The Urgent/Important list I blogged about last month has lessened somwhat now Martin and I have focused in on what really needed to be done in our lives. A few new bits have made it onto the list, some have come off. There is one very important thing on the list that we both forgot to put on last time, mainly because doing it has become part of the furniture now.
- Pay off mortgage early
We've been overpaying our mortgage for years now, but have been doing it more as somewhere to stash surplus cash and bring the overall term down a bit. We never actually set a target for when we want the mortgage paid by and then moved heaven and earth to find the money.
Yesterday we finally did.
If Martin and I continue as we are the mortgage will be done in around 7 years - that is half the term it would be if we were not overpaying.
If we can find an additional £245 a month to add to our payment and current overpayment, we can be done in five years. Do-able with some stretch.
If we can find an additional £445 a month to add to our payment and current overpayment, we'll be done in four years. Hard - lots of stretch needed - but can be done.
We've both agreed that trying to find an additional £810 a month to add to our payment and current overpayment so we could be finished in three years would be pushing it too far.
So last night we settled on a plan.
We're going to find that additional £245 a month and be done within five years - we're ringing up the bank and telling them to increase the overpayment. Then next month we'll see how we adapt. Can we make/save £245 next month? We're going to find out.
Then as our income increases, we'll increase the size of the payments using our favourite trick of sneaking things up by £10 a time. Big chunks you miss. £10 here and there you don't and you adapt. I reckon we could be up to that £445 extra overpayment by next summer at the latest, because once Martin and I have an problem to mull over in our heads we automatically begin to align ourselves to a solution without even realising it.
By the way, have you ever used a mortgage overpayment calculator to see how much time and interest you could save on your mortgage? Have a go if you haven't - try this calculator here.
Let's say you have a £100,000 mortgage and you pay it back over 25 years. At the moment with interest rates so low (for example we're on 2.5% variable) you would pay back £134,585 in total.
Now let's say you overpay by £50 a month. You would be done in 21.5 years and have saved £5,010 interest.
What about £100 a month? You'd be done in just over 19 years and have saved £8,740 in interest
But to be honest, it's not really the saving interest that's the attractive thing. It's a) knowing when your big debt will be paid off so you can cut down your hours or even retire b) the pleasure of not letting the bank get the amount of money from you that they think they will and c) making maximum use of the current low interest rates.
So, do you overpay your mortgage?
How many years before you are mortgage-free?