How I Intend to Pay Off My Mortgage in 5 years

I’ve been blogging quite a bit recently about how, why and when to over pay your mortgage. In this post i’ll break down some of the reasons and methods that have helped me reach a stage where I hope to pay off my mortgage within the next 5 years.

I Am On A Tracker Mortgage

Luckily when I decided to re-mortgage my home loan and move away from my then lender Northern Rock shortly after they became one of the first victims of the financial crisis. Interest rates at the time were about 5.5% and I was very close to opting for a fixed rate mortgage deal. At the time however I felt that the Bank of England would reduce interest rates by a quarter of a percentage point in the following quarter so I opted for a tracker mortgage from First Direct.

My current mortgage deal charges interest at the Bank of England base rate (currently 0.5%) plus 0.47%, meaning I am currently paying only 0.97% interest on my mortgage. The net effect of this is that the current monthly repayment amount on my 20 year mortgage is well under half what it was when I took out the loan about 2 years ago, saving me a large amount of money each month.

I Regularly Make Mortgage Over Payments

With all of the savings I am making on my mortgage I could have significantly increased my monthly disposable income. Instead when interest rates began to tumble I instructed my mortgage company to keep my repayments at the same level, effectively making over payments to my mortgage each month. As rates began to fall further the size of my over payments compared to the regular payments began to rise significantly. As a result I am saving myself thousands in the long run without really noticing it in the monthly payments i make.

I Divert All Work Bonuses Into Over Payments

In addition to making regular over payments out of my monthly salary I also divert any financial windfalls into my mortgage account. Most of my work bonuses I have received in the last two years have been used to make one off mortgage over payments. In addition the odd tax refund, ebay sale of junk and any other little windfalls i have received have all gone toward reducing the capital of my mortgage.

I Make Small Sacrifices Everyday

Since embarking on this journey to reduce my mortgage I have paid much more attention to the small amounts of money I used to fritter away on needless expenditure. Below is a list of some of the simple things I have done that save me money on monthly basis. You’ve already guessed it, all of these savings become mortgage over payments.

• Walk or get the bus instead of the odd taxi
• Avoid eating out too much (restrict myself to a couple of times each month)
• Try to take a packed lunch to work instead of buying from cafes (this is a big saver)
• I question all purchases. Do i really need to buy that watch when i have one that works fine?
• I’ve sold huge amounts of junk on ebay, stuff i would never have used again and made a healthy profit doing so

I Make Extra Income Online

This has been another important factor for me in the last year or so. I have a few websites and blogs (including this one) that i have set up over the last couple of years and continue to maintain. This year I have realized the potential of a few of them to make money for me. There are numerous ways to make money online, i have concluded that no way is the right way. I tend to make my money by providing useful content to users on subjects that i am interest in.

I took a couple of online internet marketing courses that helped me learn the basics of internet marketing and now I am being rewarded by seeing my online income steadily grow month on month. I use all of this extra income I am earning to go towards over payments on my mortgage.

I Am Becoming Obsessive About Overpaying My Mortgage

Making mortgage over payments can be likened to a snowball rolling down the hill. The more over payments you make (and sooner you make them) the bigger their impact is. The more you overpay the more you save and the easier it is to see the impact of your over payments each month when that mortgage statement comes through the post. To me this snowball effect is a great motivator to keep over paying more.

Once i saw how £100 per month could save me over £20,000 I started a continually search to find more ways of finding an extra £50 or £100 to put towards overpayments each month. Overpaying your mortgage is definitly one of those things where the more you put in the more you get.