Now, this is a topic where a lot of financial people would say that we’re doing it wrong, but this is our take on mortgage overpayments and financial freedom.
We’re overpaying our mortgage and aiming to pay it off early. Sort of. We first got our mortgage in December 2012 and, for the majority of 2013, we made overpayments of around £700 each month. This was in addition to our regular payment which goes out at the start of the month. However, this was unsustainable for our aims.
When we re-evaluated our aims towards the end of 2013 we changed our mind on the goals we would set for 2014 (see more on there here) and what we were hoping to achieve in the long run. We decided that we’d need to change the amount we were overpaying as we had different, bigger savings goals that we want to achieve. Also, we’ve looked at more long term, including retirement planning (more on that another day!) and there’s only so many ways our money will stretch. However, both me and my husband agree that paying off more than just our mortgage payment takes off every month is a good thing. Our mortgage rate depends on the Bank of England interest rate. At the moment, it’s good because interest rates are so low, but as soon as they go back up, even a bit, the interest on our mortgage will also go up.
So, our new plan regarding overpayments is to overpay at least the mortgage interest every month. This is about £300 each month at the moment. By overpaying by this amount plus a little extra, we’re still on track to pay off our mortgage a lot earlier than it would do on paper, but we’re managing to achieve other financial goals at the same time. In relation to our financial freedom goal eventually, being mortgage free is a massive part of that. The amount of pressure every month will be greatly reduced, as we’ll have less bills that we need to pay each month. To ensure financial freedom and for it be a success, we need to make sure that our outgoings are at a suitable level in relation to income. We can’t do that with a big mortgage payment! Having said that, we also want to create other income streams, so overpaying our mortgage can’t be the only priority.
So there we go; we’re sort of paying off our mortgage early. And we’re okay with that.
Do you agree? Or not? Are you paying your mortgage off early? I’d love to hear your thoughts in the comments below!
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