I am $3K away from paying off my mortgage in under a year. My secret was to start with a very small loan to begin with, I put EVERYTHING toward that sucker, staying diligent and focussed when so many things tried to distract my attention (including my own self-sabotage) from this one central goal. The feeling of relief and security is like nothing else I’ve ever experienced. Do the thing. It’s so worth it.
I have just found this channel- also in Scotland and looking to buy my first home. I’m almost there. Will be binge watching all of your videos this week while I do the dishes and laundry 🧺
Thanks for yet another great video. I’m overpaying my mortgage, which feels good, but now I’m investing in Vanguard Life Strategy too. I’ll put £100 a month into it and continue to overpay my mortgage. What I have learned is that with a little faith in the Western world’s economies, it might be better to invest more, with a long term view.
Could you guys tell me a bit more about Vanguard Life Strategy? I literally just came across it through the comment and reply here then done some research but wanted to see you're own personal opinions and an insight to how It works/how to get started.
Great idea to get people thinking about where to get the best return on their money. I would like to see the risk element highlighted here more though because there is no guarantee that this will be a benefit even over a long period.
As someone who is looking to buy a house in the future I really appreciated this video. I've never thought about it like this and it's definitely something I will explore more
Not easy at first Michelle but once you've been overpaying for a few months it becomes a habit. The banks actually don't like the overpayments - it means less money for them. Just stick at it and you'll find it's one of the best habits you can pick up. Good luck Michelle.
This video has really opened my eyes - we are overpaying what we can but now I am going to have a rethink and see if we should be change our way of doing things. Thank you for this!
Jen, I have been an avid follower of your videos for quite some time. I just realised I didn’t finish watching this one. I am so glad I did! I am going to switch my strategy and instead of overpaying by a large amount each month; I will reduce my overpayment and invest more. Congrats on being able to quit the day job!
I'm nearly 20 and am going to be moving into my new home soon. We've got a 14 year term (because we had to opt for a guarantor mortage and the guarantor is getting on a bit, so they wouldn't give us a 20/25 year term). And honestly, I think this is actually a blessing. The mortage payments will be about 1/3 of me and my partner's combined income, meaning we can still live comfortably and be able to afford new furniture, renovations etc. Also, the thought of owning our own home outright before the age of 35 is a very nice thought! I feel incredibly privileged to be in this position. Any disopsoable income will be invested and hopefully I can afford to overpay and get the mortgage paid off in 10 years!
Thank you so much. I happened to come across your youtube page today by chance and I am so glad that I did, I had never considered growth from investment to pay towards the mortgage I was only looking at the 10% overpayment option. I will definitely be looking into this and also binge watching your videos. Thank You again for your great work
I took a mortgage at the peak of pandemic a year ago and have fixed it for 5 years; very happy with the rate (1.3) in comparison to today's rates. Should I be looking to overpay or look to invest instead? What's the best strategy
In the S and P 500 model, I'm not sure if you are differenting total returns and interest (dividend) yield. The historical return on the S and p is 8% total return. That isn't the same as occurring dividend / interest payments.
My problem is that there are no savings accounts that give 5% or more for big sums of money (that I've seen)... the only one I've seen was capped as to how much you could put into it. Have you seen any?
Over the long term, investing in a global index fund has returned over 5% :) Check out vanguards fund VWRL if you're based in the UK. It's similar to VTSAX in the USA. Hope this helps.
In the UK we don't have such high return accounts now. She is showing that if it's invested over the long term you will make more money to be able to pay off the mortgage than simply putting extra small payments towards the mortgage principal :) She is right. I invest in some index fund that tracks the s&p500 and AVG is roughly 8% in the long term... So 8% is obviously a lot higher than the 2.9% mortgage rate of interest. So she is showing that your money could potentially grow a lot quicker in stocks to be able to pay off your mortgage quicker. Since mortgages here in the UK often only allow 10% repayments on top of the usual mortgage amount. So it caps how much you can pay off without incurring fees. So best to go slap the wheel barrow full of cash you make in the stocks on the banks desk and tell them to count that bad boy and to pay off all your mortgage 🙃
There are no savings accounts with 5% interest rates because the Bank of England interest rate has been very low (around 0.5%) since the 2008 crash, it means mortgages are cheaper (because credit is cheaper) but savings account rates are very low (because credit is cheaper) the bank does not make as much money because of low interest rates so in turn our money sitting in our accounts make less money.
Worth pointing out that this method is the basis of the famous Endowment policies of the 70s and 80s, with the equally famous problems they caused when investments weren't enough to pay off interest-only mortgages. The difference today is that we can diversify and invest in funds across the world, rather than being constrained by returns from the domestic market of the moment.
Remember that The annual interest from the compound interest calculator is not what your ACTUALLY going to get in interest. You might get £109k after 9 years but you might not. There are risks involved in investing in the stock market. What would be more useful is a video review comparing the last 100 years and seeing all scenarios of what's happened with stock prices & if there are situations where you might not have paid it off to provide a guide of the risk based on past performances. But even then, there are still no guarantees and you must not simply look at the returns from the compounded interest calculations
I get your point, but the reality is that stocks are not guaranteed to appreciate that much. Plus there are hardly any compounding interest savings account in the UK. But thanks for sharing this.
Thanks Jennifer for sharing all your insight. Finding it very useful. I’m curious to know how you juggled significant expenditures in life like a new car or renovations to the home that may crop up without affecting your long term money strategies? Any suggestions would be great. Thanks
Great video. Eye opener 😮. Am I correct in saying that every time I remortgage at the end of a 2 year introductory offer (for example), the amortisation schedule resets? So basically I’m always going to be paying mainly interest each time I remortgage? Thanks
I really liked this concept. I had not thought about it before. I'll do more research and see how I can incorporate this into my financial plan. Thank you! :-)
I'm a new subscriber and love your content and accent!! I live in London and I've recently been made aware of the benefits of bimonthly mortgage payments. From next month I will be paying my mortgage by standing order half on the 16th of the month and half on the 2nd which is s great way to reduce interest if you can't afford to make additional payments currently. I have found an online calculator but it's based on USD. This would be a great topic for you to cover if you haven't done so already.
@@megzzr7522 I've just checked the calculator on the Santander website but it appears to be for overpayments only not for making two monthly payments. What I am doing isn't making overpayments but paying the monthly amount in two monthly payments of half the full amount each so the bank receive money sooner and therefore the interest on the outstanding balance will be less.
From what I understand of the US fortnightly mortgage payments calculators, is that most of the benefit accrues from the premise that you make 26 payments per annum (1 payment every 2 weeks, not 2 payments per month), ie you are effectively making an annual overpayment equivalent to one month’s mortgage? Is there a significant impact from just making 24 equal payments?
In US if you put that money in Roth IRA and invest. Make 5% average. When you take it out you have to pay 10% tax. Better of putting that money direct on principal of your house. You win 5% for sure or the amount you have of interest on your house is.
Hi, I am on a interest only mortgage and during early years i have been paying off repayment in cash lump sums. Rather than paying cash on the remaining capital of my mortgage I am thinking of putting cash on to a vanguard ISA fund and S&P 500. Have you got any thought on this change of tactics.
I have a 25 year mortgage for which I pay under £90 per month. I may also pay interest but why would I want to pay this off sooner? £90 in 25 years time will worth much less and buy much less than it does today due to inflation.
Because you'll want to use that money in the future for other things. I understand what your point is but if you can get a hold of Rich Dad Poor Dad it talks about why you should work to turn your liability into an asset as soon as possible. So in this scenario, paying it off and using that £90 for other things. If you also look at the compound interest calculator that Jennifer refers to in the video, compare paying your mortgage off in 5 years compared to 25 years....the amount of interest you are saving is basically the reason to pay it off.
I like this idea, but where are you getting these high interest rate accounts? The highest rates I'm seeing does not exceed 3.04% (variable). On average I'm seeing less than 2%.
My partner can't seem to agree that overpaying in the first year by £1,900 would save £4,400 over the mortgage as most of the interest is accumulated at the start of the mortgage.
Thank you for all that info; definitely got me thinking. Do you think it’s worth combining this strategy with an offset mortgage against my 6-month emergency fund and big purchase savings (vehicles, house maintenance, holidays)?
Taking what has been a normal interest rate of 3% and the usual 25 year term, you can pay off your mortgage in 10 years by doubling (+100%) the usual monthly amount. Or to pay it off in 5 years you'd need to instead overpay by +280% a month (good luck).
Brilliant Video and love the fact its UK based and even more so you're Scottish... I'm Scottish also! I like the idea of these stock share investments like higher interest savings accounts but where is best to go look and enquire? Just phone banks locally or search the Web?... If so does anyone have any recommendations?
I love this, really great perspective. But one question, if using the example of investing and getting the 8% growth, (say in the s&p500) - in order to get that money that would pay your mortgage (the growth), presumably you'd have to sell some of your shares? Would that not then negatively impact your year on year growth, by having less shares?
WOW! Absolutely fantastic and very clear! Thank you.. Please could you clarify regarding paying off the mortgage after the 10yr example using the investment: is that using the total balance of the investments ~£108K, OR use the annual/monthly Interest-earned on the investments to drip-feed the mortgage payments?
The idea is you keep the 108k or whatever it ends up in the investment funds and just take the yearly interest to go toward the mortgage. Once the mortgage is paid you own the house and still have the lump sum. Win win.
Question please: Great idea however the only issue I see is what if I want to upgrade my house? Paying off the mortgage helps towards the deposit for the next house. Whereas taking the interest from the investment after 10 years or so means you’ve basically got to stay in the same house for 10-20 years or so. Am I missing something or is that correct? Thanks
Hi, If I remortgage my house and bought few buy to let interest only mortgage, is it a good idea to payoff my house using cash flow from rental properties?
would you want the goal to be to max out your Stocks & Shares ISA to utilise the whole £20,000 per year? I've done the calculation on the website and you'd achieve this in 5 years at 5% interest. Obviously, if you have £20,000 to invest you're earning well above the average person. Also, for your kids you can open a junior ISA for an extra £9,000 to invest in their name, what's your advice on this - pros and cons? Any loop holes you know? I'm only 22 and have no plans to have kids just yet but still interested for when the time comes.
Thank you for this video. I am waiting for a house to come on sale for next summer, new build and will be using help to buy. Could easily pay off the help to buy loan this way within the 5 years interest free then continue this to pay the rest of the mortgage off. Thank you again.
Just quick question weres the best account to put your money into to compound interest like you send in your video any help would be great i only 3 years left of mortgage to pay.
Stocks and shares ISA but you're not going to get the growth you need in 3 years to make this strategy work are you? Needs to compound for c. 5 - 10 years. Or unless you have a lot saved aready
I paid my mortgage off in 9 years and used an offset mortgage so it was cheap. Then I got another property and mortgaged both and rented it out and it pays (after tax) 70% of my mortgages as I'm a high tax payer. I have shares but I've only broken even
Mortgage overpayment; such a debate with so many other modes of investment available now, which were non existent years ago! I don’t have enough capacity to follow and keep up to date with stocks and crypto, so I may be best to overpay with my 10% allowance, over saving it in my bank account, but would be interested to know your thoughts and others perspectives, as always open to new ways of thinking!??
I am an American so I do not know anything about your mortgages. I have a question about something you mentioned. Did I understand correctly that some UK mortgage terms have pre-payment penalties if you pay too much in extra principal payments? Is this to keep the loan on the banks books for a minimum period of time or am I missing something. I just refinanced my mortgage last month and made sure there was no prepayment penalty before I signed. With as cheap as mortgages are right now, I would think they would prefer people pay it back faster freeing that money for more loans. Also, you mentioned the S&P 500 that is on the New York Stock Exchange, do you have something like ADRs (American Depository Receipts) where we can buy positions in foreign companies? Thank you1
Hi there! Great video, just want to make sure I understand this correctly. So with my ISA I basically have 3 choices 1) I can use the monthly interest to pay my monthly mortgage, 2) I can take out all the 100k and pay off my entire mortgage or 3) I can just keep paying my mortgage as normal but have this additional income via the ISA? If I go for 2) my ISA is zero, correct? So I would have to restart the ISA from scratch? Sorry quite new to this :) thanks!!!
@@JenniferAMThomson Thank you for your prompt response. And Happy New Year btw... I think I should have been more specific in that there are a number of sources out that that suggest that this eats into the amount of interest paid more rapidly? Aside from that, I do think it is good in that you’d end up with an extra payment in the year due to the fact that some months have 5 weeks in them.
@@dyin2live83 it's the fact that you pay every 2 weeks, which is 13 payments in a 52 week year, rather than once a month which is 12. It is a well regarded strategy by many but UK banks don't promote it as it means setting up a standing order which is too much of a faff for them. It is the combination of this strategy/reducing your term, over paying AND the strategy in this video that will really get your mortgage paid off in no time. See Dave Ramsey for more details on the bi weekly payment approach.
I have been overpaying my mortgages for 13 plus years, as far as I'm concerned it is the golden goose that will always lay. I've never heard of a mortgage that only allows you to pay an additional 10% per month. All of mine have been 10% of the principal extra per year. Additionally peoples risk tolerance don't suit trying to use the stock market to earn 5% or more, proven by the mass sell out lately. My investment portfolio is currently down 25% I'm comfortable with my journey but most wouldn't be!
I have to agree! Many seem to forget that the Bank of England rate can go up, many new home owners post 2010 dont understand that historcally interest rates were much higher, in fact it has only been since 2008 that the BoE rate has been as low as 0.10% over the last 100 years its usually been somewhere between 3-15%. I think this is the perfect window to pay off your mortgage quickly whilst the interest rates are low, the second they go up your mortgage goes from £700pcm to £1200pcm very quickly after your fixed rate expires and there goes your overpayments!
If you are on a fixed rate mortgage the max overpayment is usually 10% of the balance, calculated at the start of the year. If you are on the standard variable rate, there is usually no limit to the overpayment. I overpay each month and am on track to pay off the mortgage in 9 years not 25!
You have me thinking, since you have been doing this for years I guess you are more knowledgeable than I am. I have been over paying for less than a year however, I thought you could ONLY overpay 10% of my annual payment, didn't realise it was 10% of the actual principle...food for thought..
@@daviwatson3296 It gets recalculated every year I think, so its 10% of principal owed at the start of the year, once you get down to smaller amounts it might be best to stay on a variable mortgage with no limits and keep overpayming significantly until its gone!
@@Chills124 that is a good idea. I just remorgeged our house for 5 yrs fix with interest rate at 1.67 we have bought the 3 bedroon house 2 yrs ago, and planing to pay it off in no more that 6-7 yrs. Planning to pay every year the extra 10% so hopefuly in 5yrs we just have left ~40K. If we do not have more cash to pay it off what is left, we could remorgeged again in 5yrs to a non fix rate until it is gone. Thanks for the advice :)
Paying off a mortgage as emotion your heart will say pay it off But my own brain says dont But invest in ISA via a tracker we are all different Debt can be a good thing
We already overpay by about £100 a month ( realistically all we can afford right now). If say we had a spare £100 or £50 a month. Where would you advise we invested that? We already have a 3 month emergency fund ( we are working on making that one year). Thanks I am learning lots
Hi Jessica - I would say learn and understand about using an investment ISA as a way to invest tax free if you feel that works for you. Invest for minimum of 5-10 years in good index funds and/or bonds mix as a starting point, but base your choice on what works for your goals and happy with risk wise.
Thanks for showing us the power of compound interest. I am currently overpaying my mortgage by £500, what proportion of that should I invest in an account that gives compound interest?
The 10% confused me. Based on a 600 monthly payment, £60 overpayment would not go over the 10% threshold. I thought it was 10% of the loan figure in a year. So my remaining mortgage is £150000. Which means i can pay an extra £15k a year without penalty, correct?
I think she was saying that her personal money strategy is to overpay 10% on any debt, rather than it being in relation to the 10% threshold you can pay off your mortgage yearly without fees. If your mortgage says you can pay up to 10% of the mortgage yearly then yes that would mean £15k.
Problem with investing as opposed to paying your mortgage off quicker is that index funds will likely return somewhere between 5-10% over 25 years but BoE base rate will likely not stay at 0.5%. The second the economy picks up the BoE rate will go up probably somewere between 5-8% but it has been as high as 14% historically meaning that 2.9% mortgage could suddenly go up to 6-9% or even higher! meaning your £700 mortgage could go up to £1200+. Short term you will be safe on 2.9% but the chances are in the next 10-15 years the interest will go up (unless we remain in this economic nightmare!)
Completely agree! We’re focusing on clearing our mortgage to hopefully insulate us against those inevitable future interest hikes. Once that’s gone we can then take advantage of those high interest rates by saving/investing. We’ve still got a long way to go (15-17 years) but at least we’ve started on this journey!
@@KalishkaRuby Keep up the hard work! We are in a similar boat around 13-14 years to go, we still invest but once the house is gone your living costs go down, no stress if your job is at risk, you can put loads more into retirement/investments and best of all nobody can take it away from you cus you own it!!
great video :) . I'm with nationwide on a 2 year fixed rate , I'm allowed to make payments up to 10% off the overall mortgage amount . is this 10% plus my normal monthly mortgage amount or is this combined ? thanks :)
Pretty much everyone is feeling the same way, so try not to panic. Good health mentally & physically are so important. The fact you have some savings is a blessing, some people have none. When you are feeling a bit better, look at costs you could cut or reduce as a temporary or permanent measure, that's what I am doing this afternoon. This will mean you will need to use less of your savings. Hope this helps, take care xx
This is really useful, thank you. I got a bit lost however from 17:30 onwards but keen to understand and implement. Are you suggesting you could use the annual interest payment only over several years to throw at the mortgage rather than take from the balance?
Ye I am not sure either. £700pm mortgage annually is £8400, so your interest of £4k you get from potential investment pot is only half of what you need
Very helpful, thank you for the compound interest calculator as I’ve been looking for something like that. I’m personally putting money in the stock market as well as physical commodities such as Gold and Silver as a hedge against the current high inflation woes. I don’t have a lot of confidence in the stock market at the moment as it looks like we’re about to hit a nasty recession, so I’m just pound cost averaging at the moment, but not very exciting when only just starting out and you see your total shares are currently down around 8% already lol, but I’m in here for the long game so hopefully it will pick up over time. Do you have any advise on likely scenarios of high interest high inflation over the next few years and how best to mitigate?
If your loan is tiny and you bought a studio flat for 150k mortgage and paid 10% deposit of £15k. But not everyone wants to buy such tiny place to live because then you will have to sell and get another mortgage for a bigger place. It just doesn’t make sense. People now get 30 years mortgage because they buy more expensive homes and they just about can afford the standard mortgage repayment. Not to forget you need to contribute to a workplace pension as well. How do you expect a young professional earning £30k taking home just over £2k monthly to afford all this? Lets stay to the ground please this is unworkable from any angle I look at it.
Agreed you can't use your credit card, however you can use your credit card to buy the things you need then use then use your income for the over-payment 😀
I disagree with you about debt for education. A lot of degrees are less than useless to be kind!! People thinking university is the only way to get ahead is just a lie. Paying for a degree in accounting for instance can be done from distance learning and the O.U. instead of pay a stupid amount for to be at a university!! I completely agree about the mortgage.
Great video thanks for all the tips but I just have a question about the compound interest calculator you use, when you put down 700 every month and the first year in total you put in 8400, should the interest not be 8400*0.05= 420? But it is 225.80 in this calculator why is it like this?
@@JenniferAMThomson I do agree what u saying but to get full benefit from it you need to constantly saving , without touching if possible we people just work for bread and bed . If something comes up like regarding house to get fixed plumbing or any household works that need to get it done we have to use money .only rich people will great benefit from it .
I appreciate your view but also say don't let a belief that you require "alot of money" stop you from believing that you are use the principles of money. Wealth is available for all, and sometimes our beliefs limit what we believe is actually possible.
@@JenniferAMThomson True thank you i really like your vedios and its great to get valuable advice . Yup it is possible even with little money , we all got our own way to work but life is not that easy as said like we do calculation . Health is wealth Stay safe .
I owe approx £100k on my mortgage over approx 20 years. So let’s say I build up £70k in savings over the next 10 years are you advocating that I then use that to pay off my mortgage or drip feed it back into my current account to pay the mortgage whilst continuing to save? Sorry if I’ve missed the point, I think I may need to rewatch the video.
I often wonder which would be best, I think purely in terms of the numbers you're better off putting your money where you get most interest (or pay least). If you think in the long term you'll pay 4% on your mortgage and gain 6% in your investments then keep the money on the investment side and drip in to pay the mortgage. Wouldn't that be right?
benny532017, you are right. HOWEVER, you are not factoring risks and inflation . There is a risk you will see a drop in your savings (if invested). Your savings WILL be eroded by inflation. UK inflation is at about 5% - ignore government CPI figures they are utterly manipulated lies. If you pay off the mortgage you are getting a GUARANTEED return. There is a s risk that interest rates go up, you will always pay more on the mortgage than you can get in a savings account. I tend to do both, save some ( for investing and an emergency fund) and pay some off the mortgage.
@@squirrelinstructor6075 I spent a few hours studying 3 years of my household outgoings (I am an avid record keeper) and I can back you up that the CPI figure is one big lie. I worked my inflation rate around 6 - 7 % per year. (And that doesn't include rising house prices) I expect the "real" rate of inflation to rise significantly with the economic crisis we are now in. Just so happy I overpayed mortgage and the end is near.
I don’t even have a mortgage yet I’m here 😂
😂😂 well done to you. 👏🏻👏🏻
Same here :)
Same here!
Same here😅😂😢
I am $3K away from paying off my mortgage in under a year. My secret was to start with a very small loan to begin with, I put EVERYTHING toward that sucker, staying diligent and focussed when so many things tried to distract my attention (including my own self-sabotage) from this one central goal. The feeling of relief and security is like nothing else I’ve ever experienced. Do the thing. It’s so worth it.
I have just found this channel- also in Scotland and looking to buy my first home. I’m almost there. Will be binge watching all of your videos this week while I do the dishes and laundry 🧺
That's the first time I have heard someone recommend using the growth from the investment to pay towards the mortgage so really insightful. Cheers
Thanks for that comment - glad to know I helped
This is genius, right? No wonder they don't teach this in schools
Thanks for yet another great video. I’m overpaying my mortgage, which feels good, but now I’m investing in Vanguard Life Strategy too. I’ll put £100 a month into it and continue to overpay my mortgage. What I have learned is that with a little faith in the Western world’s economies, it might be better to invest more, with a long term view.
once i'm mortgage free in approx 10 years time. I've just turned 36. I shall be investing in Vanguard too.
Could you guys tell me a bit more about Vanguard Life Strategy?
I literally just came across it through the comment and reply here then done some research but wanted to see you're own personal opinions and an insight to how It works/how to get started.
Glasgow guy here. First time buyer and this has opened my eyes big time. You absolute hero :-D
Wish you a successful year full of growth!
Great video. Do you have an updated version for 2023?
Great idea to get people thinking about where to get the best return on their money. I would like to see the risk element highlighted here more though because there is no guarantee that this will be a benefit even over a long period.
As someone who is looking to buy a house in the future I really appreciated this video. I've never thought about it like this and it's definitely something I will explore more
Glad it was helpful!
Not easy at first Michelle but once you've been overpaying for a few months it becomes a habit.
The banks actually don't like the overpayments - it means less money for them.
Just stick at it and you'll find it's one of the best habits you can pick up.
Good luck Michelle.
If you find it hard at first maybe give yourself a year breather and Invest in share ISA and then pay more off
This video has really opened my eyes - we are overpaying what we can but now I am going to have a rethink and see if we should be change our way of doing things. Thank you for this!
Thank you so much for that kind comment and for watching
Jen, I have been an avid follower of your videos for quite some time. I just realised I didn’t finish watching this one. I am so glad I did! I am going to switch my strategy and instead of overpaying by a large amount each month; I will reduce my overpayment and invest more.
Congrats on being able to quit the day job!
Wonderful!
I'm nearly 20 and am going to be moving into my new home soon. We've got a 14 year term (because we had to opt for a guarantor mortage and the guarantor is getting on a bit, so they wouldn't give us a 20/25 year term). And honestly, I think this is actually a blessing.
The mortage payments will be about 1/3 of me and my partner's combined income, meaning we can still live comfortably and be able to afford new furniture, renovations etc. Also, the thought of owning our own home outright before the age of 35 is a very nice thought!
I feel incredibly privileged to be in this position.
Any disopsoable income will be invested and hopefully I can afford to overpay and get the mortgage paid off in 10 years!
By the way, I live in a small town up North. No way would I be able to afford any house in my city of origin!
It is very inspiring to hear from a Scottish woman (like me) to see that actually we CAN do this too
Thank you so much. I happened to come across your youtube page today by chance and I am so glad that I did, I had never considered growth from investment to pay towards the mortgage I was only looking at the 10% overpayment option. I will definitely be looking into this and also binge watching your videos. Thank You again for your great work
I took a mortgage at the peak of pandemic a year ago and have fixed it for 5 years; very happy with the rate (1.3) in comparison to today's rates. Should I be looking to overpay or look to invest instead? What's the best strategy
In the S and P 500 model, I'm not sure if you are differenting total returns and interest (dividend) yield. The historical return on the S and p is 8% total return. That isn't the same as occurring dividend / interest payments.
My problem is that there are no savings accounts that give 5% or more for big sums of money (that I've seen)... the only one I've seen was capped as to how much you could put into it. Have you seen any?
Panda Boss - Personal Finance & Bossing Life she is showing you based on stocks ISA for this example. So investing in the stock market tax free etc
Over the long term, investing in a global index fund has returned over 5% :) Check out vanguards fund VWRL if you're based in the UK. It's similar to VTSAX in the USA. Hope this helps.
In the UK we don't have such high return accounts now. She is showing that if it's invested over the long term you will make more money to be able to pay off the mortgage than simply putting extra small payments towards the mortgage principal :)
She is right. I invest in some index fund that tracks the s&p500 and AVG is roughly 8% in the long term... So 8% is obviously a lot higher than the 2.9% mortgage rate of interest. So she is showing that your money could potentially grow a lot quicker in stocks to be able to pay off your mortgage quicker. Since mortgages here in the UK often only allow 10% repayments on top of the usual mortgage amount. So it caps how much you can pay off without incurring fees. So best to go slap the wheel barrow full of cash you make in the stocks on the banks desk and tell them to count that bad boy and to pay off all your mortgage 🙃
There are no savings accounts with 5% interest rates because the Bank of England interest rate has been very low (around 0.5%) since the 2008 crash, it means mortgages are cheaper (because credit is cheaper) but savings account rates are very low (because credit is cheaper) the bank does not make as much money because of low interest rates so in turn our money sitting in our accounts make less money.
Worth pointing out that this method is the basis of the famous Endowment policies of the 70s and 80s, with the equally famous problems they caused when investments weren't enough to pay off interest-only mortgages. The difference today is that we can diversify and invest in funds across the world, rather than being constrained by returns from the domestic market of the moment.
Thank you for taking the time to go through this step by step especially after already making an overpayment I thought I was doing all I could
Remember that The annual interest from the compound interest calculator is not what your ACTUALLY going to get in interest. You might get £109k after 9 years but you might not. There are risks involved in investing in the stock market. What would be more useful is a video review comparing the last 100 years and seeing all scenarios of what's happened with stock prices & if there are situations where you might not have paid it off to provide a guide of the risk based on past performances. But even then, there are still no guarantees and you must not simply look at the returns from the compounded interest calculations
I get your point, but the reality is that stocks are not guaranteed to appreciate that much. Plus there are hardly any compounding interest savings account in the UK. But thanks for sharing this.
Thanks Jennifer for sharing all your insight. Finding it very useful. I’m curious to know how you juggled significant expenditures in life like a new car or renovations to the home that may crop up without affecting your long term money strategies? Any suggestions would be great. Thanks
My personal preference is to no longer pay off my mortgage, and instead putting all the extra money into low cost index funds!
I’m here from the future. Sound advice. Mortgage rates are now >5.6%.
Great video. Eye opener 😮.
Am I correct in saying that every time I remortgage at the end of a 2 year introductory offer (for example), the amortisation schedule resets? So basically I’m always going to be paying mainly interest each time I remortgage? Thanks
I love your videos. You have so much knowledge. Keep sharing!
Thank you! Will do!
Thank you for wanting to share this with others. Your a Scottish angel x
😊 thank you
I really liked this concept. I had not thought about it before. I'll do more research and see how I can incorporate this into my financial plan. Thank you! :-)
You are brilliant. Totally different angle of looking at mortgage debt. Thank you.
Glad you think so!
I'm a new subscriber and love your content and accent!! I live in London and I've recently been made aware of the benefits of bimonthly mortgage payments. From next month I will be paying my mortgage by standing order half on the 16th of the month and half on the 2nd which is s great way to reduce interest if you can't afford to make additional payments currently. I have found an online calculator but it's based on USD. This would be a great topic for you to cover if you haven't done so already.
Santander has got an online calculator you can use x
@@megzzr7522 oh excellent thanks. I've only just seen this response.
@@megzzr7522 I've just checked the calculator on the Santander website but it appears to be for overpayments only not for making two monthly payments. What I am doing isn't making overpayments but paying the monthly amount in two monthly payments of half the full amount each so the bank receive money sooner and therefore the interest on the outstanding balance will be less.
Doesn't sound like you need the calculator. You're already doing bi monthly payments and you understand the premise of how it works 👍🏾
From what I understand of the US fortnightly mortgage payments calculators, is that most of the benefit accrues from the premise that you make 26 payments per annum (1 payment every 2 weeks, not 2 payments per month), ie you are effectively making an annual overpayment equivalent to one month’s mortgage? Is there a significant impact from just making 24 equal payments?
In US if you put that money in Roth IRA and invest. Make 5% average. When you take it out you have to pay 10% tax. Better of putting that money direct on principal of your house. You win 5% for sure or the amount you have of interest on your house is.
Don't forget to minus off the tax you would be required to pay to hmrc after you close off your investments. So this would also need to be considered
Not in an ISA
Hi, I am on a interest only mortgage and during early years i have been paying off repayment in cash lump sums. Rather than paying cash on the remaining capital of my mortgage I am thinking of putting cash on to a vanguard ISA fund and S&P 500. Have you got any thought on this change of tactics.
Your clarity of thought is extraordinary.
Very little pausing no urms.
Thank you for the kind comment and watching
If someone urms so what..
I have a 25 year mortgage for which I pay under £90 per month. I may also pay interest but why would I want to pay this off sooner? £90 in 25 years time will worth much less and buy much less than it does today due to inflation.
Because you'll want to use that money in the future for other things. I understand what your point is but if you can get a hold of Rich Dad Poor Dad it talks about why you should work to turn your liability into an asset as soon as possible. So in this scenario, paying it off and using that £90 for other things. If you also look at the compound interest calculator that Jennifer refers to in the video, compare paying your mortgage off in 5 years compared to 25 years....the amount of interest you are saving is basically the reason to pay it off.
@@sarahlawson5026 Thank you for the advice
i am payin £30 EXTRA monthly over the top of mortgage , it does help me alot .
I like this idea, but where are you getting these high interest rate accounts? The highest rates I'm seeing does not exceed 3.04% (variable). On average I'm seeing less than 2%.
Stocks and Shares ISA. Choose a Vanguard ETF. EG VUSA, VHYL, UKDV
so many things to pay. Even working 40 hours a week ain’t enough
Keep going! You'll get your breakthrough!
Christ on a bike, this is awesome, really like this thinking.
Winner of Best comment of the day :)
Christ on a bike :) Love it. Exactly what I was thinking! Jennifer, this is definitely awesome thinking :0P
Love that saying
My partner can't seem to agree that overpaying in the first year by £1,900 would save £4,400 over the mortgage as most of the interest is accumulated at the start of the mortgage.
Just recently found your channel. Binge watching all your videos..lots to think about
Thank you for all that info; definitely got me thinking. Do you think it’s worth combining this strategy with an offset mortgage against my 6-month emergency fund and big purchase savings (vehicles, house maintenance, holidays)?
Hello mamafurfur. i love your channel! im from scotland too! i have a question.... could you suggest a high interest rate savings account?
Taking what has been a normal interest rate of 3% and the usual 25 year term, you can pay off your mortgage in 10 years by doubling (+100%) the usual monthly amount.
Or to pay it off in 5 years you'd need to instead overpay by +280% a month (good luck).
Brilliant Video and love the fact its UK based and even more so you're Scottish... I'm Scottish also!
I like the idea of these stock share investments like higher interest savings accounts but where is best to go look and enquire? Just phone banks locally or search the Web?... If so does anyone have any recommendations?
So inspiring and some serious food for thought! Thanks for the great content
Glad you enjoyed it!
Fab video - interesting concept. will do more research Sue 😀
Thank you for watching and the kind comment!
I love this, really great perspective. But one question, if using the example of investing and getting the 8% growth, (say in the s&p500) - in order to get that money that would pay your mortgage (the growth), presumably you'd have to sell some of your shares? Would that not then negatively impact your year on year growth, by having less shares?
The s&p over long term shows growth, so selling some of your shares means you will have less shares but those shares are now worth more anyway
I really enjoyed the video as I'm doing the baby steps. Thank you. Do you have any protection against a stock market crash?
WOW! Absolutely fantastic and very clear! Thank you..
Please could you clarify regarding paying off the mortgage after the 10yr example using the investment: is that using the total balance of the investments ~£108K, OR use the annual/monthly Interest-earned on the investments to drip-feed the mortgage payments?
Same here?
The idea is you keep the 108k or whatever it ends up in the investment funds and just take the yearly interest to go toward the mortgage. Once the mortgage is paid you own the house and still have the lump sum. Win win.
So if you're using the interest gained, you're not paying off the mortgage in 5-10 years without utilising that lump sum?
Your videos are very helpful- keep it up
Glad you like them!
Can you share a compound interest calculator link which you used , in the description or in the comment section
Thank you for making those videos! Greetings from Edinburgh :)
Question please: Great idea however the only issue I see is what if I want to upgrade my house? Paying off the mortgage helps towards the deposit for the next house. Whereas taking the interest from the investment after 10 years or so means you’ve basically got to stay in the same house for 10-20 years or so. Am I missing something or is that correct? Thanks
Keep saving the money until you're in the house where this strategy is most effective?
Get a place with a second bedroom and get lodgers that’s how I’m over paying by a lot going to save me 15 years off a 30 year mortgage 👍🏽
Hi, If I remortgage my house and bought few buy to let interest only mortgage, is it a good idea to payoff my house using cash flow from rental properties?
would you want the goal to be to max out your Stocks & Shares ISA to utilise the whole £20,000 per year? I've done the calculation on the website and you'd achieve this in 5 years at 5% interest. Obviously, if you have £20,000 to invest you're earning well above the average person.
Also, for your kids you can open a junior ISA for an extra £9,000 to invest in their name, what's your advice on this - pros and cons? Any loop holes you know?
I'm only 22 and have no plans to have kids just yet but still interested for when the time comes.
This is a great video very clear and easy to understand and plenty of food for thought
Glad it was helpful!
Thank you for this video. I am waiting for a house to come on sale for next summer, new build and will be using help to buy. Could easily pay off the help to buy loan this way within the 5 years interest free then continue this to pay the rest of the mortgage off.
Thank you again.
Be careful with that as I think there are high interest rates after the grace period of 5years
Just quick question weres the best account to put your money into to compound interest like you send in your video any help would be great i only 3 years left of mortgage to pay.
Stocks and shares ISA but you're not going to get the growth you need in 3 years to make this strategy work are you? Needs to compound for c. 5 - 10 years. Or unless you have a lot saved aready
I paid my mortgage off in 9 years and used an offset mortgage so it was cheap. Then I got another property and mortgaged both and rented it out and it pays (after tax) 70% of my mortgages as I'm a high tax payer.
I have shares but I've only broken even
don't buy shares, buy entire indices (S&P500, FTSE100 etc)
Compared to high interest savings vs stocks, I believe stock has a capital gains tax?
Not via an ISA it doesn’t....
Excellent video as always 👍
Thank you! Cheers!
Mortgage overpayment; such a debate with so many other modes of investment available now, which were non existent years ago! I don’t have enough capacity to follow and keep up to date with stocks and crypto, so I may be best to overpay with my 10% allowance, over saving it in my bank account, but would be interested to know your thoughts and others perspectives, as always open to new ways of thinking!??
I am an American so I do not know anything about your mortgages. I have a question about something you mentioned. Did I understand correctly that some UK mortgage terms have pre-payment penalties if you pay too much in extra principal payments? Is this to keep the loan on the banks books for a minimum period of time or am I missing something. I just refinanced my mortgage last month and made sure there was no prepayment penalty before I signed. With as cheap as mortgages are right now, I would think they would prefer people pay it back faster freeing that money for more loans. Also, you mentioned the S&P 500 that is on the New York Stock Exchange, do you have something like ADRs (American Depository Receipts) where we can buy positions in foreign companies? Thank you1
Hi there! Great video, just want to make sure I understand this correctly. So with my ISA I basically have 3 choices 1) I can use the monthly interest to pay my monthly mortgage, 2) I can take out all the 100k and pay off my entire mortgage or 3) I can just keep paying my mortgage as normal but have this additional income via the ISA? If I go for 2) my ISA is zero, correct? So I would have to restart the ISA from scratch? Sorry quite new to this :) thanks!!!
Option 2 would empty your ISA, making it zero, but anything you paid in that financial year would still count toward to £20k limit.
Ooh well done on working hard to achieve that. I would choose option 2, then go crazy investing knowing no matter what I'm safe in my paid off house!
Thank you. Helpful 😊. What are your views on weekly/bi-weekly payments?
If that works better for your own budget, then I'm all for it!
@@JenniferAMThomson Thank you for your prompt response. And Happy New Year btw... I think I should have been more specific in that there are a number of sources out that that suggest that this eats into the amount of interest paid more rapidly? Aside from that, I do think it is good in that you’d end up with an extra payment in the year due to the fact that some months have 5 weeks in them.
@@dyin2live83 it's the fact that you pay every 2 weeks, which is 13 payments in a 52 week year, rather than once a month which is 12. It is a well regarded strategy by many but UK banks don't promote it as it means setting up a standing order which is too much of a faff for them. It is the combination of this strategy/reducing your term, over paying AND the strategy in this video that will really get your mortgage paid off in no time. See Dave Ramsey for more details on the bi weekly payment approach.
What drives me crazy in UK, before even buying a house is FREEHOLD and LEASEHOLD 😃
I have been overpaying my mortgages for 13 plus years, as far as I'm concerned it is the golden goose that will always lay.
I've never heard of a mortgage that only allows you to pay an additional 10% per month. All of mine have been 10% of the principal extra per year.
Additionally peoples risk tolerance don't suit trying to use the stock market to earn 5% or more, proven by the mass sell out lately. My investment portfolio is currently down 25% I'm comfortable with my journey but most wouldn't be!
I have to agree! Many seem to forget that the Bank of England rate can go up, many new home owners post 2010 dont understand that historcally interest rates were much higher, in fact it has only been since 2008 that the BoE rate has been as low as 0.10% over the last 100 years its usually been somewhere between 3-15%. I think this is the perfect window to pay off your mortgage quickly whilst the interest rates are low, the second they go up your mortgage goes from £700pcm to £1200pcm very quickly after your fixed rate expires and there goes your overpayments!
If you are on a fixed rate mortgage the max overpayment is usually 10% of the balance, calculated at the start of the year. If you are on the standard variable rate, there is usually no limit to the overpayment. I overpay each month and am on track to pay off the mortgage in 9 years not 25!
You have me thinking, since you have been doing this for years I guess you are more knowledgeable than I am. I have been over paying for less than a year however, I thought you could ONLY overpay 10% of my annual payment, didn't realise it was 10% of the actual principle...food for thought..
@@daviwatson3296 It gets recalculated every year I think, so its 10% of principal owed at the start of the year, once you get down to smaller amounts it might be best to stay on a variable mortgage with no limits and keep overpayming significantly until its gone!
@@Chills124 that is a good idea. I just remorgeged our house for 5 yrs fix with interest rate at 1.67 we have bought the 3 bedroon house 2 yrs ago, and planing to pay it off in no more that 6-7 yrs. Planning to pay every year the extra 10% so hopefuly in 5yrs we just have left ~40K. If we do not have more cash to pay it off what is left, we could remorgeged again in 5yrs to a non fix rate until it is gone. Thanks for the advice :)
Paying off a mortgage as emotion your heart will say pay it off But my own brain says dont But invest in ISA via a tracker we are all different Debt can be a good thing
Brilliant video! Intelligent idea taken on board thank you!!
Eye opening video!
We already overpay by about £100 a month ( realistically all we can afford right now). If say we had a spare £100 or £50 a month. Where would you advise we invested that? We already have a 3 month emergency fund ( we are working on making that one year). Thanks I am learning lots
Hi Jessica - I would say learn and understand about using an investment ISA as a way to invest tax free if you feel that works for you. Invest for minimum of 5-10 years in good index funds and/or bonds mix as a starting point, but base your choice on what works for your goals and happy with risk wise.
What about capital gains tax?
Thanks for showing us the power of compound interest. I am currently overpaying my mortgage by £500, what proportion of that should I invest in an account that gives compound interest?
I'm overpaying £500 per month too, 23 months countdown to go!
All of it! Just make the minimum required payment and save every penny you can in the compounding vehicle.
The 10% confused me. Based on a 600 monthly payment, £60 overpayment would not go over the 10% threshold. I thought it was 10% of the loan figure in a year. So my remaining mortgage is £150000. Which means i can pay an extra £15k a year without penalty, correct?
I think she was saying that her personal money strategy is to overpay 10% on any debt, rather than it being in relation to the 10% threshold you can pay off your mortgage yearly without fees. If your mortgage says you can pay up to 10% of the mortgage yearly then yes that would mean £15k.
Problem with investing as opposed to paying your mortgage off quicker is that index funds will likely return somewhere between 5-10% over 25 years but BoE base rate will likely not stay at 0.5%. The second the economy picks up the BoE rate will go up probably somewere between 5-8% but it has been as high as 14% historically meaning that 2.9% mortgage could suddenly go up to 6-9% or even higher! meaning your £700 mortgage could go up to £1200+. Short term you will be safe on 2.9% but the chances are in the next 10-15 years the interest will go up (unless we remain in this economic nightmare!)
Completely agree! We’re focusing on clearing our mortgage to hopefully insulate us against those inevitable future interest hikes. Once that’s gone we can then take advantage of those high interest rates by saving/investing. We’ve still got a long way to go (15-17 years) but at least we’ve started on this journey!
@@KalishkaRuby Keep up the hard work! We are in a similar boat around 13-14 years to go, we still invest but once the house is gone your living costs go down, no stress if your job is at risk, you can put loads more into retirement/investments and best of all nobody can take it away from you cus you own it!!
This has sadly aged well 😢
Thank you so much !
You're welcome!
I had a mortgage which I was allowed to pay up to 500 pounds more per month. If I paid more I paid a 5% fee.
great video :) . I'm with nationwide on a 2 year fixed rate , I'm allowed to make payments up to 10% off the overall mortgage amount . is this 10% plus my normal monthly mortgage amount or is this combined ? thanks :)
It's separate to your current monthly payment.
I’m with Nationwide too, you can overpay 10% per year of the total amount you borrowed. So, if you borrowed £112,00 you can pay £11,200 per year.
You took the words out of my mouth Stevie
Im worried how my bills are going to get payed with this crisis going on.
Right now im in bed and feeling rough and worried if i did enough savings
Pretty much everyone is feeling the same way, so try not to panic. Good health mentally & physically are so important. The fact you have some savings is a blessing, some people have none. When you are feeling a bit better, look at costs you could cut or reduce as a temporary or permanent measure, that's what I am doing this afternoon. This will mean you will need to use less of your savings. Hope this helps, take care xx
You and millions of others. All in it together x
Great video. Did i hear you correctly that you can only have 20k invested into a savings ISA? Would that include mutual funds for example?
Hi there - it's £20k deposited into it per year and everything included Stocks, ETFs, Bonds, whatever you wish.
@@JenniferAMThomson perfect. Makes sense. Thanks for the speedy response
It's usually 10% of the original amount borrowed, not 10% of the amount owed.
Depends on the T&Cs of the mortgage you have - our one is 10% of the amount remaining per year that cannot be overpaid before fees apply.
@@JenniferAMThomson how can it be the amount remaining if that amount is dropping every month?
How is that calculated?
I'm confused... just take my money!
This is really useful, thank you. I got a bit lost however from 17:30 onwards but keen to understand and implement. Are you suggesting you could use the annual interest payment only over several years to throw at the mortgage rather than take from the balance?
Ye I am not sure either. £700pm mortgage annually is £8400, so your interest of £4k you get from potential investment pot is only half of what you need
where could you get a saving of 5% p/a though? I am pretty sure thats not possible for any savings accounts anymore.
stocks and shares isa
Makes a ;to of sense!
Very helpful, thank you for the compound interest calculator as I’ve been looking for something like that. I’m personally putting money in the stock market as well as physical commodities such as Gold and Silver as a hedge against the current high inflation woes. I don’t have a lot of confidence in the stock market at the moment as it looks like we’re about to hit a nasty recession, so I’m just pound cost averaging at the moment, but not very exciting when only just starting out and you see your total shares are currently down around 8% already lol, but I’m in here for the long game so hopefully it will pick up over time. Do you have any advise on likely scenarios of high interest high inflation over the next few years and how best to mitigate?
Why didn't I know this 15 years ago 😂
If your loan is tiny and you bought a studio flat for 150k mortgage and paid 10% deposit of £15k. But not everyone wants to buy such tiny place to live because then you will have to sell and get another mortgage for a bigger place. It just doesn’t make sense. People now get 30 years mortgage because they buy more expensive homes and they just about can afford the standard mortgage repayment. Not to forget you need to contribute to a workplace pension as well. How do you expect a young professional earning £30k taking home just over £2k monthly to afford all this? Lets stay to the ground please this is unworkable from any angle I look at it.
You might need to sell your Porsche Carreras
Agreed you can't use your credit card, however you can use your credit card to buy the things you need then use then use your income for the over-payment 😀
But you still need to pay off the credit card every month to avoid interest...? respectfully, am I missing something?
How? 0% credit card? Teach us please!
I disagree with you about debt for education. A lot of degrees are less than useless to be kind!! People thinking university is the only way to get ahead is just a lie. Paying for a degree in accounting for instance can be done from distance learning and the O.U. instead of pay a stupid amount for to be at a university!! I completely agree about the mortgage.
Very true 👍🏼
Very interesting, but which deposit is giving and 5% or 8% nowadays??
First-time buyer most probably
Its a Stocks and Shares ISA and investing in a low cost index fund. Lots of videos on Jennifer's channel.
Great video thanks for all the tips but I just have a question about the compound interest calculator you use, when you put down 700 every month and the first year in total you put in 8400, should the interest not be 8400*0.05= 420? But it is 225.80 in this calculator why is it like this?
Because you didnt earn 5% of 8400 you earn 5% of 700 in month one 1400 in month 2 so on and so forth
mind...blown
saving on compound interest is not for people like us need to have decent earning amount of money for it.
Afraid that isn't the case - compound interest happens to any amount you place even in a normal savings account with interest % applied.
@@JenniferAMThomson I do agree what u saying but to get full benefit from it you need to constantly saving , without touching if possible we people just work for bread and bed .
If something comes up like regarding house to get fixed plumbing or any household works that need to get it done we have to use money .only rich people will great benefit from it .
I appreciate your view but also say don't let a belief that you require "alot of money" stop you from believing that you are use the principles of money. Wealth is available for all, and sometimes our beliefs limit what we believe is actually possible.
@@JenniferAMThomson True thank you i really like your vedios and its great to get valuable advice . Yup it is possible even with little money , we all got our own way to work but life is not that easy as said like we do calculation . Health is wealth Stay safe .
Hi Jennifer, how to save with 5%interest?
I owe approx £100k on my mortgage over approx 20 years. So let’s say I build up £70k in savings over the next 10 years are you advocating that I then use that to pay off my mortgage or drip feed it back into my current account to pay the mortgage whilst continuing to save? Sorry if I’ve missed the point, I think I may need to rewatch the video.
I often wonder which would be best, I think purely in terms of the numbers you're better off putting your money where you get most interest (or pay least). If you think in the long term you'll pay 4% on your mortgage and gain 6% in your investments then keep the money on the investment side and drip in to pay the mortgage. Wouldn't that be right?
benny532017, you are right. HOWEVER, you are not factoring risks and inflation . There is a risk you will see a drop in your savings (if invested). Your savings WILL be eroded by inflation. UK inflation is at about 5% - ignore government CPI figures they are utterly manipulated lies. If you pay off the mortgage you are getting a GUARANTEED return. There is a s risk that interest rates go up, you will always pay more on the mortgage than you can get in a savings account. I tend to do both, save some ( for investing and an emergency fund) and pay some off the mortgage.
@@squirrelinstructor6075 I spent a few hours studying 3 years of my household outgoings (I am an avid record keeper) and I can back you up that the CPI figure is one big lie.
I worked my inflation rate around 6 - 7 % per year. (And that doesn't include rising house prices)
I expect the "real" rate of inflation to rise significantly with the economic crisis we are now in.
Just so happy I overpayed mortgage and the end is near.
Even if there are penalties it's still going to work out cheaper than not overpaying.
One long run on sentence………