HOW TO PAY OFF MORTGAGE EARLY UK

Hi Everyone - Welcome back to my channel my name is Jennifer from Mamafurfur You know it's the home of smart saving, smarter spending, smart living strategies - Today I want to talk to you about how to pay off your mortgage early particularly if in the UK - if you've done a Google and our youtube search recently there's a lot of videos for the US and I'll explain why that they are not so good if you live in the UK a couple of differences but if you're interesting paying it more be sure to stay tuned and if you do not currently have a mortgage do not worry - these same principles can be applied to any lone whether it be student debt or whether paying credit cards it's the same philosophy but obviously this is particularly if your interest in paying off your mortgage early it's one of the steps to being financially free. If you're interested and this channel is all about giving you financial and tame freedom I'm doing it for my own family we're creating a life that we love and want to help inspire others to so if that is saying something that you want to be involved in hit subscribe so you never miss any of my videos. So let's talk about how to pay off your mortgage annually and this is particularly key in the UK if you're watching from somewhere else in the world like the US or Australia you have a couple more choices available to you which is actually quite exciting then the UK we do and have as much flexibility so I'll talk you through the options particularly for the UK so let me tell you just a bit how a mortgage on a large loan is structured from the bank you obviously borrow a set amount let's say for our mortgage it could be one hundred fifty thousand pounds they also charge you an interest rate for borrowing that money so for example they are charging you a fee for lending you that money upfront of course and that's usually percentage rate and it's given as an average percentage over the lifespan of that Loan. so with the loan as well you will find as there's one word that describes most loans and it's called Amortization so let me just go over what is Amortization and I've got my whiteboard because you know I love my white board. So Amortization is basically three three parts to every can a big loan that you take from the bank it is you have the principal which is basically the physical loan amount so if it's a hundred and fifty days you borrow from the bank the principle is that hundred and fifty think those are things that you're paying back to the bank then you have that interest component which is obviously our huge amount of money that they are charging as a percentage normally for having that money all right a certain time fee to tame being the actual third component here so in the UK of course we can have mortgages I believe up to 13 years perhaps even 35 and you can have it as short as you like so this is per margin potato same principles applying for a loan of course but those are the three components and of course a tame you can actually fix when you take out the lonely ticker at that mortgage you agree to say number of years to pay off now the reason we brought her amortization was because people when they're buying properties are buying investments what they would do is the bank would only lend them that money for a small amount of time like five years like 10 years at the most and what happened was your monthly payment to repay the bank with that interest was a huge amount people could not pay and what happens when people can't pay a mortgage our Lord it defaults which basically means that you have no way to pay that back you refuse to pay you go bankrupt and the bank loses our way to get that money back so they decided they wanted a way for people to get these loans over a longer period of time but with the bank's also making sure they got that interest before you default it tends to be that a longer you have a loan there's two things that usually happen Gavin long let's say for 30 years which is probably about the average in the UK 25 30 years now a lot of people will pay off a loan or mortgage early because towards your maybe 50 60 year old they will be able to cry a little bit more savings and they tend to throw and clear off the mortgage so the buyer wants a way to make sure they got all that interest all that value back from you as quickly as possible and this is where amortization comes in so you may not actually realize this everyone sometimes things that are long as you pay a fixed amount see it's gonna be a fixpoint every month for the next 10 years 20 years whatever they think that they're paying the set amount of interest as a little part every month it doesn't happen that we because the banks are smart they know that you may actually pay off that loan early or you may even start the default so this is what happens it's actually something like this graph where the ratio of the amount of interest European to the actual amount European off the principal at the moment you're actually physically pink dome of the amount of money that you borrowed from the bank so you don't realize on what people don't realize that roughly 90 percent of your payments at the start are purely interest covering for the bank 10 percent usually goes to the principal and what happens is over the lifetime of your mortgage or lauren that starts to sweat rain so it goes from paying with the principle off and the lace of the entries so eventually of course you'll be paying pretty much all the principal down and just a lot of like moment trees if you've ever actually gone up to your mortgage account perhaps it's at the bank you can go and actually see the interest payment getting smaller and smaller every single month that is why they sent up this me so that they get all their money all the profit there you want to rate at the start and then you start to actually pay off the lawn so it's a frightening thing to think that happens without you realizing it but we can use this to our advantage what you really want to do and if you want to pay off your mortgage early is really attack this principle more than the bank wants you to so that actually means safety out regular over payments so we're going to talk to you today about actually how to do that and how to pay off your mortgage early so the first way to actually pay off that mortgage early or that one is to use my 10% rule on this channel with mentioned a prepayment before I personally our family had 22,000 pounds worth of dates just a couple years ago and my husband brought it from a previous relationship and we attacked at date and this is the principle that I use we've basically every month committed to paying 10% more than the minimum and that's where you actually eat into that principle because you're not just getting the bank what they want you're beating them at their own game and the great thing is that 10% so let's see your mortgage payment could be six hundred pounds a month if you I actually added another 10% on to meet it 660 pounds you'd over the course of a year actually be giving them over one extra payment a year that little bit extra which hopefully would entreat the bank for you and your personally with the excuse the pun that little bit extra then can take a twenty five year mortgage down to twenty two years without one simple action paying 10 percent more or if you can even stretch it further and further but without limits in life that is a great place to start so that 10 percent real is super super easy to say top if you have a mortgage with your bank of course you can just go to speak to them set up a 10% extra over payment every month let's it go an autopilot knowing that you are overpaying on that principle and if you go to a particular website money-saving expert you will actually find in the UK there's a great calculator there I'll leave the link in the description bar where you can see the difference that paying that extra money consistently will make on your mortgage or Lord it is truly inspiring so the second way that you can make sure you can pay off your mortgage early is to use those fixed-rate mortgages wherever you can in the UK when we take care of 25 30 year loan or mortgage we also have the option to tie down parts of it for a fixed rate so if you do not have a fixed-rate mortgage what will happen is your mortgage will be subject to the standard interest rate at that particular month now in a bank that could actually go up everyone consistently it could go down which means your payment changes according to the entry the Bank of England now it's not very green if you're budgeting and you're trying to stick to a strict lifestyle of knowing exactly what's coming in what's going out and where you like to put all you'd ever Dean's of money when you'd see to the bank I'd like to fix my terms for let's see two years for three years they trying to get you the best deal and normally you can maybe even lock it down at the moment probably 2.1 percent 2.5 percent for two years the longer the length of time that you want to walk down your payments for for a set period of time the interest rate will go up and the moment you can even get 10 years I hope your mortgage is locked down I think for our around with 3 or 4 percent interest I'm particularly light when I can get a fixed-rate because I know how much my payments are you're also not subjected to the standard rate which camellia any point go up down whichever way the Bank of England state but also allows you to make those Albrecht payments so the bank do want you to take out those fixed rates so that they guarantee their money but they also know that you're locked in for a certain period of time so just be aware that sometimes they will have restrictions like you can only meet 10% extra all repayments in a year so if your lawn has 150,000 left you're only allowed to make 15,000 extra and overpayments be sure that you know the terms and conditions when you sign up for the fixed period of time the fix tree so that you do not make any extra overpayments and get penalized for it so their third way to pay off your mortgage early of course is similar to the 10% rule when you receive perhaps a bonus from work or perhaps your say business is generating a little bit of money consider if it's worth putting that extra money into your mortgage it will after all be eating down with principle the physical horn that you took from the bank which is great because you're not thinking or entrance you're going to save yourself interest payments but really consider if it's worth throwing it into the mortgage I like to use the money saving expert calculator that I've talked both as well in a stable principle but I can't see how much interest I'll save by putting the 10% rule onto my mortgage when I see it if I maybe had a bonus mat month I like to see how much I could actually save off my interest payment and shorten my mortgage if I threw it in there so it's really quite inspiring every time you seem a little lump sum making sure that you're putting it in the right place for your needs if your goal is to be mortgage free make sure you're focusing on any spare money going into that mortgage if you want in basement perhaps use it there my next tip of course is to shop around whenever you're not in a fixed rate and tank period of your mortgage and the yuki i've talked about that we can save up although we have a 30-year mortgage we've saved up maybe four to three five years to put into effect stream when you get close to coming out of that fixed-rate time periods maybe two or three months towards the end the world is your oyster you can actually shop around and it's not that difficult to switch your mortgage to another bank usually they'll be maybe small fees to switch but if the interest rate is a huge difference and it can make such a difference on your mortgage payment and a total and mainly you actually pay back take time to shop around use money-saving expert use any comparison sites you can because you never know you could save yourself money make sure of course that you are very good looking at your budget if you're struggling make notes and make up that 10% of our payment or to put extra money into your mortgage to eat down that principle I have devised the 7d autopilot money challenge it's a free challenge that's on my blog I'll leave the link below and it basically teaches you to look for ideas and your current spending habits well you could use money a bit smarter it means looking at what actually you're spending every single month are you really getting value from what you're spending as you maybe leads to generate more money in your life have you thought that embracing have you thought about creating a little safe business if you're interested in seeing how I could help you meet your budget smarter I never ask you to scream conceive I only ask you to use your hard-earned money as best as you can go to mama for AFRICOM and take that challenge my final tip on how to pay off your mortgage jelly's of course starting all your numbers don't be frightened of the maths and bolt it's very easy to actually go onto your lien vent banking and see your mortgage see actually break it down into what you're actually paying every month how much interest your pink where it's all going don't be scared to know exactly how much you could see by making over payments and particularly to go and see how much mortgages dropped by every month the interest rate and how much our interest payment has dropped by and then I like to use that comparison tool money-saving expert but if I get inspired and thinks you know what I might even try to put C&H or 10 pounds consistently every month what would that do for a mortgage every time that you play around with the numbers get a bit more money olestra you will absolutely have the power of back in your court rather than in the banks so unless a nice little section I want to teach you our principle that if you're able to get a large amount of money saved up - throughout your mortgage how you can pay off your mortgage super quickly perhaps even five six seven years now if you were to do a Google search on youtube search right now for the fees going to pay off your mortgage early it will be filled with a lot of us-based videos that the information does not really apply to the UK reason being when I was doing my research for this video and in my own life the US are able to use a credit card to pay off their mortgage if they wish in the UK we do not have that option as far as I'm aware I formed a couple of banks but one body would not take a credit card payment and a couple the other ones that I've tried the reason behind that is if you think about it you've probably got that card from them already so they have land lent you a certain amount of money let's say 10,000 pounds credit limit they do not want you to use that money against them to pay off that bigger day they're gonna lose interest payments from you so they will not allow it so as it really you know within their terms well in their knives it's their money that they have given you that created nought for that template upon credit card so they can do what they want in the u.s. they do not have those restrictions they can use a credit card so this is why this particular version using amortization and throwing ones that your mortgage works for them to get rid of they're more of you super quickly if you have developed strategies that allowing you to have saved businesses and that you have a good solid large amount of cash flow in your house think about using this strategy and you'll get rid of your mortgage super quickly as well managing your amortization when we talked about it was the basic fact that you at the start of a mortgage will be paying off a huge amount of interest 90 percent of your payment all the interest 10% will be the physical principle the actual Borden part that switches as we get longer into the mortgage in the u.s. what they often seem to actually pay off their mortgage early is to use that credit card that Lane up credit to credit and funds to you that you don't already have in your purse right now use it to advantage and pay off your mortgage F for example every time you maxed out your credit card against your mortgage so you fund the bank you said right put down a thousand pounds or name and a half those and prints at my team phase and creat limit against my mortgage and then what you do is you may then use your what monthly wage to pay off the credit card now I know what you're thinking credit cards are usually 20% interest rate charges this only has a 2% Jennifer yes but the total physical amount of money you actually give the bank back on that 20% is far smaller than you pay them for the mortgage so that's why people say to use it that because of physical all of the interest rates are vastly different it's the physical money that could be different that card may only have a minimum payment of 90 pounds whereas you are paying 600 pounds or 500 pounds an interest on that every single month so well they will see it as as soon as you can through a money a big lump sum and what will happen is this will start to go down then use the next let's see if you need 6 wages to click on that card take that time meet your normal minimum payments in your mortgage and your credit cards and through your money in the credit card to clean it then as soon as you get that limit down to 0 again do the same again through a money otter and do the same and basically that's how within such a short period of time because you're throwing money and you must make sure that the bank knew that you want off the principal not the end trace when you say it not up because you're reducing the physical amount of law and that's why in theory let's see if you were able to do 10,000 panes and 150,000 lon even every six months or so you would quickly see that in under maybe seven years you could have paid off that mortgage mortgage completely which is incredible and fortunately it doesn't work in the UK with credit cards so we actually physically need to have that 10,000 paints saved up so that could be a goal for you you know you could make a commitment that you're gonna every time you work towards savings in your bank that is sent only be committing on investments or putting it towards a family quality you're going to like for the next five years through all money at your mortgage then it is totally possible to use the bank against themselves and through an anthem I personally I would rather do a couple of different methods I've talked about here and it's just a shame that the u.s. they aren't always like the different methods that we can get there a little bit quicker but it's the only method that works by throwing junk songs out it use money saving expect to find out how much you could save but always remember there might be some penalties involved in paying off unborn early thanks so much for watching today of course all the principles I talked about the 10% overpayment show up in your road you know even see if you can throw money out as best you can using the tools online to see how much money you would actually seem interest rate you receive bipinnate rewards of cash after make sure you apply all of this when you're dealing with the mortgage are actually any loan at all whether it be a student loan credit card day anything of that really take time to see if you could apply these in your own life and I say I absolutely apply the 10% rule to our own date which is our mortgage at the moment it works for us anytime we get a lump sum I came to st. if I'm based or put into the mortgage I based it on the current situation on that time take that time to get as much financial knowledge as you can it truly will change your life when you are smarter than the bank be sure to hit subscribe leave me a comment are you gonna use some of these tips and tricks in your own life are you maybe saving out for your first home and no you know I'll wait to pay off that mortgage early let me know in the comments I'd love to hear from you and I'll see you very soon

Channel: Jennifer Thomson

Views: 123,524

Keywords: mortgage calculator, mortgage payoff, how to payoff your mortgage faster, how to payoff your mortgage in 5 years, how to payoff your mortgage early, how to payoff your 30 year mortgage, how to payoff your mortgage, how to payoff your mortgage quickly, save money hacks, home mortgage tips, home mortgage calculator, home mortgage explained, home mortgage loans, home mortgage interest deduction, how to pay off mortgage early uk, how to pay off your mortgage early uk, mamafurfur

Id: dX0Cpx_T--o

Length: 18min 55sec (1135 seconds)

Published: Tue Aug 21 2018