HOW TO PAY OFF YOUR MORTGAGE IN 5-10 YEARS (2023 UK) - Become Mortgage free on any budget!

hi there welcome back to the my my furfrou channel today my name is Jennifer so how could we look to pay off our mortgage within five to ten years particularly if you're in the UK there is a lot of videos out there if you do a Google search or you do a youtube search they will find a lot of Americans talking about how they paid off their mortgage super quickly often with credit cards and different ways of using their banking system but they simply don't apply to the UK you will find it a really hard task trying to use your credit card to pay off your mortgage I've wound up many a team and even just tried to see if it was possible and always got short time so I wanted to inspire you with some numbers obviously there'll be a graph they'll be a couple of spreadsheets in the course of this video I want to inspire you to show you what is possible now before we dive in let's start some growing rules the first thing to understand is a mortgage is probably the largest date you'll ever take her in your life I'm not opposed to date when it's used in the right places so for me having a mortgage is not a bad thing it simply means you need a home to live in and you're not likely to actually have the large sum of money it would need to buy that out rate so for me it's one of those experiences very much similar to education in some ways where you can't avoid it however the whole goal is in life really to give yourself as much time and financial freedom so that you can do things that you enjoy with your life now I believe getting rid of debt is one of the things naturally we have to do whether that be consumer debt or we're left with just our mortgage the mortgage will no doubt be the largest liability you ever owned as well because of the nature of the lawn no technically although I've described your home with a liability it does fall under the asset category as well so obviously the difference being an asset is something that grows in value that puts money in your pocket every single one liability is something that takes are we your money obviously if we're committed to paying off our home in our mortgage then when you're eventually that home is IRAs nobody can take it from us before we actually dive into the meat of this video I need to see a bit of a disclaimer not obviously this is not personal financial advice for your particular situation the whole point of this video is to inspire you to show you the mass and ways of actually paying off your mortgage very quickly what I will see is your mortgage is very personal you agree to certain terms and conditions when you - can I make sure you understand before you do anything different with your mortgage payment understand what those terms and conditions where how long are you locked in are you in a fixed period of time where you can't maybe make over 10% of the payments H Johnson for example a lot of fixed term mortgages perhaps for three years or five years they will say you must make the minimum payment but you can't go over 10% of the total mortgage left over every single year or you'll be penalized understand the type of mortgage you're and and the penalties if you do make extra repayments we want to keep most of our money in our pocket we don't want to be paying out penalties in charges because you haven't realized the terms and conditions so if you're comfortable you know what you're dealing with with your mortgage I'm going to assume for the rest of this video that you have a standard mortgage where you're not locked down for five or ten years and a fixed time period you're therefore able to pay as much as you like pay off your mortgage as quickly as you can but bear in mind whatever your mortgage details see you have to use them to your advantage understand the charges that could be a pause and perhaps keep within their terms until you can read mortgage and change the terms in some ways now along with that disclaimer let's just say some growing rules as well that I'm going to assume you do not have any high interest credit cards or lawn debt payments to me you've got rid of all of them if you have those in any way you're paying back a loan or credit card please do attack them efficiently before you start to really over pay your mortgage the reason being you can have you know too many fires eat it focus on what is truly important if you want help with actually paying off debt I have a number of tools in my auto pilot money system it's a spreadsheet system that allows you to work out should you pay by snowball method or Avalanche really what's the best way to use your money to attack that day to keep more money in your pocket and to reduce the amount of interest that you pay on it two major factors with any lawn of this nature particular with mortgages that we need to understand we obviously understand the penalties and charges very unique to your situation but there's two things that will play a major factor on how quickly we can pay off a mortgage that being the interest rate that we are paying right now so let's assume we're in a standard rate that's very similar every month but it could be any from one to one be on the Bank of England or whatever rate the mortgage prayed their charges and then time this is also a long-term mortgage a long-term commitment and we know that the longer we leave it the more fluctuation that mortgage could have now obviously the nature of a loan means we are also responsible to someone else for making a decision about how much money we or the interest rate and how long we are actually are paying for when we borrow money in any form we're then in debt to that person we're then under their terms and conditions so whether you want to pay an interest rate of 5% is not your decision they will charge anything you simply have to meet it or you have to go somewhere else the other thing with mortgages well we're not how they actually structure your mortgage isn't it simply that you have one fixed amount and the principle of what you're actually borrowing and then an interest payment on top and every single month you're eating into both equally so you're paying off a part of the lawn and some of the interest on the total mortgage how it actually works is using an amortization schedule so for example if you pay 500 pounds is your mortgage payment right now for our 25 year mortgage you might find that the very start year one you're only actually paying a hundred pounds off the mortgage principal June and 400 pounds is towards them interest payment of the total lon so always be aware that very much at the start is carefully towards the interest payment little bit is actually paying off the loan jus as we move into the mortgage deeper overtime then that starts to switch there so there's that sweet spot maybe halfway are sorted in the mortgage when you then flip to more sawed off the capital rather than the interest payment but the reason that Bank does that obviously is people know that you're not going to have that mortgage potentially for the full 25 years I think it's smaller amount of the mortgage that's due you're likely to try and find ways to pay it off completely so I would say of your monthly payment that is a default that you have to commit to there are obviously that we can over P is by putting lump sums as they come our way into the mortgage now that is a great method of doing things obviously if you've received a bonus from work extra money but you haven't budgeted for you can simply chuck it at your mortgage and then you know that you're reducing your day however a lot of online calculators don't make that so easy that you can actually work out their fate long term every single year you're paying and a bonus perhaps of a couple of days in Holmes what's the difference that that's going to make over those 20 25 years I use a money-saving expert calculator and I'm going to show you that as an example if we were to chuck a large sum once in a while at our mortgage what would that effectively do to the team pH of their mortgage jus then what I would recommend also to slowly eat to your day perhaps without that big financial burden of lump sums or thinking about how putting a larger amount every single month it's your mortgage your work for you perhaps consider my team percent rule now the 10% rule as long as it works some of your terms and conditions essentially means that I commit to 10% extra of my monthly installment every single month on any form of date we have we only have our mortgage payment right now but essentially that means it stayed over the 600 points of our mortgage I'll usually put in 660 pounds with 10% extra roughly the pace of a couple of T queries every single month note that action are warned that we've been committed to for the past number of years has taken our 25 year mortgage down to 22 years small sacrifice but a huge difference and that's very much within our terms and conditions we won't get penalized for that so I'm going to show you now on the money-saving expert calculator I'm gonna give you an example of our mortgage the difference in the time and interest payments making those lump sum some larger makes it really do dig into your mortgage I'm now going to show you on the computer why I believe this additional strategy and it falls on very much my passion for investing maximizing our money might be a really great way for you to consider paying off your mortgage a lot quicker it's a strategy that we are applying in our life so I would say about 10% rule reducing the term this is how also we're combating our mortgage because we're using the pair of the stock market and high interest savings accounts we're actually allowing our money to grow more money I'm gonna show you the real number examples that you can have that switch now I'm going to show you throwing a lump sum into your mortgage the difference of that will do obviously it will take in the time of your mortgage and the interest payment but also I believe in the power of your money making money and that's why I think this video is very different from other ones you will see they were often talk about throwing those larger stumps of money obviously gets you mortgage free quicker but what happens when you've used up that money if you're using every single bonus you're throwing into your mortgage that money then you do not have in future what if there was a better way of using those lump sums are consistently saving to actually fund our mortgage or pit off completely but then still be using that money in some way so what I'm talking about here is as soon are we instead of using money to through our mortgage can we save or invest and then end up paying off our mortgage plus also have that back source that savings pot that is then going to make more money for us so I'm going to show you on the computer a compound interest calculator as well that actually shows you that break point when you can very much have a savings are investing pot that could be paying off your mortgage payment every single month in every year and then it will even be a savings pot in there for you for a future that's generating more money so it's a different way of think about rather than throwing money at a date can we actually make an income source happen outside of our normal working life that actually pees for the mortgage payment and more and is ongoing for the rest of our life so I'm on the money saving a spare over payment calculator fantastic tools that they've gotten our website and I like to use it just a break down the effect that you could have on your mortgage with the first scenario which is over peeing perhaps once in your mortgage lifetime or consistently what will that do to the mortgage well obviously I'm going to assume a couple of things we're going to assume that when our standard variable reor we won't get penalized of actually making overpayments of any size so be remained if you're in a fixed mortgage right now as I've said before you need to be aware of your terms and conditions and penalties involved do not make any of our payments and later understand if you're going to be penalized and the charges involved so using their calculator if for example on a hundred and fifty thousand pay mortgage for twenty five years repayment that means we're eating into the mortgage and the interest I'm going to go with an interest rate of two point nine percent which I kind of think as a median rate now as I'm filming this video obviously interest rates can go up and that's going to vary the results you get but if we were to make a one-off payment of five thousand pounds perhaps you get a bonus perhaps even you made a bit of savings in your normal spending if you did that once in the lifetime of this mortgage what I think to it that half so if we hit calculate of course it's going to do that for us and that five thousand pounds is effectively saving us just over five thousand pounds and interest alone we're putting a big chunk of it towards the interest payment and that's obviously because we're using an amortization schedule so most of the payments at the start of any mortgage will be towards the overall end chase gained on the mortgage as a thank you to the bank for lending us the money you're paying that off first highly proportion about 95 percent 90 percent of your money at the start is purely the interest payment then it starts to switch the deeper into the mortgage you go however we've saved one year two months off our mortgage by doing that now if you wanted to apply my 10 percent rule as standard which means that instead of just paying the minimum amount you're contracted to on your mortgage you actually commit to 10 percent of that monthly amount extra every single month so if I assume that with that 150 thousand pay mortgage your payment is probably around seven hundred pounds so if we made a monthly reoccurring overpayment of seventy pounds every single month what damage with that do on the mortgage we can see that small amount in that 10 percent extra every month commitment is actually taking nearly eight and a half thousand pounds off the entries three years two months we will be mortgage free quicker you can see that in the graph just over at the 22 year marks over the 25 year mark so that small over payment commitment is a huge first step if anyone wants to pay off their mortgage early now what I suggested or by the title video is how can we pay off within 5 to 10 years if you don't have any penalties you don't have any buddies about how much money you're throwing that your mortgage so this is where I want some of the magic to happen and for this I'm actually going to assume as well that the mortgage rate that you're being charged for 2.9 percent I'm using as an example I'm going to assume that interest rate on your mortgage for the rest of this video is much lower than you would get by investing or a high interest saving account now I'm going to do this I'm going to show you what would happen if instead of paying down our mortgage and lump sums we actually decided to invest or sieve the money that we would hope could pay off our mortgage early so for the next part the number crunch I'm going to give you I'm going to use this example of 2.9 percent on the mortgage and as you see with my investments and the savings vehicle we'll use to grow our money out save our mortgage to effectively peel off that quite a difference between the two amounts of interest payments investments and a high interest seeming account are giving us far more consistently over long term than the current market rates which tend to be between two and a half percent at the moment even up to three percent then this method in theory will work or certainly will give you that advantage because we're moving our money to somewhere that's going to give us more interest than the interest on our mortgage so bear that in mind you have to see there's very different interest rates you have to have the savings or investments making you consistently more an interest than your mortgage interest payment it's not personal financial advice for you use it as something to inspire you to see what you could do long-term with your money that could really make a difference in your life so in the notes section I'm going to go into a compound interest calculator we're going to flick between the two of how much were over paying our mortgage that particular schedule I drew up which was actually paying off two nearly three years early and what we can do if we put additional money I say than a high interest savings account or investments so my favorite tool is the compound interest calculator on the calculator st. now what I want you to be aware of we're going to do some basic calculations now what would happen if we decided we were going to commit to the mortgage payment doubled every single month for the rest of the mortgage well let's go into the mortgage overpayment tool okay and let's put in instead of 70 pounds over payment so in the example I gave you we're going to assume that the monthly payment has ruined about seven hundred pounds in this particular example so if we all repeat that we won't get any fees we want any penalties so if we committed to doubling the mortgage payment every single month putting that into the mortgage and the traditional scenes we would actually be mortgage free and roundabout year 11 so almost hitting our goal so now we're starting to get interesting we'd actually save thirty-seven thousand pounds alone by doing that an overpayment doubling of the mortgage however if we to say instead of paying into the mortgage what would happen if we actually saved or invested that money instead and this is where I want you to explore the growth and the compound interest on your money and actually our way to make money and grow and keep growing and make as a source in your life rather than something getting rid of a deck with it so let's go into the compound interest calculator we're going to assume for this example a five percent year-on-year growth some high interest savings account you might get that if you lock your money way for a long time such as five or ten years that start mark again it depends what index funds what bonds you're picking but I think that's a good ground average so we've still got the difference between our mortgage payment at two point nine and this five percent so there's still a good gap there that we can feel confident that we're making some benefit of putting our money there calculation period the maximum 25 years of the mortgage is going to be every single year compounding and then we're going to put that mortgage payment instead into the compound interest calculator we're locking it away in a lower integral so you'll see first of all if we committed to that for 25 years we'd actually have just over four hundred thousand pounds in our savings pot but the other values period of is this one which is the yearly interest so that's every single year you can see that going up that's how much interest through compound interest that part of money is growing by and it keeps growing that's the nature of compound interest so you don't understand compound interest please do check out my video all about it to understand that it's the pot of money plus interest that keeps growing more and more and more it gets bigger and bigger we actually went back and we saw that we were paying that off with any 11 years what is actually the amount of money we would need to pay this off a far sooner so if we actually went to the original example which was just making the normal payments so if we went back to this example we're not going to make an overpayment at all I want to know what is the sweet spot actually where we could pay off our mortgage with this money that we've been putting aside so if we look on this graph so if we take the year 10 mark for example it needs over one hundred two thousand pains to clear the mortgage effectively let's go into your teen and our sums and we actually see we have a hundred and eight thousand pounds setting there if we saw at five percent year-on-year growth and the other flip side of that is the year interest we're actually getting about three hundred and twenty pounds every single month effectively because that's the year lemo on interest payments added on so that would keep auto-generating everywhere to withdraw that year everything go back dancing things five days and keep auto-filling if we saw five percent year-on-year growth and I could actually take that I stopped there that would keep filling and I could pay off their my mortgage half of it would be with the interest payment however the great thing is I could completely withdraw all my money so that one hundred ain't pains would clear our mortgage completely if we saw it five percent year-on-year growth consistently now the reason I save between five and ten years I'm going to show you why is because we they want to use this money that's the interest and that's where the magic happens if we were to simply pay off the mortgage we would back down at 6,000 pounds effectively in our savings part in our investment portfolio however if we left this and instead withdrew this money that was an interest that would keep auto generating more and more money for us you can use that amount to pay your mortgage so for example if we saw a little bit higher interest rate let's see 8% which is closer to the S&P 500 it's a hundred year average let's see with investment index funds you will see about the ten about actually the nine year mark we would then be able to pay off the mortgage but their mantra getting every single year is actually closer to eat those in pounds and interest those auto-generating if you like our stocks are shares our values are increasing by that 8% year a new growth on average so it keeps filling even if we withdrew that small amount of money the hope would be it would also fill right back up again for the next year and so that's the beauty of actually using money in different places so as a beauty of actually putting your money in certain vehicles if we pay off as I said our mortgage with that money instead well it effectively we are mortgage free within the ten and a half years but we've got no extra money to show for it if we actually used in high interest savings okay or another vehicle such an investments within that ten years you would actually have something that was then making money for you you could pay your mortgage payment if you still had any you could pay off your mortgage or keep that monthly amount ongoing because you've got our vehicle to actually pay that amount for you instead of having to air in it and that's really understand the power of your money where are you putting it and we're cannabase serve the purpose that you want can you actually find a way of growing your money to make an income that you're using that you're saving that you have this particular goal for or are you better to actually choosing the original option and get rid of maybe the expense get rid of the mortgage that decision is completely up to you what I would prefer though is having multiple passive incomes that way for example if I was growing my portfolio and you could easily do this at an investment I so we were allowed up to 20,000 pounds deposited per person per year if I was using actually in this week I know I'm developing a passive income that will just keep going on and on however long I'm using it or saving it now if you're looking at this going well my mortgage payment isn't seven hundred pounds a month that is fine in the UK per person you can have twenty thousand pounds saving investment eisah so really unless your mortgage payment was above 3000 pounds three thousand two hundred pounds a month this same principle could apply now the reason I say aim for paying off your mortgage within five to ten years is because with the stock market and I really encourage you to watch my stock market videos to understand more about how it works the volatility the rests are involved there's no guarantees getting 5% or seven or eight percent year on your growth is not guaranteed some years you might make plus fifteen some years they might make negative four it's the average and that's why you need that long term you need 5 10 even 15 years so that your amounts are stable in some way so that if a recession hits as a drop in the market it doesn't affect what you're actually wanting to do with that so without paying off your mortgage I believe is a really critical life decision that you can make obviously i'm explained actually believe in the balance of to ease that you can do that and i believe that will be the most successful for you the reason being we're focusing perhaps in a small overpayment of the mortgage but we're then saving or investing we're creating an additional money source in our life so that we can pay off the mortgage but then you've got that source for life as well this isn't just finite when the mortgage goes away we don't have that commitment we then potentially could have an income source and a savings pot day only when a lament songs come our way I know the default would be or throw at any form of day we really have to take stay back and see what is the best use for my money am i messing it on a potential uses where I could then make more money and that's where for me right now because our mortgage payment is well below any returns I can make on investments long term between five or ten years if I put it in an account and more than I'm building income source that can pay off that mortgage perhaps in five or ten years instead so definitely work out whatever fits rate for your circumstance there's no right way of doing it but hopefully I've given you the math the inspiration to show you that isn't very much possible that you can do this with any form of budget and also if you make a commitment to save and base and pay off your mortgage you're really going to be in the best of both worlds if you have enjoyed today's video I'd love if you give it a thumbs up all helps with someone else finding it and do drop me a comment below if you've got any feedback at all if you've put Italy been inspired by this video thank you so much for watching I'll see you very soon

Channel: Jennifer Thomson

Views: 86,499

Keywords: how to pay off mortgage early uk, how to pay off mortgage faster, how to pay off mortgage early, mortgage calculator, mortgage payoff, how to pay off your mortgage in 5 years, how to pay off your mortgage in 5 to 7 years, how to pay off your 30 year mortgage in 5 years, how to payoff your mortgage quickly, home mortgage calculator, home mortgage tips, home mortgage loans, mortgage interest deduction, debt free, pay off mortgage, mamafurfur, amortization schedule

Id: r9k5ebqbSGM

Length: 23min 4sec (1384 seconds)

Published: Tue Mar 17 2020