never get the money it's 'made'). You'll only ever make or lose money on a second property - might be worth paying a set amount on your own mortgage and accepting that it'll only be paid off when you retire - then buy a second place with the savings.

[Jurgen-Jm-Imports]

http://www.yourmortgage.co.uk/08calculators/08_calculators2.htm

 

If you go there and click on the mortgage calculator you can see an example on a graph.

 

One thing I don't understand is...if you borrow 200k at 5.5% over 25 years it will cost you 1228 a month repayment and 916 a month for interest only.

So interest only saves you 312 a month. If you saved up that every month in 25 years you would only have 93600 and not enough to pay off the mortgage. But I guess this doesn't include any interest you would have got on those savings.

 

This is harder to work out than I thought.

 

so if its interest only and say fixed for 3 years on the scheme you said u save 312 a month which = 11,232 that you can pay off in a chunk or invest maybe

[tbourner]

Or as a deposit on a small flat, that you can then rent out.