I Reduced My Mortgage By 15k And Saved 30k On Interest Payments

Now that I have raised £15,000 and reduced my mortgage, I just want to quickly jot down the impact of what paying off a huge chunk has financially made. The results are pretty eye-opening; I hope it encourages some of you to start thinking about paying off your mortgage early.

The maths

Here’s some calculations displaying how much real money I saved by reducing my mortgage by £15,000.

Before reducing mortgage by £15,000
Balance£154,000
Interest Rate5.59%
Monthly mortgage payments£965.13
Calculations 965 x 12 (months in a year) = 11,580
11,580 x 25 (length of mortgage) = 289,500
Total amount payable after 25 years (length of mortgage)£290k approximately
After reducing mortgage by £15,000
Balance£139,000
Interest Rate5.59%
Monthly mortgage payments£871.12
Calculations 871 x 12 (months in a year) = 10,452
10,452 x 25 (length of mortgage) = 261,300
Total amount payable after 25 years (length of mortgage)£260k approximately

The figures are all approximates, and don’t take into consideration interest rate changes that may occur in the future, so I probably ended up saving myself more money (assuming that interest rates increase later on). However, by sticking to my current rate, I saved myself a minimum of 30k over a 25yr duration by reducing my mortgage by 15k. Not bad, aye?

You can also find out how much you could save by reducing your mortgage with the use of my Mortgage Calculator. If you are also thinking about reducing your mortgage earlier than planned, make sure you find out if there are penalities or extra charges for doing so. Some mortgage policies have extra charges for early lump sum payments (fortunately, mine didn’t).

Overall, I’m extremely happy with the outcome of this project. You can get a breakdown on how I raised the money here: I Raised £15,000 To Help Reduce My Mortgage

2 Comments- Join The Conversation...

Guest Avatar
Victoria 24th October, 2007 @ 16:57

So how did you dodge the early repayment penalties, then?

If I get the lump sum I'm expecting I could be tempted to reduce my mortgage in a similar way, given the current state of the market, but I know I'll have penalties at least until next summer when my rate switches from fixed to variable.

1
The Landlord Avatar
The Landlord 24th October, 2007 @ 17:04

Hey V,
I didn't need to "dodge" early repayment penalties because there aren't any for my particular policy. There is, however, a 6k (approx) penality for completely clearing my balance with in the "tie in" period, which is 2 years. You don't get penalised for making lump payments on interest-only mortgages, because they don't expect you to pay the entire outstanding balance in one go after 25 years.

Are you sure you'll have penalities for making lump payments? Check your policy, you might be surprised. Do you have an interest-only or repayment mortgage Let me know how you get on.

One of my policies switch to a 7.3% variable rate next year, I plan on remortgaging at that point. There is no way i'm paying that much interest when the baserate is still 5.75%.

2

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