Tackling the mortgage

Hi Folks,

The moment has finally arrived. After years of searching, hoping, saving, obsessing, procrastinating I am…a homeowner, otherwise known as a highly indebted individual.

And that’s the bit I dont like, in fact I want to pay off my mortgage as soon as I can. I’m planning to pay off 3 times the repayment amount on our 30year mortgage by sinking my full wages into it and splitting Mrs Bilbot’s salary for living costs etc. If it goes optimally there will be a day six years later where we will feel much better off than we previously were.

Does anyone have any tips/strategies for tackling the mortgage? The only answer I’m not interested in is ‘Don’t overpay it, its the cheapest money you’ll ever get blablabla’

Also I keep hearing about paying weekly rather than monthly due to compounding interest rates but I get paid monthly, so there’s no mathematical argument for that…right?

You’re actually paying your mortgage?! There’s always bloody one, spoiling it for the rest, huh! Desecrating the memory of the famine and the land wars :neutral_face:

Overpay whenever possible, it could take years off the term, then you can generate some real savings, remember the interest rates appear low (relative to other loans) but in reality the interest payments each month are huge.

keep enough set aside for emergencies but otherwise pay it down; if you’re paid monthly not much you can do except throw in lump sums whenever possible

but if you’re really determined to get out of debt look at your general expenditure too…

The idea behind the weekly repayment is that you are paying the money back earlier, i.e. the first weekly payment is paid 3 weeks before an equivalent monthly payment so less interest accrues.

Just remember, there is no guarantee the bank will lend you back your overpayment if you need it for some emergency in the future.

From personal experience, they won’t!

Well we’re planning to set a little aside. Just a little though because I think with tackling it head on like this the approach should be ‘All or nothing’. Has anyone here ever done it like that?

I wouldn’t bother until you have 6 months living expenses set aside.

Liquidity usually trumps solvency.

I’ll second that. I had a bit of spare cash once so paid down a few months worth, then a few years later found things a bit tight and tried to borrow a bit back or at least get a mortgage “holiday” for a month or two and was refused.

Worked out all right in the end, just ended up with a couple of “tight” months.

Another +1, bit like so many who put away too much into pensions then needed it during the bust. I’d always make sure i’d enough that I could access at short notice.

I find that the most prudent beginning.

Considering the fervour displayed by bilbot I’d say 12/24 months living expenses or same as one sallary for that duration net or gross, you decide.

I don’t overpay my rent.

Cash is Regent.

Live your life.

en.wikipedia.org/wiki/Pay_Off_Yo … _Two_Years

You could just save the extra money. If its gone into the mortgage its gone forever, bar selling your house. So your plan can include cutting spending drastically, and saving drastically, but it doesn’t have to include shovelling every spare cent into a locked in situation.
Otherwise in 6 years time, you will have scrimped and saved and lived on a shoestring yet still have no savings. AND then your situation could have changed.
If you don’t have kids are you planning to? Childcare is close on 1k a month. Or someone gives up their job. Wouldn’t it be nice to have a cushion of savings so that one person could take that option for a few years till school starts?
If you needed a new car, and had no savings that’s another loan you are looking at which will put a serious dent in the monthly budget.
Why did you get a 30yr mortgage if you could afford to pay 3 times more, why did you not get a 20yr mortgage or a 25yr mortgage? You appear to have chosen to get the lowest possible repayments you could. And that is a flexible approach to take especially if you are a young couple starting out. So why has that reasoning suddenly changed I’m wondering.
If I were you I’d do nothing for now except set up standing orders into a joint savings account, and both you and your other half syphon a pro-rata percentage of your wages into it. Do that for a year and then decide what the picture looks like.
Now if you already have €40k in savings or whatever that’s a different story.

IMO if you’re going to overpay it’s better to reduce the principal and keep the term the same rather than vice versa.

Reason being that having a lower principal reduces your outgoings which reduces your exposure to future financial shocks.

It should produce a virtuous circle by freeing up more income to overpay more.

Once mortgage repayments are down to ~20% of NDI and the equity is <60% they don’t pose much of a lifestyle burden or threat to your financial health and you can avail of cheaper rates.

I also think you should reconsider this plan. First and foremost, as has been suggested, save enough that you have six months net salary saved in cash. Then look to repay any other debt you have, because your mortgage is the lowest cost loan you will ever get in your life.

Once you are in that position, I would then consider whether you could achieve a higher return on your savings than you are paying on your mortgage. If you can, it would make sense to save. That also has the double benefit of leaving you with a nice rainy day fund, or for other expenses that might arise in the future such as children’s education costs etc.

Don’t neglect your pension either. There are tax advantages available there still, even if they are not what they were. If you can invest steadily into a pension pot over say a period of 25 years with the majority invested in equities for the first 20, the probability is very high that you will be better off than using the funds to overpay your mortgage.

Im just going to be the voice of the lazy and unprepared and say while I admire your discipline and foresight, I just could not bring myself to go through 6 joyless, soul crushing years. Would probably die of boredom in the 71st month of mince for dinner and cold baths and then what good would it have been anyway?

I’ll echo that. 6 years is a whole lot of your life. I’m all for delayed gratification but the cost versus pay off needs to make sense too.

You’re gonna put yourself through 6 years of scrimping and scraping for not much reward.

Overpay and reduce your term when it doesn’t impact you too much sure, but don’t sacrifice living your life for a shorter term.

I have no other debts and i’'m taking a small risk with aggressive repayment. I don’t want to save 6 months living expenses because it will mean 6 1/2 years instead of 6. I hope to take full advantage of the low interest rate environment so that I pay debt down more effectively while it’s cheap and hopefully start saving as rates go up. I’ve never had 6 months living expenses ever, except for what was the deposit. I feel like if we do this then 6 years from now we could be set for life, if something does happen…better having no mortgage to pay and a roof over your head. People say save instead but have you seen the amortisation table?
Not for me. At 3.6% there is a real opportunity to get on top of the loan.

It’s good to read a thread on this, as I was thinking about the same thing recently. Don’t have mortgage yet, but it’s probably imminent.
I was wondering about the real impact of paying down a little (or more) of the principal each month or weekly if the terms would allow.
Does anyone have a good link to an online calculator where Ican input term, loan amount, rate etc and then mess around with various repayment scenarios. I’d like a good Excel sheet if anyone has a reliable fairly intuitive one… or instructions to build my own!

The one comment I would have, Bilbot, like some others here - if you can afford 3 times your mortgage repayments - then why not get a 20yr mortgage and aggressively pay it down rather than a 30yr? Surely the interest saving would be substantial?

Or if you are going to overpay week to week, or month to month, and shear down some of the principal - you could still put a little aside for any unforeseen life expenses: car packs-in early, kids creche, one of you has to give up work for a year, or loses job, or does college course etc?

Is there really a huge security or long term advantage in paying off mortgage in 8 years rather than 6? At least with the 8yr option you’ve got some cash if the unforseen happens?

You won’t be set for life, you’ll just have slightly lower living expenses.