@@DamienTalksMoney that is such an L. In the US system: the whole point of buying a house is to have a fixed payment to hedge against inflation and rate hikes. So what In the heck is the POINT in buying in the UK's version of banking if your payments go up and down just like rent!
@@Masterche18 You can get some long term fixed deals but they are really not very common. The 2/5 year fixed is what most people go for. A 30 year fixed at 2% is the dream! So what we do in the U.K. is fix then remortgage at the end of the fixed term once it goes onto a variable rate. The same as your arm ones I assume? Remortgaging at the end of the fix was all good while rates have been low. But now people coming off those fixes will move from 2-6% overnight..
@@DamienTalksMoney now we are all suffering. I literally dont know what I am going to do in 2 years time if the rate is still 6%, mine at the moment is 2.19, I pay £791 per month. That means if continues on 6% I will be paying over 1.400 per month, I can never afford that and will probably lose my house. I have a headache just to think about that.
I threw everything at the mortgage, making quite a few sacrifices along the way. When it was all gone in 2009 I decided to turn the tables and get the banks to pay me instead. With the mortgage gone I now had extra firepower each month to build a dividend portfolio which I have been compounding ever since and generate over £1000 a month in passive income. And as you mentioned Damien, there is also the psychological effect of getting rid of the mortgage burden which should not be underestimated.
Basically , mortgage rates have reached their highest point since 1998, spanning 25 years. Considering inflation trends, there's potential for them to rise even further. Just a year ago, a 28year fixed rate was only 6%. This prompts the question: should I wait for a housing market downturn before buying or shift my focus towards the equity market?
Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her resume.
@@MABFR01 for peace of mind it really is, no question. That is what they're saying. From a purely financial perspective maybe not but life is more than just numbers and spreadsheets.
@@cluggywuggy I can understand what you mean but I don’t feel the same. Maybe we have a sense of safety here in France as there very little ways to lose money. I could even say that I would feel worse having no debt knowing that I’m not making the best out of my work
paid my 25 year mortgage off in 15 years, im 50 now and boy is it great watching all these videos / news and not having to worry about interest rates. Sure I could have invested but my risk tolerance is zero and me and my family will now always have a place to call home. 100% of repossessions happen to those who have mortgages....
@@jdmulloy but you do have to worry about mortgage payments, that said i agree must have both a paid off house and a healthy pension / investment to see out your days in retirement
This is situation dependent. I was paying my mortgage off early for awhile. Once I owned 20% and got rid of PMI, it no longer became worth it to pay extra into my mortgage. My fixed rate is less than 3%, so I’ll earn more money by simply keeping my money in a high yield savings account at this point. If I want to pay early still, it makes more sense to just save the overpayment in that savings account and pay it off as a lump sum in a few years. I work in tech, so I’m worried for my job currently. It makes sense for me to stay liquid instead of locking my money up in a mortgage.
@@whywouldigivemyrealname5162 Exactly the same here mine is at 2.3 or so and so basically even the most conservative investing will beat my interest so I save my overpay and will either have a downpayment for a new home or pay it all off when X=Y
So many people see their homes as something to make money instead of a place to live. If you value money, you will invest your money.....but if you value freedom, you will pay off your home.
I paid large amounts extra to the principal during the first few years of my 30 year mortgage. This not only increased my equity, but made all subsequent payments as if I was paying extra, since interest amount was lower. I refinanced to a 15 year mortgage after 5 years when interest rates declined and my new payment was actually lower. I continued investing and overpaying my mortgage. In 2022 I paid off the mortgage which allowed me to retire with pension at 55. I've contributed to my 401k since I was 24, so I have more to come, along with Social security.
I hope to be in a similar situation as you at 55, although the mortgage started at 25yrs now down to 10yrs and did reduce the term by 5 years to get to 10 years but still overpaying and investing. Not sure I would want to retire that early though, I think those with wealth should think from age 60 is a good starting block for retirement. 40 years is a long time to enjoy life (assuming we all reach the 100 mark :) From what I can see from all the video blogs online is that if you can sustain your current lifestyle from the day you retire then go for it.
Great if that’s possible. In Germany the amount you can pay in addition is capped in the mortgage contract, most often to 5% or 10% of the original principal a year. So even if you’d had the means to pay down faster, you wouldn’t be able to.
You certainly picked an "interesting" time in UK history to be a financial commentator 😁Always impressed by your ability to help make sense of overwhelmingly difficult situations.
@@DamienTalksMoney Hi Damien I really like your view on investing I was thinking of investing in the stock market buying into ETF what do you think about this many thanks for any advice
@@DamienTalksMoney bet you are. Some of the topics you talk about are eye openers and you bring a lot of knowledge to the table in a very easy to understand way. As usual, appreciate the astrophysics humour!
@@DamienTalksMoney you are along with other you tubers. I’m 62 work colleague just over 40 we were discussing does he pay off a mortgage that has 8 years to go with a sitting tenant that covers the mortgage, or invest his cash into his stocks n shares ISA I did an excel for him where he could add pension pot and ISA pot value and compare investment amount 😢options into both with a 5% annual return. He is looking to buy a place in 2-3 years
Great video. We made sure we had an emergency fund before paying additional to mortgage , then if we get pay rises we split 3rd mortgage,3rd spend (usually on food!) 3rd short term savings goals. We have inched along but now have brought our 25yr mortgage to 3 years to go...we refinanced when rates went crazy low and locked for 5 years. When you get a way in the interest starts to drop aswell as you are paying extra so it drops faster and faster...it's so worth it for us but we wouldn't cut everything we enjoy just prioritised the things we enjoy most.
Yeah I feel free. I don't have a mortgage where one thing going wrong in life could end me. I don't need it. I'll rent mansions till I die. Handing your kids stuff hurts them, not helps them.
@@DamienTalksMoney it's a refreshing change from the usual financial gurus who call people idiots for paying their mortgages off early. Everyone has different wants and needs 👍
I am a huge fan of paying off the mortgage. The peace of mind is priceless. I can sleep at night if my investments have taken a hit, no problem. But won't ever risk my home. However, I purchased in 2013 in the Midlands, and it's a small home so wasn't stupid money, and managed to clear it in 6 years when I was 34, which gives me many years to invest. Might be different if it was a larger mortgage amount.
@@felixveja8154 same to you. It's totally an emotional debt. Certainly menas I'm risk adverse in a sense but now I can risk future capital whilst still having a roof over my head
@@JonathanWillis congrats to you matr, im 38, my remaining mortgage is 60k and i have 70k saving, what do u suggest? Paying off and live with 10k or what this guy said about stock(which i dnt know anything about) or to put toward my pension(while ive got one through my work) ?
The thing with paying off your mortgage is that you clear off a lot of downside risk: if life interferes (inflation, illness, losing a job, divorce etc). Downside risk is way more important than upside potential.
Agreed, particularly when the potential upsides are tiny in comparison. How many people ignored the downside risk by not fixing their mortgages in recent years ? The more you have to lose the more important it is to protect the downside.
Biggest lesson i learnt in 2022 in the housing market is that nobody knows what is going to happen next, so practice some humility and follow a strategy with a long term edge.
Nobody knows anything You need to create your own process, manage risk, and stick to the plan, through thick or thin, While also continuously learning from mistakes and improving.
Uncertainty... it took me 5 years to stop trying to predict what bout to happen in market based on charts studying, cause you never know. not having a mentor cost me 5 years of pain I learn to go we’re the market is wanting to go and keep it simple with discipline.
@@debstrodovan The one effective technique I'm confident nobody admits to using, is staying in touch with an Investment-Adviser. Based on firsthand encounter, I can say for certain their skillsets are topnotch, I've raised over $700k since 2017. Just bought my 3rd property for rental. Credit to Yvonne Annette Lively.. my Investment-Adviser.
@@tateoften I just looked up Yvonne Annette Lively online and researched her accreditation. She seem very proficient, I wrote her detailing my Fin-market goals and scheduled a call.
UA-cam needs to stop recommending me videos about weird things they do in the UK, like not lock down a date for 15/30 years. Happily taking locked rates for granted here.
As Ramsey would say about mortgage vs investing after that 15%, 'would you take out a loan on a paid off house to invest? Then why wouldn't you overpay your mortgage?'.
I use velocity banking to pay off my debts. And it makes cash flow much higher each month. I also invest extra bc I use revolving credit that I keep at a low average daily balance.
Took my mortgage out in 02 at the age of 22. Paid off in 2019 when I was 40. So 17 years. The overpayments I made were not massive but in the end it did add up to 8 years off the term. I was soooo tempted in 2020 to move and take out another mortgage but covid put a hold on that and now rates are back to 6% I am glad I got it paid off. At my age a lot of my piers still have 15+ years left to go on their mortgages. The key is for overpayments to be of a size that make no financial difference to you. Still allowing you to have savings, pension etc.
Exactly what I've been doing, still have a bit to go on mine but if I really wanted to, I could clear it off by then end of the year however, will make over payments that still allow for savings etc to be made. Should still have it paid off at the end of my 41st birthday and I've only had my mortgage for 5 years.
I have paid my mortgage below 50 %. My rates are locked until 2025 at 1.5 %. It is my only form of debt. Trying to min/max returns without considering risk will leave you exposed to needing to pause investments or even selling investments at a loss to cover expenses. A low risk approach that values cashflow benefits and very low day to day costs makes it easy to keep investing no matter what else is going on. Don't just get stuck on the highest rates of returns because you'll be very exposed. I'll be a millionaire 10/10 times. I'm not worried about the specific number of millions. It really doesn't matter much.
Our 5 year fixed rate (2.89%) was up at the end of August & after many long discussions My wife and I decided to sell everything & dump 90% of our life savings into the mortgage and pay it off. I don't know if it was the right decision long term but, you can forgive me for feeling like Einstein for a month or two!!
Nice one on clearing the Mortgage debt. I will be in your shoes one day but I would ask if you are young enough to be able to claw back some of those savings to compensate being mortgage free? if so then well done and look forward to your mortgage payment free pay day :)
So many ways to pay a house off early. Someone I knew sold their mcmansion after living there for 13 yrs, they sold it. They made enough money to pay cash for a smaller home........that was 7 yrs ago and they are living their best lives.
3 years ago I got a great paying job but never thought it would be forever so I put all my extra money into paying off my mortgage. Sure enough, I just got laid off from that job but now have a 7 figure net worth with no mortgage. And that is why I paid off my mortgage instead of investing all that extra money.
I compressed my mortgage term years ago, then at the start of pandemic I started "overpayments on steroids" - at a rate of 1.74% interest fixed until summer 2023 I decided to finish my mortgage once & for all. Paying around 60 - 65% of take home pay into the mortgage and I'm nearly there, under £5000 owing on 1st November 2022. To say I'm relieved with all this turmoil going on is an understatement!
I've been overpaying my mortgage off with an extra 75% for about five years now and it's helped my mortgage term come down by years, the extra payments just become part of the normal mortgage payments, every six months or so it's nice to see actual progress on the amount coming down rather than just a tiny bit due to the interest they take! My advice is at least over pay something, even 100 pounds a month, you will feel and see the results.
@@maryanakurti bullshit huh? My income and 3 paid off rentals in the SF Bay Area says otherwise. love those rental incomes, average 3+2 rents here is minimum $3K. You can do the math. Life’s good.
Personally I think a mixture of both. Build up a contingency fund for 3-6 months. Overpay on mortgage whilst investing through ISA accounts. Don’t think it needs to be one of the other. Just do all and manage accordingly
I agree. Mortgage debt is certainly worth paying off sooner if possible but financial investments and strategy should be established in parallel. At some point, the debt will disappear and you should have a financial machine built to take your newfound free cash flow and start producing returns immediately. It's risky in itself to throw all your money at the mortgage. If your house value takes a dump, you are left essentially burning all of your money and any shred of security. Diversification includes your home and no financial advisor would tell you to put all your money on a single stock. Why on earth would you do it with your home?
Overpaying on your mortgage if you can is always a bonus, because of the saving on interest. But honestly, an Emergency Fund should have come before the mortgage. Its wise to have an energency fund of the value of 3 to 6 months worth of expenses, as things do go wrong, and we're living with a finance cycle where recessions - mostly minor, but 2008 was only 14 years ago - are coming around more frequently.
One of the biggest things that helped repay my mortgage off was rounding up any transactions to repay to the mortgage. If you spend £8.72 on your card £1.28 can be transferred to your mortgage if they allow faster payments. This technique will allow significant overpayments over time without needing to specifically allocate funds. It's also worth noting most mortgages interest is applied monthly where as most savings rates are applied quarterly or annually so the compounding effect over the years also helps save more
I’m 50 years old. I had a mortgage of £250,000 that was due to be paid off when I reached 70 (my wife is 45). In January I decided to change to a 5 year fixed mortgage and overpay by 300%. I did it mainly because I was terrified of still having a mortgage at 70. It felt like a big commitment. But after a few months it’s weird how it no longer feels like a stretch. It’s just ‘the mortgage’. We life off my wife’s income and mine all goes on the mortgage and on an ISA and pension for my 9 year old son (based lately on advice from brilliant channels like this). I did a calculation using rhe CBS site to estimate what I would pay now if I chose to take out a new mortgage either £250k for 20 years or £250k for 5. The first would mean paying an extra £800 a month. The second an extra £500. Choosing to massively overpay my mortgage and fix it at exactly that time was the best decision I have ever made in my life. If I had chosen to invest instead (another option) - I would not have had either £800 or £500 to invest. Also - don’t underestimate the psychology. While the world has been going to hell in a handbasket over the past 8 months I’ve been watching the capital in my home increase by £3500 a month. It’s an incredible feeling of having at least some control in a volatile environment.
@@alangordon3283 he changed to a 5 year fix, but last year I left a 5 yr fixed deal a year early it cost me 2% of the balance on the mortgage. I moved to a new 5 yr deal there were three advantages1) new rate 1.29 % which was nearly 1% lower. 2) the remortgage was for the amount still owing 3) my saving was about £370 a month which I could use better elsewhere
@Ra’s Abdul surely that depends if interest on the mortgage exceeds income from investments and if you can reduce the debt ( it does not have to be cleared) mortgages are often the cheaper rates of lending money
@@alangordon3283 I’m sorry I don’t know what ‘how much did that story cost you?’ means. If you mean did I face any charges - I didn’t face any. I had a mortgage with the same company since 2003 and had 3 different mortgage product with them. The first two were variable. I switched from the second product - a variable mortgage that I had held for 12 years and that was on a standard variable rate. The 5 years fixed was the first fixed rate mortgage I ever held in my life. Had a I continued with the mortgage ‘as was’ I would now be paying a little over £1700 instead of roughly £1,200 I had been paying. That’s slightly more than my current car payment. I am currently paying in £240 into my son’s pension and £250 into my son’s ISA. Had I kept my mortgage as it was in December 2021 the increase in payments would have meant I had to cancel both, both for the duration of the increase in interest rates which could mean years, and also without paying off any capital on the mortgage. I haven’t paid any fees. I had 65% in equity so CBS wasn’t about to start charging me for anything. My total interest over the 4 years and 9 months I now have remaining is about a tenth of the interest I would have paid over 20 years if I kept the original mortgage product (about £7k compared to £70k - and that is based on the interest rates from December - I haven’t calculated what I would now being paying on the variable because I no longer need to). Is this the point where I insert some sort of emoji in place of an argument? I’m afraid I’m not up with current ‘use emojis instead of a coherent argument’ trends.
I think this video has beautifully summed up and answered what so many of us are questioning, and some how the news outlets aren’t answering even half this well. Thanks!
I think it depends on your current level of liquidity. If you have a good amount of liquid assets, then it might be ok to overpay the mortgage for a time. If all you have access to is what you got paid one month from a job you might lose, then you probably should continue increasing your liquid assets.
It's a different scenario in Australia when you make additional payments into your mortgage. The money isn't locked away. Your mortgage statement quotes the amount of any overpayments as available for redraw: it can be used as a line of credit for any purpose, e.g. investment when mortgage rates are low and the benefit of leaving it against your mortgage is minimal. Very flexible. When interest rates rise, you can take the capital out of investments and return it to the redraw facility which again offsets the principal owed (with greater effect because when rates are higher). Hope you're feeling better soon.
@@jrlx86 well I live in the. North east property is not as high as south/ London where in London 300K does not even buy a 3 bed terrace. At the time it was three times our joint income but redundancy in covid for me and the new job at 60% previous salary meant it was tight till I could re-mortgage. It was a new build on a good estate where my house at £300K is a cheaper one. I don’t care it’s a 4 bed wife and i plus two of her grandkids live with us, it’s a home first still get a buzz when I come home. Have split our money into property, investments and pension. Looking forward to the day nil mortgage. One thing I would say is to move I I had to clear all Other debt such as credit cards, loans. Which I needed toaccess via a pension but best thing I ever did. I only have one credit card zero interest and it’s for emergencies / big purchases. Having no debt is a massive stress buster.
Life is a balancing act….in all matters, especially with regard to finance. Debt is always the ‘driver’ on financial matters. The less debt you have, the more wriggle room you have. Every pound off your mortgage, creates a small lifting of the shoulders and Empowers your ability to adequately deal with whatever the world throws at you. Your well-being increases, your stress levels diminish and life begins to get back into Your control ……not others. A huge factor in these uncertain times.
Living within our means, paying off the two mortgages we had early and investing the mortgage money we would have had and additional savings was a recipe for our success. You have to have a plan and execute, it won't be perfect, but it will provide direction in an ever-changing world. Having options that you create are priceless.
I bought my house in 10 years. Rented for 18 years! I had been saving hard but for one reason or another, I never saw how dumb I was for not buying a house! I now own that house and no one can take that from me! It also means I’ve got more to invest in etfs now, and a few other stocks. The feeling you get from owning your home is a security like I never thought it could be! The hard part now is affording houses! I got lucky in life and property was in a dip when I bought. It’s worth double now! Crazy!
Great content as always. There is also another option - pay off your mortgage as much as you can now and release equity when interest rates are low again and stock markets are trending up. Most people lock their mortgages for 2 or 5 years anyway.
Brilliant Content! My solution is offset mortgage. So put your savings in an offset account and you don't pay mortgage interest on it, but it's always available for a rainy day! Great peace of mind!
I just want to pay off my credit card debts which I’m doing now and it all should be clear next year November. I’m paying £100 a week to debt recovery companies. Once that’s clear I’m keeping away from credit cards
Funny how times have changed, when I told people about 8 yrs ago that I was going to pay off my mortgage, they told me don't do it.....invest.........now it seems every one wants to pay off their home. best thing I ever did. If I go broke, i will always either have income (rent) or a place to live. When you have a paid off home, you can recover from financial castrophies so much faster and with less struggle.
I paid my mortgage off early age 49 . One of the Best feeling ever !!! then gives you the option and freedom to do whatever with your money, Knowing I'll always have a roof over my head.
Recent subscriber having been recommended based on watching another British finance UA-camr. I’m glad both of you are doing this content, and glad I came across it. I’m much better informed for it… But on top of that. Bravo for spending the time to put the Warren Buffett and Sandra Bullock thing together, I thought it was all a bit tenuous right up until you pulled out getting kicking in the Bullocks.
@7:40 This is why a variable loan + redraw is important IMO. You can save on interest and also have the ability to access funds if absolutely necessary.
Hi Damien, an offset fixed mortgage may be the answer. We have one with First Direct, whereby we can put money in the linked offset account which acts as a way to offset the interest you’d pay just like paying off a portion of the mortgage, but, you can access or take that money out if needed. It is also fixed for 2 years so it’s predictable. The other benefit is you only pay the interest which keeps the monthly payments down, but can make overpayments (or simply put in the offset account) whenever you want. Food for thought 💰
@ian, just taken one with YBS at 4.69%, not the best rate but we will be offset 100% so paying zero interest but hedging the rate and keep the liquidity. Also works well with todays higher rates as only around £10k saved will create around the £500 interest income before paying 40% on the amount over if a HRT.
One alternative view is try neutralise your interest costs rather than overpay the mortgage capital. So throw some cash in high interest savings and/or fix deposit accounts depending on how long your mortgage has left to run on the fix deal. This way you earn more interest than what you pay on the mortgage. Kinda like offset mortgages from back when. And you build a cash buffer as well at the same time.
My approach over the years was a bit of everything when it came to overpayments and saving / investing. A point I think you missed Damo was if you save cash, when it comes to getting a new deal after the fixed term ends, these normally cost a fee to secure lower rates so that money can be very useful then. Peace of mind was important to me as not having to worry anymore about what for most is the largest monthly expense means I am free now to invest more. Great video as always 👍🏻
I'm the same. I over payed the hell out of my mortgage up until last year because cash accounts paid FA. But this year savings accounts are paying a higher rate so Im dumping what I was overpaying on the mortgage into a savings account and will pay off a lump sum once my fixed term ends. But we have another four years on my fixed mortgage.
I knocked out the mortgage before investing more and it was a bad idea in hindsight, as the investments would have outpaced the 4% mortgage by quite a lot. Having the house paid off is nice, but being a millionaire right now would have been nicer.
@@MIKEZGAMER-g8t I had plenty of VTSAX prior to getting the mortgage, so it was dabbling in TSLA that waited until after I paid it off (and it 10x'd in the meantime).
@@DamienTalksMoney Sorry Damian, I did see your last message about contacting you, but I could not work it out. I have mentioned you to my wife (School business manager in the midlands) and she would love to speak more about getting you involved if you would. If you are able to contact me without either of us doing it publicly then please do. Thanks again Damien, again, loving the channel and your work
@@ryanifbb5204 Hi Ryan, That last message was not me it was a scam account pretending to be me trying to con you. You will notice my name is highlighted in grey this is the only way to tell that it is actually my profile replying. Feel free to email me on damientalksmoney@gmail.com
Hi Damien I'm a brand new subscriber and I have to say I'm very impressed! Ive been interested in personal finance since 16 and 2 years on I'm in a low cost Vanguard index dund dollar cost averaging my way to early retirement! Keep up the good work I'll be watching more of your videos for sure ! :)
If you pay off your mortgage you still need to go to work to pay the rest of your bills. If you invest the money instead, it can create an income that can pay all of your bills.
@@bikecurious9163 not really. If you have a longer loan period with a lower monthly payment and you use the extra cash on hand to invest smartly, you'll offset the extra interest and inflation and end up with more money than you would from lower interest on a shorter loan.
Been critical of some of your stuff previously but this is a really good synopsis. For some people the certainty of paying off a mortgage is reassuring although rarely investment efficient. Takes a lot of pressure off.
good message. people should really be honest with themselves. the order of investing does: pay off your debts, get an emergency cash reserve, get some physical gold and silver, and then you can start investing once you have that foundation.
@@simonalcroft7897 hahaha can't help but notice that you don't present any alternative. We all know what that means. You don't even invest. Lol people these days
@@simonalcroft7897 core recommendations on Dave Ramsey in The states. Except for the gold / silver but. Before you do anything get rid of debt such as cards etc. do not underestimate the relief that the only debt you have is your mortgage, all credit cards are clear or on zero interest
@@simonalcroft7897 just curious, what is it about paying down your debts and building a reserve prior to investing is clueless? perhaps the key word here is investing, as opposed to speculating. if you have unsecured credit card debt on a floating interest rate, it seems to me a pretty bad idea to be yoloing your money on altcoins or memestocks. just my 2 cents here, but it seems like you are the one who is clueless.
I'm currently doing EXACTLY what Kiki is doing.. I'm on a fix rate for 5 years now, just started.. so I'm going to amass a pot leading up to the fix ending and decide what to do with it then. That way, as you have said, I can either pay the lump to bring the rate down, use it in an emergency, invest it or even add it to my "fun-fund" and spend it on something I want to - but either way, I'm securing some sort of future with the capital I have..
Beautifully concise summary. You touched at the end on something that I think is quite important. The nominal return on overpayments may be climbing but, with inflation currently at about 10%, the real return on overpaying a mortgage, even at a 6% rate, is negative. A mortgage is basically a negative cash balance, which is a pretty good thing to have when inflation is rampant. As long as you can afford to service the debt, there's an advantage to keeping the mortgage balance high and letting inflation eat it away.
But the problem is not everyone can afford to service such debt with the rising interest rate. If you have the opportunity to keep your monthly mortgage payment down by paying a lump sum into your house, why would you not do it in this case?
@@JayFengBeat I agree that if the only way to keep the mortgage going is to overpay then it makes sense to do that. But, as mentioned in the video, overpaying typically won't do much to your monthly payments and reduces your flexibility vis-a-vis putting the money aside and using it to meet the higher monthly payments as needed. In any case, my comment was indeed really directed at people who don't have a problem servicing their mortgage. That might include those who plan to meet the higher monthly payments by reducing the rate at which they save, or those who are on a fixed deal with plenty of time left.
Inflation will eat it out only if your wages will keep up with it. Usually rates on mortgage go up higher than wage rise. It is all individual situation, but almost nobody that I heard from had 10% (RPI) wage rise, usually it was 3-6%, so in fact mortgage is eating purchase power not devaluating.
@@michaewelina7983 I agree that inflation also reduces the purchasing power of your income. But that doesn't mean it's not a good idea to let inflation eat away at the mortgage. We can see this with a simple stylised example. Imagine a situation where you have a £100 mortgage with a two-year term and 0% fixed rate of interest (the numbers aren't important, so I just keep things simple). You earn £100 per-year. The other thing you can spend money on besides mortgage payments is a consumption good that costs £1 in year 1. Inflation is 100% so each unit of the good will cost £2 in year 2, but your income doesn't increase. The question is whether it's better stick with the original plan to pay £50 each year on the mortgage, or whether you should overpay the entire mortgage in one year. Let's look at what you can consume over the two years in each case. Firstly, if you don't overpay then you spend £50 each year on the mortgage, leaving £50 each year to buy goods. That means you can buy 50 units of the good in the first year and 25 units in the second year. Your total lifetime consumption is 75 units of the good plus a house. Alternatively, suppose you overpay the entire mortgage in year 1, spending the whole £100. Then you don't buy any goods in the first year, but you have £100 free for goods in the second year -- enough for 50 units of the good. Your total consumption is 50 units plus a house. Overpaying reduces lifetime consumption because it means spending money in the first year (when a pound goes a long way) in order to have the money free in the second (by which time inflation has destroyed its value). Note that in this example inflation reduces the value of your income as quickly as it reduces the value of the mortgage balance, just like you said. But you would still be better-off waiting to repay the mortgage. The example is silly, of course, but it illustrates a more general logic that is not widely-understood. You can put more realistic numbers into the same example and come to a similar conclusion.
@@UbiquitousBooks I think that's a good illustration for fixed rate mortgages although if you have a variable rate, your mortgage has a risk of going up in year 2 as well if interest rates go up to try and combat the inflation.
actually with prices in the stock market dropping surely the future return (which is what counts) is only improving... yes it hurts to see a portfolio go red for a year or two but buying stocks cheaply with decent dividends means you get paid to wait while you bought companies at decent levels (thinking long term)...
I land on the 'pay off your house' side. You will always need a place to live. The peace of mind - knowing that you've secured a home - drastically reduces the anxiety over money. There are too many variables affecting market performance for me to want to put all of my eggs in that basket. If I'm wrong - I have a home. If I'm right - I have a home.
Nice post, thanks man. Lucky enough to be on a low fix mortgage for a few years here so not panicking just yet. Hoping to ride the interest wave out and pick up some cheap investments along the way. But I'm seeing friends lose their jobs so by no means complacent...
My idea exactly is what you said at the end of the video .at the moment I’m on a very low rate and my money is doing pretty well in the bank and in my investments, i’ve got three years left at a low rate of 1.8% I fixed at the perfect time ( pure luck 🍀) when it goes up for renewal and interest rates are still pretty low I will probably continue to invest and not bother paying any extra payment, but if the rates are pretty high, I will probably start to pay off a mortgage as that guaranteed return ( unlike investing). I’m 35 so I have a few years left in Me before I retire. But I totally agree with the people saying they want the freedom of paying their mortgage. Must be an amazing feeling. I also agree off people saying don’t buy additional property as it’s a lot of stress which it can be it’s not for everyone
I bought just after the crash in 2009. Had a tracker from the off and never knew when rates would go back up again so I overpaid while I was getting charged very little interest. I’ve now cleared off so much capital that I’ve only got 2 years left, just in time for poo hitting the fan!
Yes, I perhaps lost out on asset gains, but for me, if I’d have still had the majority of the balance outstanding now, I’d be in for a shock. Yes I may well have beaten this with gains in assets, but like you say it’s a guaranteed win knowing what you’re saving in interest on your biggest debt.
I'm 13 months into my 5-year fix at 1.8%. I was overpaying, but since inflation and interest rates soared during the end of 2022, I stopped overpaying and starting investing/saving these overpayments. I can get a much higher interest on these savings than the % on what I have my mortgage at. Plus the fact that inflation is >10%, I am effectively paying -8.2% on my mortgage. I got very lucky getting my mortgage when I did, so I am trying to take advantage whilst I have the length of this fix left
This is a perfectly timed video for me. I was thinking of switching monthly isa payments to overpaying the mortgage while i can make more of a dent in loan while my rate is 1.74% Im gona stick with my original plan
In my opinion if you have a nest egg large enough to pay your mortgage (or simply purchase a home in cash), you should ALWAYS do so in all market conditions. Yes, it's possible that in low-rate environments you could make a few grand more via the difference between your debt repayments/insurance and the income derived from the nest egg compared to just using the full nest egg to pay off the home, however frankly speaking this is your family home. I struggle to believe that the security, certainty and peace of mind that comes from having the place where your kids rest their head every night be completely, 100% yours pales in comparison to making a few extra grand in some market conditions. Leverage on your family home makes no sense, and if you still don't buy it, ask yourself this: would you take a HELOC out of a fully paid home in order to invest in equities just because "debt is cheap"? If not, don't put off paying your mortgage; it amounts to the same thing. Don't get me wrong, the same does not apply to investment property, where I'd always seek to use as much leverage as possible to maximise returns. But I want for my future family to rest easy and the permanent financial independence brought about by owning your home is unparalleled in my view.
@@b-id5wq actually the complete opposite, you'll have all that extra disposable income because you won't have a mortgage. Extra money to spend on investments, holidays, whatever.
That is poor people mindset. Buy, borrow, rent it out. Buy, borrow, rent it out. Pay off some of the mortgages. Keep healthy debt to equity ratio. Be consistent. Over the time you will become financially independent. That's one of the simplest ways to become financially independent.
After coming through the late 80s and 90s recession, then the 2008 recession. I learnt a few things. I could not afford to pay 15% rates then 10% rates in the 90s, especially after being put on a 3 day week. I rented the house out and my wage and rent just covered mortgage. After 1 year I moved back in and rented a bedroom instead. Always have your house in a ready to sell condition just in case things go tits up. You do have options.
Retired last June at age 59 with the house and two sports cars paid off. Divorced. No kids. No debt. Respect money, manage it well, live within your means, and sleep soundly each and every night. Works for me.
@@n.s.5278It was the right decision for me. No regrets. Staying busy with my passions in retirement- visits to the gym, walking, mountain biking, screenwriting, traveling, and just rescued a puppy. : ) My plate’s full. Aging is for wimps.
What I'm confused about (and I'm not in the UK so maybe that's why) is why there sounds like an almost certainty that people will re-mortgage? Is the norm in the UK to have an adjustable rate mortgage? Or a balloon payment? I have a 30 yr fixed and barring something unexpected, I will not be refinancing.
There is no widely available 30 year fixed mortgages in the UK. We only really have access to 2/5 year fixes. So millions of people are coming to the end of their fixed rate deals and are now being faced with higher interest rates.
@@DamienTalksMoney oh man, that's really tough. It makes home ownership feel inherently more risky. I suspect it is bc the US govt buys/secures conforming home loans that it is widely available here. Even the jumbos that banks own will offer that term.
@@littlerunner4505 the 30 year fix is a dream! Especially over the last decade. I will pin this comment as many people from your part of the world have asked the same question.
I always did. Compared to other ways of investing any surplus money you have, it zero risk and also tax free (they only tax you on interest earned, not interest saved). I started by rounding my payments up by a few 10's of quid, and kept up payments every time interest rates dropped instead. Overall, I saved a few years from the term of my mortgage and several £k in interest. The only downside is the lack of flexibility, you can't get the money out again easily so you can only real do this if you have enough cash in your rainy day fund to cover life's emergencies.
All of this would have made sense back in the 2000s and 2010s, but we are living in a different world now. Keeping your money in a bank is not safe. Keeping your money in the stock market... where you actually do not own any stock. Keeping your money in bonds, that will either be defaulted on, or inflated away. We are smack in a Kondratiev Winter. People need to be switching to hard assets. And the reason to pay off your mortgage is because with the financial reset coming, if you do not have your house paid off, you are going to be looking at all kinds of shenanigans. Like, calling in your mortgage when there is no refinancing available. The bank gets the house, you get the streets. In some cases, the banks will just take the houses. The "law" will be on their side... because they are a big institution that would not make mistakes and commit fraud... (like they have done in the past) After you have several months of living expenses saved up, I would definitely suggest paying off your mortgage. Or sell and move to some place much less expensive.
7 years ago I refinanced at 3.99% for 18yrs which added $300/mo to my payment. I’ve checked on refinancing since but the $10K cost to close has always negated any offer in the long term. Recently I lost my job and ran the numbers taking $10K out plus rolling $9K in closing in. At 7.5% apr for 30yrs my payment would drop $150/month but triple my payoff. It might have been a mistake at the time to stretch for a quicker payoff. But NOW it would be completely idiotic to try and lower my monthly mortgage.
Thank you! As always masterpiece and has a lot of different points of view! At the moment we are investing twice as much as we overpay the mortgage. We have shortened the mortgage a bit and we are building our investment. Damo and this is because of you! I can't thank you enough for all that you do. Just keep it going. Big thank you!👏🍻🖖
Mate this comment makes me so happy that I have been able to help you get a hold of your finances. Over pay or invest no matter what you do you will be better off as a result
I’m done, finished 8 years early. How did I do it? You have to seize the opportunity when it’s presents. I was on tracker mortgage. Interest rates in uk have been on all time low. So I overpaid every month on my mortgage for 11 years. Rather than save money. Most satisfying feeling is when you are paying off capital in big chunks instead of interest. When it got £20k. Paid off the lot. I learnt my lesson. In the 90,s interest rates hit 15%. Yes, 15%. That was the mother of all recessions. It almost broke me. I sold my first home for £500 more than when I bought 9 years later. Plus to add I had an endowment mortgage which wasn’t going to give me the returns I needed to pay off the loan. Another story.. Ive never owned a credit card, I don’t get things on credit or buy new cars etc. There’s good debt and bad debt. I have no pity for people that find themselves with bad debt due to foolish borrowing. BANKS ARE RUTHLESS. it’s now time for the banks look after people with savers. I don’t see that happening anytime soon. If you can alway try and pay little extra
It's a personal choice and depends what you want from life at the end of the day. But one factor I don't see discussed very often is the age at which each strategy realises its full benefit. For example I'm planning to be mortgage free by 42. It will bring freedom to invest more, travel, take a career break, change career altogether... at relatively young age. If I let my mortgage run its full course and invest the extra money instead I'll be 60... I'll undoubtedly be financially better off overall by this point but I'll be 60! I've got 18 fewer years to enjoy the benefit of this strategy.
Locked a 10 year fix at 2.24% in July, 18 years left on my mortgage I am tempted to overpay and clear it after 10 years but the stocks are looking too tasty atm. Bizzare as I wouldnt remortgage to invest in the market and I equally wont sell my investments to pay off my house.
I think it's worth mentioning that if you do manage to pay off your mortgage completely, even if the savings on interests you achieved were inferior to what you would have gotten by investing the overpayments in the stock market instead, all those years you will keep working while having no mortgage will more than compensate and ultimately get you more money. If you finish paying your mortgage at 65 while retired, you will be missing on those juicy years of working/generating income while having no mortgage. Ultimately what you are buying is time. Time that will pay a lot later.
thanks youtube for the timing.. I just withdrew the overpayment I’d built up against the principle on my mortgage and put it in an ISA. I’ve also stopped my overpayments and putting them in the same ISA. I’m on a fixed for 10 years at 2.5% (9 years to run). ISA is 5.5% currently and at least for a few years IMO. So in my mind I’m still mentally paying off my mortgage sooner - I’m just doing it by investing it alongside in a dedicated account which will be used to hopetully pay off the remainder in 9 years time.
we managed to pay off the mortgage on our house when I was 49. Then now we bought an appartment... and got a mortgage running for 25 years... I'd say if your goals are to own two homes, better set the cash aside so you can reduce the percentage you have to borrow. The banks will give you a better deal for two reasons: if you start the second mortgage at the age of 45 or at the age of 50, if the ratio loan to value is lower... the bank will care more about how safely they can get their money back by selling your house plus appartment than by how likely it is that you lose your job...
Good advice covering the various angles. We came to the same conclusion - our mortgage is fixed for another 4 years @ 1.7% but you can easily beat that with a savings account so rather than overpay we are going to build up a cash pot to keep our options open when we have to refinance.
2:13 what? Do British people not have fixed rate mortgages like the Americans? I guess their system is different than ours
We do not have 30 year fixed mortgages only 2/5 years. So millions of people who fixed a few years ago are now coming to the end of the deal
@@DamienTalksMoney that is such an L. In the US system: the whole point of buying a house is to have a fixed payment to hedge against inflation and rate hikes. So what In the heck is the POINT in buying in the UK's version of banking if your payments go up and down just like rent!
@@DamienTalksMoney that's aweful tbh, but good to know. It's like yoyr only options are equivalent to 5 year arms at best.
@@Masterche18 You can get some long term fixed deals but they are really not very common. The 2/5 year fixed is what most people go for. A 30 year fixed at 2% is the dream!
So what we do in the U.K. is fix then remortgage at the end of the fixed term once it goes onto a variable rate. The same as your arm ones I assume? Remortgaging at the end of the fix was all good while rates have been low. But now people coming off those fixes will move from 2-6% overnight..
@@DamienTalksMoney now we are all suffering. I literally dont know what I am going to do in 2 years time if the rate is still 6%, mine at the moment is 2.19, I pay £791 per month. That means if continues on 6% I will be paying over 1.400 per month, I can never afford that and will probably lose my house. I have a headache just to think about that.
I threw everything at the mortgage, making quite a few sacrifices along the way. When it was all gone in 2009 I decided to turn the tables and get the banks to pay me instead. With the mortgage gone I now had extra firepower each month to build a dividend portfolio which I have been compounding ever since and generate over £1000 a month in passive income. And as you mentioned Damien, there is also the psychological effect of getting rid of the mortgage burden which should not be underestimated.
How fast did you pay it off and what dividend portfolio you using ?
I’m overpaying mine but can’t see the light at the end
@@lukesargent5594 10 years to pay off mortgage and I use Barclays Smart Investor for my dividend portfolio.
@@TheCompoundingInvestor Thankyou are you picking your own stocks or do they do it in like an isa ?
Excellent ..I completely agree with you
Basically , mortgage rates have reached their highest point since 1998, spanning 25 years. Considering inflation trends, there's potential for them to rise even further. Just a year ago, a 28year fixed rate was only 6%. This prompts the question: should I wait for a housing market downturn before buying or shift my focus towards the equity market?
My partner is also thinking about taking a similar approach. Could you please provide more details about the advisor who assists you?
Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her resume.
Buy when u can afford
Lol....6% is low compared to some other countries
I'll have mine paid in 12 months I've just turned 45, cant wait,👍🏻👍🏻👍🏻
Edit, its paid 🎉🎉🎉
Well done :)
Congratulations my friend!
Well done mate
Congratulations!!!!🎉
Congratulations.
100% mortgage-free, debt-free and peace of mind is priceless!
Debt free isn’t always the best solution though
@@MABFR01 for peace of mind it really is, no question. That is what they're saying. From a purely financial perspective maybe not but life is more than just numbers and spreadsheets.
@@cluggywuggy I can understand what you mean but I don’t feel the same. Maybe we have a sense of safety here in France as there very little ways to lose money. I could even say that I would feel worse having no debt knowing that I’m not making the best out of my work
I borrow as much as I can and I'm still at peace.
As long the capital gain is higher than the borrowing cost, I see no problem with borrowing.
@@MABFR01why if it really makes you happy and you aren’t greedy?
I did both from 2012. I hedged my bets. I invested in my SIPP and overpaid my mortgage. Result. Win Win.
paid my 25 year mortgage off in 15 years, im 50 now and boy is it great watching all these videos / news and not having to worry about interest rates. Sure I could have invested but my risk tolerance is zero and me and my family will now always have a place to call home. 100% of repossessions happen to those who have mortgages....
@@jdmulloy but you do have to worry about mortgage payments, that said i agree must have both a paid off house and a healthy pension / investment to see out your days in retirement
Houses can be lost due to nonpayment of taxes and well. You can never truly own your land.
This is situation dependent. I was paying my mortgage off early for awhile. Once I owned 20% and got rid of PMI, it no longer became worth it to pay extra into my mortgage. My fixed rate is less than 3%, so I’ll earn more money by simply keeping my money in a high yield savings account at this point. If I want to pay early still, it makes more sense to just save the overpayment in that savings account and pay it off as a lump sum in a few years. I work in tech, so I’m worried for my job currently. It makes sense for me to stay liquid instead of locking my money up in a mortgage.
Congratulations! Can’t wait to get to that point in life!
@@whywouldigivemyrealname5162 Exactly the same here mine is at 2.3 or so and so basically even the most conservative investing will beat my interest so I save my overpay and will either have a downpayment for a new home or pay it all off when X=Y
So many people see their homes as something to make money instead of a place to live. If you value money, you will invest your money.....but if you value freedom, you will pay off your home.
I paid large amounts extra to the principal during the first few years of my 30 year mortgage. This not only increased my equity, but made all subsequent payments as if I was paying extra, since interest amount was lower. I refinanced to a 15 year mortgage after 5 years when interest rates declined and my new payment was actually lower. I continued investing and overpaying my mortgage. In 2022 I paid off the mortgage which allowed me to retire with pension at 55.
I've contributed to my 401k since I was 24, so I have more to come, along with Social security.
I hope to be in a similar situation as you at 55, although the mortgage started at 25yrs now down to 10yrs and did reduce the term by 5 years to get to 10 years but still overpaying and investing. Not sure I would want to retire that early though, I think those with wealth should think from age 60 is a good starting block for retirement. 40 years is a long time to enjoy life (assuming we all reach the 100 mark :) From what I can see from all the video blogs online is that if you can sustain your current lifestyle from the day you retire then go for it.
Great if that’s possible. In Germany the amount you can pay in addition is capped in the mortgage contract, most often to 5% or 10% of the original principal a year. So even if you’d had the means to pay down faster, you wouldn’t be able to.
You certainly picked an "interesting" time in UK history to be a financial commentator 😁Always impressed by your ability to help make sense of overwhelmingly difficult situations.
Yeah what a shit show Alison haha I just hope i am helping people in some way.
@@DamienTalksMoney Hi Damien I really like your view on investing I was thinking of investing in the stock market buying into ETF what do you think about this many thanks for any advice
@@DamienTalksMoney bet you are. Some of the topics you talk about are eye openers and you bring a lot of knowledge to the table in a very easy to understand way.
As usual, appreciate the astrophysics humour!
@@bernardo.daSilva I see you posting some fascinating space stories on insta mate love them
@@DamienTalksMoney you are along with other you tubers. I’m 62 work colleague just over 40 we were discussing does he pay off a mortgage that has 8 years to go with a sitting tenant that covers the mortgage, or invest his cash into his stocks n shares ISA I did an excel for him where he could add pension pot and ISA pot value and compare investment amount 😢options into both with a 5% annual return. He is looking to buy a place in 2-3 years
The moment of paying off a mortgage is one of the most fantastic experiences in life.
I can only imagine!! True ownership over one’s castle
I echo this sentiment.
Paid mine off in April. Everyone told me I was crazy 😂
It’s not actually a good idea but it helps you sleep at night.
@@marcwareham9351 Best thing I’ve ever done… 👌
Great video. We made sure we had an emergency fund before paying additional to mortgage , then if we get pay rises we split 3rd mortgage,3rd spend (usually on food!) 3rd short term savings goals. We have inched along but now have brought our 25yr mortgage to 3 years to go...we refinanced when rates went crazy low and locked for 5 years. When you get a way in the interest starts to drop aswell as you are paying extra so it drops faster and faster...it's so worth it for us but we wouldn't cut everything we enjoy just prioritised the things we enjoy most.
mate, the way you make your analogies, jokes and value flow together- is nothing short of genius.
You legend mate what feedback this is. Thank you 🙏🏻
Great that you mentioned the 'feeling of freedom' it's a point that's often overlooked in the pursuit of greater potential gains.
The aim is to be happy isn’t it that is the best return from life anyone can hope for
Difficult to put a price on that. It makes you look at life differently and gives you an opportunity to rearrange your priorities.
i get my feeling of freedom from not having a mortgage at all lol. Each to their own
Yeah I feel free. I don't have a mortgage where one thing going wrong in life could end me.
I don't need it. I'll rent mansions till I die. Handing your kids stuff hurts them, not helps them.
@@DamienTalksMoney it's a refreshing change from the usual financial gurus who call people idiots for paying their mortgages off early. Everyone has different wants and needs 👍
I am a huge fan of paying off the mortgage. The peace of mind is priceless. I can sleep at night if my investments have taken a hit, no problem. But won't ever risk my home. However, I purchased in 2013 in the Midlands, and it's a small home so wasn't stupid money, and managed to clear it in 6 years when I was 34, which gives me many years to invest. Might be different if it was a larger mortgage amount.
Ha, snap, £220k house, same area, same year of purchase, almost same age too, "in effect cleared" as saving > mortgage at 33.
@@JonathanWillis that's amazing Jonathan. Well done
@@felixveja8154 same to you. It's totally an emotional debt. Certainly menas I'm risk adverse in a sense but now I can risk future capital whilst still having a roof over my head
Well done
@@JonathanWillis congrats to you matr, im 38, my remaining mortgage is 60k and i have 70k saving, what do u suggest? Paying off and live with 10k or what this guy said about stock(which i dnt know anything about) or to put toward my pension(while ive got one through my work) ?
The thing with paying off your mortgage is that you clear off a lot of downside risk: if life interferes (inflation, illness, losing a job, divorce etc). Downside risk is way more important than upside potential.
Agreed, particularly when the potential upsides are tiny in comparison. How many people ignored the downside risk by not fixing their mortgages in recent years ? The more you have to lose the more important it is to protect the downside.
Paid off house leaves you at more risk in a divorce. Husband or wife can demand their half and could force a sale.
I like how you phrased this “downside risk is way more important than upside potential” . This is so true.
How is paying off your house going to help you in a divorce when she is going to seize said house? Like what?
@@jaybartgis5148 exactly what I said.
Biggest lesson i learnt in 2022 in the housing market is that nobody knows what is going to happen next, so practice some humility and follow a strategy with a long term edge.
Nobody knows anything
You need to create your own process, manage risk, and stick to
the plan, through thick or thin, While also continuously learning
from mistakes and improving.
Uncertainty... it took me 5 years to stop trying to predict what bout to happen in market based on charts studying, cause you never know. not having a mentor cost me 5 years of pain I learn to go we’re the market is wanting to go and keep it simple with discipline.
@@debstrodovan The one effective technique I'm confident nobody admits to using, is staying in touch with an Investment-Adviser. Based on firsthand encounter, I can say for certain their skillsets are topnotch, I've raised over $700k since 2017. Just bought my 3rd property for rental. Credit to Yvonne Annette Lively.. my Investment-Adviser.
@@tateoften I just looked up Yvonne Annette Lively online and researched her accreditation. She seem very proficient, I wrote her detailing my Fin-market goals and scheduled a call.
UA-cam needs to stop recommending me videos about weird things they do in the UK, like not lock down a date for 15/30 years. Happily taking locked rates for granted here.
Dave Ramsey baby steps 4,5&6, invest 15% then throw everything else at paying off the house. 👍 great video
As Ramsey would say about mortgage vs investing after that 15%, 'would you take out a loan on a paid off house to invest? Then why wouldn't you overpay your mortgage?'.
If the loan was at 2% I would seriously consider it yes.
I use velocity banking to pay off my debts. And it makes cash flow much higher each month. I also invest extra bc I use revolving credit that I keep at a low average daily balance.
Took my mortgage out in 02 at the age of 22. Paid off in 2019 when I was 40. So 17 years. The overpayments I made were not massive but in the end it did add up to 8 years off the term. I was soooo tempted in 2020 to move and take out another mortgage but covid put a hold on that and now rates are back to 6% I am glad I got it paid off. At my age a lot of my piers still have 15+ years left to go on their mortgages. The key is for overpayments to be of a size that make no financial difference to you. Still allowing you to have savings, pension etc.
Exactly 👏🏻 well said
Good job!
Exactly what I've been doing, still have a bit to go on mine but if I really wanted to, I could clear it off by then end of the year however, will make over payments that still allow for savings etc to be made. Should still have it paid off at the end of my 41st birthday and I've only had my mortgage for 5 years.
I have paid my mortgage below 50 %. My rates are locked until 2025 at 1.5 %. It is my only form of debt. Trying to min/max returns without considering risk will leave you exposed to needing to pause investments or even selling investments at a loss to cover expenses. A low risk approach that values cashflow benefits and very low day to day costs makes it easy to keep investing no matter what else is going on. Don't just get stuck on the highest rates of returns because you'll be very exposed.
I'll be a millionaire 10/10 times. I'm not worried about the specific number of millions. It really doesn't matter much.
Our 5 year fixed rate (2.89%) was up at the end of August & after many long discussions My wife and I decided to sell everything & dump 90% of our life savings into the mortgage and pay it off. I don't know if it was the right decision long term but, you can forgive me for feeling like Einstein for a month or two!!
good move
Tell me about it. I paid my $328K mortgage off in 25 months. Went absolutely crazy on my part.
Nice one on clearing the Mortgage debt. I will be in your shoes one day but I would ask if you are young enough to be able to claw back some of those savings to compensate being mortgage free? if so then well done and look forward to your mortgage payment free pay day :)
So many ways to pay a house off early. Someone I knew sold their mcmansion after living there for 13 yrs, they sold it. They made enough money to pay cash for a smaller home........that was 7 yrs ago and they are living their best lives.
3 years ago I got a great paying job but never thought it would be forever so I put all my extra money into paying off my mortgage. Sure enough, I just got laid off from that job but now have a 7 figure net worth with no mortgage. And that is why I paid off my mortgage instead of investing all that extra money.
I compressed my mortgage term years ago, then at the start of pandemic I started "overpayments on steroids" - at a rate of 1.74% interest fixed until summer 2023 I decided to finish my mortgage once & for all.
Paying around 60 - 65% of take home pay into the mortgage and I'm nearly there, under £5000 owing on 1st November 2022.
To say I'm relieved with all this turmoil going on is an understatement!
I've been overpaying my mortgage off with an extra 75% for about five years now and it's helped my mortgage term come down by years, the extra payments just become part of the normal mortgage payments, every six months or so it's nice to see actual progress on the amount coming down rather than just a tiny bit due to the interest they take! My advice is at least over pay something, even 100 pounds a month, you will feel and see the results.
I paid my $328K mortgage off in 25 months. Went absolutely crazy on my part.
@@jml9550 Bullshit.
@@maryanakurti bullshit huh? My income and 3 paid off rentals in the SF Bay Area says otherwise. love those rental incomes, average 3+2 rents here is minimum $3K. You can do the math. Life’s good.
@@jml9550 highly doubt that.
@@maryanakurti believe it, don’t believe it. Don’t affect me one bit. Life’s good though for sure.
Personally I think a mixture of both. Build up a contingency fund for 3-6 months. Overpay on mortgage whilst investing through ISA accounts. Don’t think it needs to be one of the other. Just do all and manage accordingly
Also bear in mind sooner you get to a 60% or lower LTV mortgage you get access to better rates.
Thanks for this
I agree. Mortgage debt is certainly worth paying off sooner if possible but financial investments and strategy should be established in parallel. At some point, the debt will disappear and you should have a financial machine built to take your newfound free cash flow and start producing returns immediately. It's risky in itself to throw all your money at the mortgage. If your house value takes a dump, you are left essentially burning all of your money and any shred of security. Diversification includes your home and no financial advisor would tell you to put all your money on a single stock. Why on earth would you do it with your home?
Overpaying on your mortgage if you can is always a bonus, because of the saving on interest. But honestly, an Emergency Fund should have come before the mortgage. Its wise to have an energency fund of the value of 3 to 6 months worth of expenses, as things do go wrong, and we're living with a finance cycle where recessions - mostly minor, but 2008 was only 14 years ago - are coming around more frequently.
One of the biggest things that helped repay my mortgage off was rounding up any transactions to repay to the mortgage. If you spend £8.72 on your card £1.28 can be transferred to your mortgage if they allow faster payments. This technique will allow significant overpayments over time without needing to specifically allocate funds. It's also worth noting most mortgages interest is applied monthly where as most savings rates are applied quarterly or annually so the compounding effect over the years also helps save more
I’m 50 years old. I had a mortgage of £250,000 that was due to be paid off when I reached 70 (my wife is 45). In January I decided to change to a 5 year fixed mortgage and overpay by 300%. I did it mainly because I was terrified of still having a mortgage at 70. It felt like a big commitment. But after a few months it’s weird how it no longer feels like a stretch. It’s just ‘the mortgage’. We life off my wife’s income and mine all goes on the mortgage and on an ISA and pension for my 9 year old son (based lately on advice from brilliant channels like this). I did a calculation using rhe CBS site to estimate what I would pay now if I chose to take out a new mortgage either £250k for 20 years or £250k for 5. The first would mean paying an extra £800 a month. The second an extra £500. Choosing to massively overpay my mortgage and fix it at exactly that time was the best decision I have ever made in my life. If I had chosen to invest instead (another option) - I would not have had either £800 or £500 to invest. Also - don’t underestimate the psychology. While the world has been going to hell in a handbasket over the past 8 months I’ve been watching the capital in my home increase by £3500 a month. It’s an incredible feeling of having at least some control in a volatile environment.
Cool story . How much did that story cost you in overpayment penalties seeing as you were fixed for 5 years 🙄
@@alangordon3283 he changed to a 5 year fix, but last year I left a 5 yr fixed deal a year early it cost me 2% of the balance on the mortgage. I moved to a new 5 yr deal there were three advantages1) new rate 1.29 % which was nearly 1% lower.
2) the remortgage was for the amount still owing
3) my saving was about £370 a month which I could use better elsewhere
@Ra’s Abdul surely that depends if interest on the mortgage exceeds income from investments and if you can reduce the debt ( it does not have to be cleared) mortgages are often the cheaper rates of lending money
@@alangordon3283 I’m sorry I don’t know what ‘how much did that story cost you?’ means. If you mean did I face any charges - I didn’t face any. I had a mortgage with the same company since 2003 and had 3 different mortgage product with them. The first two were variable. I switched from the second product - a variable mortgage that I had held for 12 years and that was on a standard variable rate. The 5 years fixed was the first fixed rate mortgage I ever held in my life. Had a I continued with the mortgage ‘as was’ I would now be paying a little over £1700 instead of roughly £1,200 I had been paying. That’s slightly more than my current car payment. I am currently paying in £240 into my son’s pension and £250 into my son’s ISA. Had I kept my mortgage as it was in December 2021 the increase in payments would have meant I had to cancel both, both for the duration of the increase in interest rates which could mean years, and also without paying off any capital on the mortgage. I haven’t paid any fees. I had 65% in equity so CBS wasn’t about to start charging me for anything. My total interest over the 4 years and 9 months I now have remaining is about a tenth of the interest I would have paid over 20 years if I kept the original mortgage product (about £7k compared to £70k - and that is based on the interest rates from December - I haven’t calculated what I would now being paying on the variable because I no longer need to). Is this the point where I insert some sort of emoji in place of an argument? I’m afraid I’m not up with current ‘use emojis instead of a coherent argument’ trends.
Or you could have bought puts on everything, easy asf gains if you understood QT and rate hikes, DCF formula. Lol
Doing both 🎉. Overpay on mortgage and doing stock investment via ISA. Best of both worlds.
I think this video has beautifully summed up and answered what so many of us are questioning, and some how the news outlets aren’t answering even half this well. Thanks!
I think it depends on your current level of liquidity. If you have a good amount of liquid assets, then it might be ok to overpay the mortgage for a time. If all you have access to is what you got paid one month from a job you might lose, then you probably should continue increasing your liquid assets.
It's a different scenario in Australia when you make additional payments into your mortgage. The money isn't locked away. Your mortgage statement quotes the amount of any overpayments as available for redraw: it can be used as a line of credit for any purpose, e.g. investment when mortgage rates are low and the benefit of leaving it against your mortgage is minimal. Very flexible. When interest rates rise, you can take the capital out of investments and return it to the redraw facility which again offsets the principal owed (with greater effect because when rates are higher). Hope you're feeling better soon.
Not here in the UK they want to "shackle" us to that mortgage debt for LIFE! sad
You can generally only overpay by 10% if in a fix rate term without early repayment charges
Yeah mate I think I mentioned this at one point
Yes but for many overpaying 10% of a 200K mortgage is hard to achieve, that’s an extra £1667 a month.
@@guyr7351 200k is a crazy amount tbh, 8x national median earnings
@@jrlx86 well I live in the. North east property is not as high as south/ London where in London 300K does not even buy a 3 bed terrace. At the time it was three times our joint income but redundancy in covid for me and the new job at 60% previous salary meant it was tight till I could re-mortgage.
It was a new build on a good estate where my house at £300K is a cheaper one. I don’t care it’s a 4 bed wife and i plus two of her grandkids live with us, it’s a home first still get a buzz when I come home. Have split our money into property, investments and pension. Looking forward to the day nil mortgage. One thing I would say is to move I I had to clear all Other debt such as credit cards, loans. Which I needed toaccess via a pension but best thing I ever did. I only have one credit card zero interest and it’s for emergencies / big purchases. Having no debt is a massive stress buster.
Life is a balancing act….in all matters, especially with regard to finance.
Debt is always the ‘driver’ on financial matters.
The less debt you have, the more wriggle room you have.
Every pound off your mortgage, creates a small lifting of the shoulders and
Empowers your ability to adequately deal with whatever the world throws at you.
Your well-being increases, your stress levels diminish and life begins to get back into
Your control ……not others. A huge factor in these uncertain times.
Living within our means, paying off the two mortgages we had early and investing the mortgage money we would have had and additional savings was a recipe for our success. You have to have a plan and execute, it won't be perfect, but it will provide direction in an ever-changing world. Having options that you create are priceless.
I love that your videos have sections so I can just skip to the bits I'm interested in. Keep up the good work Damo!
Nice and balanced advice, you cover all bases. Mirrors exactly what I’m thinking about right now. Thanks 🙏
I bought my house in 10 years. Rented for 18 years! I had been saving hard but for one reason or another, I never saw how dumb I was for not buying a house! I now own that house and no one can take that from me! It also means I’ve got more to invest in etfs now, and a few other stocks. The feeling you get from owning your home is a security like I never thought it could be! The hard part now is affording houses! I got lucky in life and property was in a dip when I bought. It’s worth double now! Crazy!
Great content as always. There is also another option - pay off your mortgage as much as you can now and release equity when interest rates are low again and stock markets are trending up. Most people lock their mortgages for 2 or 5 years anyway.
I think leveraging your house to invest is some of the worst advice I've ever read.
Brilliant Content! My solution is offset mortgage. So put your savings in an offset account and you don't pay mortgage interest on it, but it's always available for a rainy day! Great peace of mind!
I should have discussed the offset mortgages!
Exactly. That's what i did.
I just want to pay off my credit card debts which I’m doing now and it all should be clear next year November. I’m paying £100 a week to debt recovery companies. Once that’s clear I’m keeping away from credit cards
Funny how times have changed, when I told people about 8 yrs ago that I was going to pay off my mortgage, they told me don't do it.....invest.........now it seems every one wants to pay off their home. best thing I ever did.
If I go broke, i will always either have income (rent) or a place to live. When you have a paid off home, you can recover from financial castrophies so much faster and with less struggle.
I paid my mortgage off early age 49 .
One of the Best feeling ever !!!
then gives you the option and freedom to do whatever with your money,
Knowing I'll always have a roof over my head.
Early 49 lol bless ya , needs to be done at 30 u should of worked harder in your youth ;)
@@johnjames5666and what do you do for a living?
Don’t mind the other commenter, trying to pour water on your parade. You did great, and that’s done now!
@@Esme26433
Thank you
I appreciate that 👍
I'm in America and (still) found this to be a really excellent discussion of the issues and their various pros and cons. Well done.
Recent subscriber having been recommended based on watching another British finance UA-camr. I’m glad both of you are doing this content, and glad I came across it. I’m much better informed for it…
But on top of that. Bravo for spending the time to put the Warren Buffett and Sandra Bullock thing together, I thought it was all a bit tenuous right up until you pulled out getting kicking in the Bullocks.
Hahaha love that it was the kick in the bullocks that convinced you
@7:40 This is why a variable loan + redraw is important IMO. You can save on interest and also have the ability to access funds if absolutely necessary.
Hi Damien, an offset fixed mortgage may be the answer. We have one with First Direct, whereby we can put money in the linked offset account which acts as a way to offset the interest you’d pay just like paying off a portion of the mortgage, but, you can access or take that money out if needed. It is also fixed for 2 years so it’s predictable. The other benefit is you only pay the interest which keeps the monthly payments down, but can make overpayments (or simply put in the offset account) whenever you want. Food for thought 💰
Great option, but not always accessible, and rates was 4% when market average on standard mortgage was 2.54%.
I had this when I paid my flat off but you can no longer get an offset with first direct.. they stopped doing it
@ian, just taken one with YBS at 4.69%, not the best rate but we will be offset 100% so paying zero interest but hedging the rate and keep the liquidity. Also works well with todays higher rates as only around £10k saved will create around the £500 interest income before paying 40% on the amount over if a HRT.
Such a brilliant video!
One alternative view is try neutralise your interest costs rather than overpay the mortgage capital. So throw some cash in high interest savings and/or fix deposit accounts depending on how long your mortgage has left to run on the fix deal. This way you earn more interest than what you pay on the mortgage. Kinda like offset mortgages from back when. And you build a cash buffer as well at the same time.
yep this is exactly what I have done. especially with savings interest rates going up passed my mortgage rate
Very clever!
If you can't pay off your mortgage before investing, you own too much home.
My approach over the years was a bit of everything when it came to overpayments and saving / investing.
A point I think you missed Damo was if you save cash, when it comes to getting a new deal after the fixed term ends, these normally cost a fee to secure lower rates so that money can be very useful then.
Peace of mind was important to me as not having to worry anymore about what for most is the largest monthly expense means I am free now to invest more.
Great video as always 👍🏻
I'm the same. I over payed the hell out of my mortgage up until last year because cash accounts paid FA. But this year savings accounts are paying a higher rate so Im dumping what I was overpaying on the mortgage into a savings account and will pay off a lump sum once my fixed term ends.
But we have another four years on my fixed mortgage.
Paid my mortgage off in 2003. Just watched house prices go insane since then. Now what?
Great post Damien and I love the reference to the Oompah Band. They're a great band too (having gigged with them)!
I knocked out the mortgage before investing more and it was a bad idea in hindsight, as the investments would have outpaced the 4% mortgage by quite a lot. Having the house paid off is nice, but being a millionaire right now would have been nicer.
What kind of investments
@@MIKEZGAMER-g8t I had plenty of VTSAX prior to getting the mortgage, so it was dabbling in TSLA that waited until after I paid it off (and it 10x'd in the meantime).
Great work Damien!
Yes Paul! Seen you living the life lad. First class flights and everything. Love it
Another great video Damian. People like you (knowledgeable with charisma) are so needed in our UK schools and colleges. Thankyou again
Thank you so much!
@@DamienTalksMoney Sorry Damian, I did see your last message about contacting you, but I could not work it out. I have mentioned you to my wife (School business manager in the midlands) and she would love to speak more about getting you involved if you would. If you are able to contact me without either of us doing it publicly then please do. Thanks again Damien, again, loving the channel and your work
@@ryanifbb5204 Hi Ryan, That last message was not me it was a scam account pretending to be me trying to con you. You will notice my name is highlighted in grey this is the only way to tell that it is actually my profile replying.
Feel free to email me on damientalksmoney@gmail.com
Wow, great video. Explained this beautifully, and covered all aspects, both sides
Thank you!
Hi Damien I'm a brand new subscriber and I have to say I'm very impressed! Ive been interested in personal finance since 16 and 2 years on I'm in a low cost Vanguard index dund dollar cost averaging my way to early retirement! Keep up the good work I'll be watching more of your videos for sure ! :)
Thanks Henry mate! Welcome to the channel and well done for getting started so young you are going to do so well
Thank you 🙏 Great listen
Thank you!
If you pay off your mortgage you still need to go to work to pay the rest of your bills. If you invest the money instead, it can create an income that can pay all of your bills.
Bad advice
Wheres the income 🤣 its all red negative...
Calculating risk
@@bikecurious9163 not really. If you have a longer loan period with a lower monthly payment and you use the extra cash on hand to invest smartly, you'll offset the extra interest and inflation and end up with more money than you would from lower interest on a shorter loan.
Paid off houses don't generate income unless you rent the rooms
Thanks 😊
Great video Damien. Very refreshing to hear a Brits take on the financial world! Keep it up
I love flying the British flag! We deserve dedicated content
@@DamienTalksMoney you got it! It can feel very oversaturated with American content. Keep flying for flag for us 👏🏻
Been critical of some of your stuff previously but this is a really good synopsis.
For some people the certainty of paying off a mortgage is reassuring although rarely investment efficient.
Takes a lot of pressure off.
good message. people should really be honest with themselves. the order of investing does: pay off your debts, get an emergency cash reserve, get some physical gold and silver, and then you can start investing once you have that foundation.
What? Clueless
@@simonalcroft7897 hahaha can't help but notice that you don't present any alternative. We all know what that means. You don't even invest. Lol people these days
@@simonalcroft7897 core recommendations on Dave Ramsey in The states. Except for the gold / silver but. Before you do anything get rid of debt such as cards etc. do not underestimate the relief that the only debt you have is your mortgage, all credit cards are clear or on zero interest
@@simonalcroft7897 just curious, what is it about paying down your debts and building a reserve prior to investing is clueless? perhaps the key word here is investing, as opposed to speculating. if you have unsecured credit card debt on a floating interest rate, it seems to me a pretty bad idea to be yoloing your money on altcoins or memestocks. just my 2 cents here, but it seems like you are the one who is clueless.
I'm currently doing EXACTLY what Kiki is doing.. I'm on a fix rate for 5 years now, just started.. so I'm going to amass a pot leading up to the fix ending and decide what to do with it then. That way, as you have said, I can either pay the lump to bring the rate down, use it in an emergency, invest it or even add it to my "fun-fund" and spend it on something I want to - but either way, I'm securing some sort of future with the capital I have..
Beautifully concise summary. You touched at the end on something that I think is quite important. The nominal return on overpayments may be climbing but, with inflation currently at about 10%, the real return on overpaying a mortgage, even at a 6% rate, is negative. A mortgage is basically a negative cash balance, which is a pretty good thing to have when inflation is rampant. As long as you can afford to service the debt, there's an advantage to keeping the mortgage balance high and letting inflation eat it away.
But the problem is not everyone can afford to service such debt with the rising interest rate. If you have the opportunity to keep your monthly mortgage payment down by paying a lump sum into your house, why would you not do it in this case?
@@JayFengBeat I agree that if the only way to keep the mortgage going is to overpay then it makes sense to do that. But, as mentioned in the video, overpaying typically won't do much to your monthly payments and reduces your flexibility vis-a-vis putting the money aside and using it to meet the higher monthly payments as needed.
In any case, my comment was indeed really directed at people who don't have a problem servicing their mortgage. That might include those who plan to meet the higher monthly payments by reducing the rate at which they save, or those who are on a fixed deal with plenty of time left.
Inflation will eat it out only if your wages will keep up with it. Usually rates on mortgage go up higher than wage rise. It is all individual situation, but almost nobody that I heard from had 10% (RPI) wage rise, usually it was 3-6%, so in fact mortgage is eating purchase power not devaluating.
@@michaewelina7983 I agree that inflation also reduces the purchasing power of your income. But that doesn't mean it's not a good idea to let inflation eat away at the mortgage. We can see this with a simple stylised example.
Imagine a situation where you have a £100 mortgage with a two-year term and 0% fixed rate of interest (the numbers aren't important, so I just keep things simple). You earn £100 per-year. The other thing you can spend money on besides mortgage payments is a consumption good that costs £1 in year 1. Inflation is 100% so each unit of the good will cost £2 in year 2, but your income doesn't increase.
The question is whether it's better stick with the original plan to pay £50 each year on the mortgage, or whether you should overpay the entire mortgage in one year. Let's look at what you can consume over the two years in each case.
Firstly, if you don't overpay then you spend £50 each year on the mortgage, leaving £50 each year to buy goods. That means you can buy 50 units of the good in the first year and 25 units in the second year. Your total lifetime consumption is 75 units of the good plus a house.
Alternatively, suppose you overpay the entire mortgage in year 1, spending the whole £100. Then you don't buy any goods in the first year, but you have £100 free for goods in the second year -- enough for 50 units of the good. Your total consumption is 50 units plus a house.
Overpaying reduces lifetime consumption because it means spending money in the first year (when a pound goes a long way) in order to have the money free in the second (by which time inflation has destroyed its value).
Note that in this example inflation reduces the value of your income as quickly as it reduces the value of the mortgage balance, just like you said. But you would still be better-off waiting to repay the mortgage.
The example is silly, of course, but it illustrates a more general logic that is not widely-understood. You can put more realistic numbers into the same example and come to a similar conclusion.
@@UbiquitousBooks I think that's a good illustration for fixed rate mortgages although if you have a variable rate, your mortgage has a risk of going up in year 2 as well if interest rates go up to try and combat the inflation.
so clear, thanks
actually with prices in the stock market dropping surely the future return (which is what counts) is only improving... yes it hurts to see a portfolio go red for a year or two but buying stocks cheaply with decent dividends means you get paid to wait while you bought companies at decent levels (thinking long term)...
"Run by fruity" caught me off guard 😂😂😂
Top vid as always mate, it was the Bullocks………
I land on the 'pay off your house' side. You will always need a place to live. The peace of mind - knowing that you've secured a home - drastically reduces the anxiety over money.
There are too many variables affecting market performance for me to want to put all of my eggs in that basket. If I'm wrong - I have a home. If I'm right - I have a home.
Nice post, thanks man. Lucky enough to be on a low fix mortgage for a few years here so not panicking just yet. Hoping to ride the interest wave out and pick up some cheap investments along the way. But I'm seeing friends lose their jobs so by no means complacent...
Yeah the job thing is a big threat especially if we enter a big recession
@@DamienTalksMoney Yeah huge. Plus you have absolutely no idea what this batshit government might do next!
My idea exactly is what you said at the end of the video .at the moment I’m on a very low rate and my money is doing pretty well in the bank and in my investments, i’ve got three years left at a low rate of 1.8% I fixed at the perfect time ( pure luck 🍀) when it goes up for renewal and interest rates are still pretty low I will probably continue to invest and not bother paying any extra payment, but if the rates are pretty high, I will probably start to pay off a mortgage as that guaranteed return ( unlike investing). I’m 35 so I have a few years left in Me before I retire. But I totally agree with the people saying they want the freedom of paying their mortgage. Must be an amazing feeling. I also agree off people saying don’t buy additional property as it’s a lot of stress which it can be it’s not for everyone
Excellent video as per. Thanks Damo!
I bought just after the crash in 2009. Had a tracker from the off and never knew when rates would go back up again so I overpaid while I was getting charged very little interest. I’ve now cleared off so much capital that I’ve only got 2 years left, just in time for poo hitting the fan!
Yes, I perhaps lost out on asset gains, but for me, if I’d have still had the majority of the balance outstanding now, I’d be in for a shock. Yes I may well have beaten this with gains in assets, but like you say it’s a guaranteed win knowing what you’re saving in interest on your biggest debt.
I mean great move really and strong case for clearing off cheap debt while you can. Well done
I'm 13 months into my 5-year fix at 1.8%. I was overpaying, but since inflation and interest rates soared during the end of 2022, I stopped overpaying and starting investing/saving these overpayments.
I can get a much higher interest on these savings than the % on what I have my mortgage at.
Plus the fact that inflation is >10%, I am effectively paying -8.2% on my mortgage.
I got very lucky getting my mortgage when I did, so I am trying to take advantage whilst I have the length of this fix left
This is a perfectly timed video for me. I was thinking of switching monthly isa payments to overpaying the mortgage while i can make more of a dent in loan while my rate is 1.74%
Im gona stick with my original plan
Glad I could help you come to a decision!
same here, isa v mortgage and isa wins
@@sspeedy3 certainly if mortgage rate is very low.
In my opinion if you have a nest egg large enough to pay your mortgage (or simply purchase a home in cash), you should ALWAYS do so in all market conditions. Yes, it's possible that in low-rate environments you could make a few grand more via the difference between your debt repayments/insurance and the income derived from the nest egg compared to just using the full nest egg to pay off the home, however frankly speaking this is your family home. I struggle to believe that the security, certainty and peace of mind that comes from having the place where your kids rest their head every night be completely, 100% yours pales in comparison to making a few extra grand in some market conditions. Leverage on your family home makes no sense, and if you still don't buy it, ask yourself this: would you take a HELOC out of a fully paid home in order to invest in equities just because "debt is cheap"? If not, don't put off paying your mortgage; it amounts to the same thing. Don't get me wrong, the same does not apply to investment property, where I'd always seek to use as much leverage as possible to maximise returns. But I want for my future family to rest easy and the permanent financial independence brought about by owning your home is unparalleled in my view.
Buy a modest house, pay it off quickly and never borrow money. That is all the advice you will ever need.
But then you live like a peasant
@@b-id5wq Wrong, i have plenty money, Because i never borrow.
@@b-id5wq actually the complete opposite, you'll have all that extra disposable income because you won't have a mortgage. Extra money to spend on investments, holidays, whatever.
@@b-id5wqhow is living in a MODEST house equivalent to being a peasant? 😂
That is poor people mindset. Buy, borrow, rent it out. Buy, borrow, rent it out. Pay off some of the mortgages. Keep healthy debt to equity ratio. Be consistent. Over the time you will become financially independent. That's one of the simplest ways to become financially independent.
After coming through the late 80s and 90s recession, then the 2008 recession. I learnt a few things.
I could not afford to pay 15% rates then 10% rates in the 90s, especially after being put on a 3 day week. I rented the house out and my wage and rent just covered mortgage. After 1 year I moved back in and rented a bedroom instead. Always have your house in a ready to sell condition just in case things go tits up. You do have options.
Retired last June at age 59 with the house and two sports cars paid off. Divorced. No kids. No debt. Respect money, manage it well, live within your means, and sleep soundly each and every night. Works for me.
Same here, 59 ......debt free, mortgage free, child free and drama free. best feeling in the world.
Retiring early is only good if you don't enjoy your job. I've seen people age quicker by sitting idle.
@@n.s.5278It was the right decision for me. No regrets. Staying busy with my passions in retirement- visits to the gym, walking, mountain biking, screenwriting, traveling, and just rescued a puppy. : )
My plate’s full. Aging is for wimps.
I needed this video right now. Thanks a lot.
What I'm confused about (and I'm not in the UK so maybe that's why) is why there sounds like an almost certainty that people will re-mortgage? Is the norm in the UK to have an adjustable rate mortgage? Or a balloon payment? I have a 30 yr fixed and barring something unexpected, I will not be refinancing.
There is no widely available 30 year fixed mortgages in the UK. We only really have access to 2/5 year fixes. So millions of people are coming to the end of their fixed rate deals and are now being faced with higher interest rates.
@@DamienTalksMoney oh man, that's really tough. It makes home ownership feel inherently more risky. I suspect it is bc the US govt buys/secures conforming home loans that it is widely available here. Even the jumbos that banks own will offer that term.
@@littlerunner4505 the 30 year fix is a dream! Especially over the last decade. I will pin this comment as many people from your part of the world have asked the same question.
Countries with fixed rates exist? 😮
@@veed71 The US has a completely socialist mortgage market where the state takes over the risks for people's housing decisions
I always did. Compared to other ways of investing any surplus money you have, it zero risk and also tax free (they only tax you on interest earned, not interest saved).
I started by rounding my payments up by a few 10's of quid, and kept up payments every time interest rates dropped instead. Overall, I saved a few years from the term of my mortgage and several £k in interest.
The only downside is the lack of flexibility, you can't get the money out again easily so you can only real do this if you have enough cash in your rainy day fund to cover life's emergencies.
A year late but wow, this video is excellent. Great work. Covered all pros and cons and realistic as well.
All of this would have made sense back in the 2000s and 2010s, but we are living in a different world now.
Keeping your money in a bank is not safe.
Keeping your money in the stock market... where you actually do not own any stock.
Keeping your money in bonds, that will either be defaulted on, or inflated away.
We are smack in a Kondratiev Winter.
People need to be switching to hard assets.
And the reason to pay off your mortgage is because with the financial reset coming, if you do not have your house paid off, you are going to be looking at all kinds of shenanigans. Like, calling in your mortgage when there is no refinancing available. The bank gets the house, you get the streets.
In some cases, the banks will just take the houses. The "law" will be on their side... because they are a big institution that would not make mistakes and commit fraud... (like they have done in the past)
After you have several months of living expenses saved up, I would definitely suggest paying off your mortgage. Or sell and move to some place much less expensive.
Pay your mortgage off first and any other debts. Once you’ve done that it becomes a question of how to invest it.
7 years ago I refinanced at 3.99% for 18yrs which added $300/mo to my payment.
I’ve checked on refinancing since but the $10K cost to close has always negated any offer in the long term.
Recently I lost my job and ran the numbers taking $10K out plus rolling $9K in closing in. At 7.5% apr for 30yrs my payment would drop $150/month but triple my payoff.
It might have been a mistake at the time to stretch for a quicker payoff. But NOW it would be completely idiotic to try and lower my monthly mortgage.
Thank you! As always masterpiece and has a lot of different points of view! At the moment we are investing twice as much as we overpay the mortgage. We have shortened the mortgage a bit and we are building our investment. Damo and this is because of you! I can't thank you enough for all that you do. Just keep it going. Big thank you!👏🍻🖖
Mate this comment makes me so happy that I have been able to help you get a hold of your finances. Over pay or invest no matter what you do you will be better off as a result
I’m done, finished 8 years early. How did I do it? You have to seize the opportunity when it’s presents. I was on tracker mortgage. Interest rates in uk have been on all time low. So I overpaid every month on my mortgage for 11 years. Rather than save money.
Most satisfying feeling is when you are paying off capital in big chunks instead of interest.
When it got £20k. Paid off the lot.
I learnt my lesson. In the 90,s interest rates hit 15%. Yes, 15%. That was the mother of all recessions.
It almost broke me. I sold my first home for £500 more than when I bought 9 years later. Plus to add I had an endowment mortgage which wasn’t going to give me the returns I needed to pay off the loan. Another story..
Ive never owned a credit card, I don’t get things on credit or buy new cars etc.
There’s good debt and bad debt. I have no pity for people that find themselves with bad debt due to foolish borrowing. BANKS ARE RUTHLESS. it’s now time for the banks look after people with savers. I don’t see that happening anytime soon.
If you can alway try and pay little extra
The market has ripped the last 2 years.
It's a personal choice and depends what you want from life at the end of the day. But one factor I don't see discussed very often is the age at which each strategy realises its full benefit. For example I'm planning to be mortgage free by 42. It will bring freedom to invest more, travel, take a career break, change career altogether... at relatively young age.
If I let my mortgage run its full course and invest the extra money instead I'll be 60... I'll undoubtedly be financially better off overall by this point but I'll be 60! I've got 18 fewer years to enjoy the benefit of this strategy.
Love the content bro!
As with most things with life, doing a little of everything is likely the best option
You are probably right
@@DamienTalksMoney I have always split my money 4 ways, 25% each.
1. Overpayment
2. Premium bonds
3. PIP
4. S&S ISA
Locked a 10 year fix at 2.24% in July, 18 years left on my mortgage I am tempted to overpay and clear it after 10 years but the stocks are looking too tasty atm. Bizzare as I wouldnt remortgage to invest in the market and I equally wont sell my investments to pay off my house.
I think it's worth mentioning that if you do manage to pay off your mortgage completely, even if the savings on interests you achieved were inferior to what you would have gotten by investing the overpayments in the stock market instead, all those years you will keep working while having no mortgage will more than compensate and ultimately get you more money. If you finish paying your mortgage at 65 while retired, you will be missing on those juicy years of working/generating income while having no mortgage. Ultimately what you are buying is time. Time that will pay a lot later.
thanks youtube for the timing.. I just withdrew the overpayment I’d built up against the principle on my mortgage and put it in an ISA. I’ve also stopped my overpayments and putting them in the same ISA. I’m on a fixed for 10 years at 2.5% (9 years to run). ISA is 5.5% currently and at least for a few years IMO. So in my mind I’m still mentally paying off my mortgage sooner - I’m just doing it by investing it alongside in a dedicated account which will be used to hopetully pay off the remainder in 9 years time.
we managed to pay off the mortgage on our house when I was 49. Then now we bought an appartment... and got a mortgage running for 25 years... I'd say if your goals are to own two homes, better set the cash aside so you can reduce the percentage you have to borrow. The banks will give you a better deal for two reasons: if you start the second mortgage at the age of 45 or at the age of 50, if the ratio loan to value is lower... the bank will care more about how safely they can get their money back by selling your house plus appartment than by how likely it is that you lose your job...
Good advice covering the various angles. We came to the same conclusion - our mortgage is fixed for another 4 years @ 1.7% but you can easily beat that with a savings account so rather than overpay we are going to build up a cash pot to keep our options open when we have to refinance.
I think this is the way I'm leaning, while putting what I was saving for children's future into an equity fund.
We payed ours off in 2018. We will always have a home to live in.
T & I $190 a month.
Great advice 👍🏾