How to Pay Off a 25-Year Mortgage in 10 Years On Average Income

guys one thing i absolutely love is going for a walk and on the way back home when i get to the front of the house secretly thinking to myself wow i cannot believe we own that house out right now you see none of that would be possible had we not had a game plan of trying to become mortgage free okay now for us it took seven years to make that a reality and for you it could happen in 20 years 15 years or however long you want it to happen today i want us to explore the idea of becoming mortgage-free in 10 years on an average salary we've also partnered with sprive as a sponsor for today's video sprite is an app that helps you pay off your mortgage faster but more on that later now we appreciate paying off your mortgage early is not everyone's priority at the moment what with the cost of living crisis going on but there is a lot we can learn from exploring a practical scenario together particularly the huge difference that small amounts of payments can make over time overpaying on your mortgage is something to consider strongly of course in addition to investments in the stock market as interest rates are starting to rise now let's dive straight in now guys to make this super practical we're going to be looking at a scenario where we've got a couple ben and grace okay now they live in a community commuter town to london we also made some reasonable assumptions around their salaries according to research the average london salary is around sixty seven thousand four hundred and seventy seven pounds but the typical london salary is around thirty seven thousand two hundred and thirty two pounds now with that in mind let's assume that ben earned thirty two thousand two hundred and thirty two pounds that's two thousand three hundred and eighty nine pounds sixty three in net monthly payments let's assume ben is a graphics designer grace is a solicitor and she earns a bit more than ben she earns 47 000 pounds and takes home 2 932 pounds 97 pence nets which is still below the london average ken mentions so in a month they bring in a total of 5 32 pounds 60 pence of net take-home pay now with a current mortgage of 250 000 pounds let's assume they're paying interest at a rate of 2.1 that works out to be 1072 pounds per month so to now analyze what their numbers could look like if they wanted to pay this off over 10 years instead of 25 years let's cut over to a screen share where i'll be looking at some scenarios hey guys so what we're looking at here is my mortgage overpayment calculator and you can see that a monthly implied payment is 1072 pounds which you can see here as the output i've just typed that in there so we can see what additionally they're going to need to pay you can see also that the interest over the term of the loan is 71 555 pounds now what if they could do it in 10 years what i decided to do was going to look at mortgage market as at the time of making this video and you can see very interestingly there's a 10-year product which you know it's not necessarily a recommendation but it's for illustration it's a 10-year product at 2.78 i'll take that number and plug it in here okay so 2.78 percent now let's assume that i then changed that to 10 years okay keep an eye on that number look at what that does so they will suddenly need to pay 2 389 pounds per month which is 1317 pounds additionally per month yes that's a lot of money but pay attention to what happens to the interest over the term remember we had over 71 000 in interest expected this drops to 36 645 pounds okay in addition to that uh if you notice the amount that they're paying each month it's actually pretty similar to the salary for one of the people uh in this hypothetical example what that tells us uh is that there's potentially uh an opportunity for uh one of both of them to re to live more on one salary which is what one thing that mary and i did on our journey to becoming a hundred percent mortgage free in our case in seven years now the thing i want to illustrate by sharing this is that there's something in this for everybody 10 years might be extreme for you but how about uh a little bit each month imagine i didn't make this 23 years you're shaving two years off and i put this back to 2.1 okay two years off that's an additional 71 pounds per month which i'm quite sure a lot of people with some adjustments in their lifestyles can ca can find on a monthly basis okay if i change that to 20 years you can see again 205 pounds per month additionally we shave five years off the mortgage i made that 15 years again 548 pounds per month additionally and i'm going to be speaking and giving some ideas on how you might be able to do this we'll shave 10 years off the mortgage you get the point okay what i'm really trying to say here is that there is something in this for everybody the key here is to understand that every little matters when it comes to becoming mortgage free what if there was an app that helped you make sure that you're saving bits here and there each month and making those overpayments sprite is a free app that lets you pay off your mortgage faster and save thousands of pounds in interest it takes minutes to get started simply link your bank account find your mortgage and set your limits spri will then automatically set money aside each week based on your spending and with one tap you can make overpayments to your lender saving the equivalent in interest what we love about this app is that one it gives you a lot of control you can easily cancel pause the auto saves that it generates for you and you can easily withdraw that money if you decide in a particular month that you actually needed it for something else the second thing we love you have the freedom to overpay more money if you wanted or less money if you wanted for each specific month and final thing we love you have complete transparency such that you don't exceed the usual 10 requirements for overpayments that most mortgage products allow you on an annual basis with all that said do you really want to spend the rest of your life just paying a mortgage just imagine the possibilities of being mortgage free take control of your money by getting on top of your mortgage so guys sprite is offering five pounds to help start your account and get going using a cold humble five however this code is only active for the next seven days so please head over and download the app for free as soon as possible and use that code humble5 we'll link to it below for you guys to get started all right with all that said let's now share some quick tips for how to become mortgage free in 10 years one is to overpay more by living more on one salary now in the example that ken shared we saw that the amounts that the couple needed to pay per month in order to become mortgage-free in 10 years was similar to ben's monthly salary if they can adapt a simpler lifestyle and live more than one salary then their dream of becoming mortgage-free in 10 years becomes more of a reality ken and i did this ourselves where my salary was used mostly for investments to help with overpayments on our mortgage we also paid with some of ken's salary and also some of his bonuses but the point you're making essentially is that we rely predominantly on one salary yes we did and adjusted our lifestyles heavily yeah yeah we've made other videos on this topic which we'll link to below and above right so the next tip is to earn more through work or through a side hustle okay if you've been watching our channel even for a week you know that we talk about earning more quite a lot on this channel now i've mentioned work because mary's always spoken to lifestyle but you know if you can if you can negotiate a bit more with pay rise particularly as inflation's rising going through your work might be a good way to kind of increase your income in order to potentially be able to pay more uh through overpayments if you wanted to do that an alternative way is for you to go off and start something using your existing skills or acquiring new skills that means that you're able to earn something extra income in our case whenever we did that that extra income was mostly then put towards making either overpayments on our mortgage and combining that with uh additional payments uh by us investing through the stock market we've made various videos if you're interested in starting your own side hustle or even taking what you already have as a side hustle and making some extra money from it i'm gonna link to uh those videos below as well as above you to head over and check them out tip number three is to consider a low 10-year fixed-rate mortgage for example we saw some ranging from 2.78 to 2.99 in the example that ken shared earlier it's unbelievable that you can get such low rates at this current time for the next 10 years we personally have paid rates as high as 5.99 percent yeah so 2.78 to 2.99 sounds like a great deal to us all right the fourth tip is to get a mortgage product without an overpayment cap limit okay what do i mean here most mortgage products out there have a 10 overpayment cap they said you can overpay by 10 so for example if you have a 250k mortgage you can overpay by 25 000 in a year okay now in the hypothetical scenario where if somebody wanted to overpay for more than that getting a product that doesn't have that limitation does actually exist right now we know this because we got one ourselves when we were doing this and trying to pay off our mortgage a lot earlier uh a product and this is not a recommendation that we one of them that we used back then was with nationwide these products are usually ones that you can access via a breaker so our suggestion here is to go and speak to a broker who can uh you know listen to your circumstances and help you identify the right product for your specific needs now just to summarize guys although we use 10 years as an illustration of how you can pay off your mortgage early it doesn't actually have to be 10 years for you it could be 15 years or even 20 years but we just simply want to illustrate your points that every little matters towards paying off your mortgage early and getting that freedom earlier guys we'd love to hear from you in the comments are you currently working towards paying off your mortgage earlier and becoming mortgage-free if so jump in the comments and let us know how many more years have you got left before you become mortgage free and in addition we'd also like to know what are you doing additionally to be able to save that money and make those overpayments that are helping you become mortgage free jump in the comments guys and let us know thanks so much for watching guys and as ever in all things be thankful and seek joy take care take care people bye

Channel: The Humble Penny

Views: 7,693

Keywords: how to pay off mortgage early, how to pay off mortgage early uk, mortgage payoff, pay off mortgage early, pay off your mortgage, mortgage, the humble penny, humble penny, sprive, sprive app reviews, sprive app, pay off mortgage, how to payoff your mortgage in 7 years, how to pay off your mortgage in 10 years, mortgage free, paying off mortgage early, how to pay off your mortgage in 5 to 7 years, mortgage calculator, how to payoff your mortgage quickly, uk, debt, debt free, money

Id: sPRWxIGASI8

Length: 11min 27sec (687 seconds)

Published: Tue Jun 14 2022