A lot of people excitedly talk about the concept of being mortgage free, but the truth is that for many people chasing this goal ends up losing them a huge amount of money.
It sounds nice not having to pay a monthly mortgage and live in your house completely for free, but if you do have a mortgage, is making overpayments a good idea?
For many people the answer is a categorical no.
If you have any other forms of debt that cost more in terms of interest percentage than the mortgage (and that is likely to be almost every kind of debt out there), you will actually save more money and be in a better net financial position if you repay the highest interest rate debt first.
Even if you have absolutely no other debt, there are a number of ways you can invest your money to get a much better rate of return on it than the amount you'd be saving by repaying your mortgage so you would net be making more money by doing that instead.
I cover a few other interesting things to think about throughout the video - let me know if you have any comments or questions below!
Here's the link from the Robert Kiyosaki video that I briefly included:
https://www.youtube.com/watch?v=A8vD_XO0vUU
It sounds nice not having to pay a monthly mortgage and live in your house completely for free, but if you do have a mortgage, is making overpayments a good idea?
For many people the answer is a categorical no.
If you have any other forms of debt that cost more in terms of interest percentage than the mortgage (and that is likely to be almost every kind of debt out there), you will actually save more money and be in a better net financial position if you repay the highest interest rate debt first.
Even if you have absolutely no other debt, there are a number of ways you can invest your money to get a much better rate of return on it than the amount you'd be saving by repaying your mortgage so you would net be making more money by doing that instead.
I cover a few other interesting things to think about throughout the video - let me know if you have any comments or questions below!
Here's the link from the Robert Kiyosaki video that I briefly included:
https://www.youtube.com/watch?v=A8vD_XO0vUU
There is one important detail that you seem to be missing… say if you are locked in a mortgage deal at 1.5% and you have few years until this fixed deal expires, overpaying mortgage now(or paying toward higher rate savings acc with intention to pay toward mortgage when switching deals) is essential to keep basic mortgage payments low when interest goes up leaving you with more cashflow for future investments. Othrrwise if you dont over pay now toward capital which decrease menght of the mortgage you will later over pay in interest
2023: Perhaps paying down the mortgage early isn't such a bad idea after all!
Hi Sasha, thanks for these videos. I have a mortgage question.
So I am self employed and also employed. typically when i fill out my self assessment I list as many things as i can as expenses to keep my tax low which means i have saved up a chunk of money which is my deposit. Im concerned that the underwriter will look at this and look at my tax return and see the difference and not allow me to use these deposit savings I have, can you shed any light on this please? thanks alot
Mortgage overpayment; such a debate with so many other modes of investment available now, which were non existent years ago! I don’t have enough capacity to follow and keep up to date with stocks and crypto, so I may be best to overpay with my 10% allowance, over saving it in my bank account, but would be interested to know your thoughts and others perspectives, as always open to new ways of thinking!??
Agh. We'd always invested in our isa to overpay once we had our mortgage balance matched, plus a bit extra. Then I went and bought Tesla, reaching our target earlier than expected plus more which is great! But! I can't now bring myself to sell. I feel like if I sold half, and sold half index funds, we could pay it off and it would be good risk management. Thoughts Sasha?
A house is a liability on a balance sheet but is definitely a great investment as is property in general. It carries a different risk and some stress from time to time but being a landlord can be very lucrative if done correctly and you manage to get monthly cashflow and capital appreciation. I think with investing there is a huge belief that one particular way is the best and only way but it’s what suits the individual and your area of knowledge too. Over the last year I am looking to grow my knowledge of the stock markets, when I was younger I far too irrational and impatient for the stock market which is why the property suited me more. Hopefully 2022 will be a good year for us all. Thanks for your content Sasha it’s refreshing honest amongst a sea of sharks. All the best for the new year and I hope you enjoyed the festive holidays
I love that coffee machine
I am not overpaying my mortgage but I am saving as much as I can in my ISA. When my fixed rate ends, I will take the money I need and pay it off.
Hi, I have no other debt other than my mortgage and I have money In savings that yields nothing each month and I have quite a bit invested in premium bonds. Also paid off my limit of 10% off my mortgage + another 8% once I go into the standard rate at approximately 4.34%(ish) just for one month to not incur any charges then back onto a 2/3 year fixed rate with the mind set of paying 10% extra each year. I also have £100 in stocks as I don’t know enough about them to confidently invest more. Currently have £110 worth of stocks if I sold . Anything else I should be considering? Thanks for your help!
Rates are most likely going to increase in the near future
I think we can only overpay by 10 % a year so could hedge my bets 50 50 on overpay and invest but have no idea where to start on investing unless starting a small business in buy n sell or service business
I've just freed up 200quid a month have no debt other than mortgage I also have no knowledge of investments should I just overpay my mortgage or ? 550 a month my mortgage now with 10 years left value of house now 250k dont wann waste my spare cash
I'm in the different mindset where clearing the house mortgage is a better safety move than investing. Invest after you've paid for the bed you sleep in. Always pay credit cards off first though agreed
How much are you assuming people owe on credit cards?
This video assumes you have high interest debt elsewhere other than a mortgage.
You can't deny having no mortgage isn't better than having a mortgage (even at a low interest rate).
If you have extra cash after you are out of debt and you also invest, overpay your mortgage (even if it is £50-£100) to lower your interest payment and get completely debt free quicker and eventually giving you a lot more cashflow.
It's more psychological than financial.
@Sasha Yanshin Loving to the content Sir. I have been watch many videos on velocity banking and can't get my head around it. Anyway from what I understand is that it only works for the people who live in the USA. Maybe if you have time would you create a video with your insights to velocity banking and what is the method/s we can use here in the UK to pay off a mortgage.
Great video, I wouldn’t pay extra on my mortgage. I would prefer to invest the extra money in a BTL property or start a business.
You're absolutely right!! I paid all my highest debt first until I finished paying all my debt!! Great video!!
When the interest rates are so low, it may make sense to invest that money elsewhere. Subrscribed! Hopefully you will enjoy the content on my channel enough to do the same.