Beating the banks with the Mortgage.

July 7, 2009 by
Filed under: Banks, General Budgeting, Interest Rates, Credit Cards & Mortgages in NZ, The Book and Website 

Today is a really good day. Because today I have managed to get one of my personal mortgages down from a starting point of $165,000 to a measly $45,000. That’s a whole $120,000 gone – that the banks can’t charge me anymore interest on.

loan-down-to-45k

I’m a bit chuffed.

Especially as – as well as that – the overdraft limit of my Revolving Credit account has also come down, from $100,000 to $55,000. Which means I have now paid off a total of $165,000 from my personal mortgage (62%).

In just under 4 years.

So – how have we done it?

Well, a lot of it is from budgeting and careful use of money – I have always overpaid on the mortgage by doing this. We have been able to make bigger steps in the past 18 months because we have an LAQC which means hubby gets a tax refund each month. That money always gets paid straight off the mortgage (we get it because we have mortgages elsewhere on Rentals and the rent doesn’t cover the cost of the mortgage – I think it is vitally important not to use this refund for anything other than paying off mortgages somewhere rather than living the high life and treating it as extra income).

We have also taken the decision to cash is our Endowment Policy in the UK, and we have brought over about £17,000 from that. This is the bulk of the latest reduction – giving us about $44,000 to pay off the mortgage in a lump sum.

Although we felt that it would be nice to hang on to the Endowment and wait for the stockmarket to recover (we had another 10 years to run), we had to balance that with the fact that the New Zealand banks are refusing to budge on Interest rates, and getting more and more belligerent about negotiating on rates and fees. We also decided to this despite the exchange rate being in the floor right now. I show you how to work out whether to keep money in the UK or bring it over and pay it off a mortgage in my book.

For us, the decision was a simple one: get rid of the mortgage.

I have now fixed the mortgage at 5.42% for 6 months, which takes the monthly payment down to $346.50 from the original payment of $1321.73 at 7.42% on the full amount of $165,000. Not a bad saving.

The important thing is that, even before we use the tax refund – we always pay the same amount on the mortgage that we did when the interest rate was at its highest – which in our case was $2500 a month. This means that as time goes on, more and money of the money we send to the bank is paid off the principle and we can get rid of the rest even faster. We continue to pay the $2500, rather than take the savings offered and spend the rest. That is one way to beat the banks.

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Comments

4 Comments on Beating the banks with the Mortgage.

  1. Beating the banks with the Mortgage. | Avalon's Blog | Money Blog : 10 Dollars : Money Articles. on Tue, 7th Jul 2009 8:23 pm

    2. [...] More here: Beating the banks with the Mortgage. | Avalon's Blog [...]

  2. Mortgage online » Blog Archive » Beating the banks with the Mortgage. | Avalon's Blog on Tue, 7th Jul 2009 8:30 pm

    3. [...] here:  Beating the banks with the Mortgage. | Avalon's Blog This entry was posted on Tuesday, July 7th, 2009 at 1:16 am and is filed under [...]

  3. Hubby on Fri, 10th Jul 2009 10:59 am

    4. Dream big and be hugely impressed!

    I used to think many (i.e. 20) years ago that if I worked hard at savings I could afford to buy a Jaguar car with cash in four years once I started working. At a time when Jag’s were UKP 20,000. I clearly wasn’t thinking big enough.

    I didn’t really dream we could have paid for half a house in that sort of time. I learnt to think bigger since that time.

    How have we done it?
    Lots of hard work, budgeting and managing our money – mostly down to Avalon. power by lots of coffee! also mostly down to Avalon :)
    And regularly reviewing our investments, cashing things in when the returns were dropping.. It’s nice having a pot of investments for a rainy day, however it’s not much use if it takes you weeks to turn that investment into cash. We felt paying down the mortgage was better protection against a rainy day.

  4. Beating the banks with the Mortgage. | Avalon's Blog « The Forex News on Sat, 18th Jul 2009 12:21 pm

    5. [...] Avalon wrote an interesting post today onBeating the banks with the Mortgage. | Avalon's BlogHere’s a quick excerpt [...]

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