Want to pay off your mortgage early?
The International Monetary Fund and World Bank are holding their spring meetings this week.
In a new report published yesterday, the IMF suggest governments should use the current strong economic environment to strengthen their finances.
As a wealth manager and financial planner, my role is to assist individuals, families and businesses feel more secure about their financial outcome.
However, one aspect of financial planning that always strikes is how some financial advisors are focused on the saving, investing and pension proposition (new products advice and commission) – whilst ignoring the largest drain on most households – mortgage costs.
The goal to pay off mortgage earlier is one that normally sits quite high in financial priorities. However, many of our new customers have never explored this with their current advisor, never mind establish a clear picture of the financial savings in euros and cents. The savings that can be made by looking for alternative rates from your provider and/or increasing payments on your mortgage can be very significant.
This will most certainly having a big positive impact on your longer term wealth!
By making over payments or lump sum repayments - YOU WILL SAVE INTEREST on your mortgage AS WELL AS REDUCING THE TERM.
Please let me give you an example from a meeting last week (figures only).
Client based in Dublin, recently asked Nelson Life for pension and investment review. As part of this process we spoke about their mortgage payments – mortgage current rate of interest 4.30%, with total amount outstanding circa €192,000.00 Currently on a Standard Variable Rate and term remaining 23 years. Both 40 years old. Current repayments are €1,104.45 per month. Over 23 years total paid back, assuming all things equal = €304,828.20 (quite a shock when flagged this figure). Current mortgage rate 4.30% (APRC 4.40%).
Let’s consider some strengthening options – even if the mortgage remains with the same provider the outcome financially can be improved significantly.
Move to alternative standard variable rate where Loan to Value (LTV) less than 80.00%. This reduces monthly cost of the mortgage to €985.40 per month. Over 23 Years this reduces outlay to €271,970.40 (a huge saving of €32,857.80)
If they qualified for the LTV rate of less than 60% (which they will do in a few years). Then monthly payments would have reduced to €975.47 per month. Over 23 years reduces outlay to € 269,229.72 (saving €35,598.48 over the term)
Customers have a good disposable income and there was significant scope for an increase in payments (with some sacrifices including new cars).So lets consider the options for reducing the term of the mortgage by increasing payments :
If payments increased to €1,230.99 per month, assuming interest rate 3.30%, reduce mortgage term to 17 years.
If increased payments to €1,515.25 per month, assuming interest rate 3.30%, reduce mortgage term to 13 years.
If increased payments to €1,880.67 per month (an extra €776.22 per month versus current payments), assuming interest rate 3.30%, reduce mortgage term to 10 years.
In the above example, customers did not want to consider a fixed rate.
Next steps: For a small fee, we can assist you and we will definitely talk about other potentially money saving techniques.
Want to know more? We are available to discuss your options, and we look forward to hearing from you.
Our job is to help you choose a product and structure that will help you meet your goals.
telephone | 091441188 and/or email | office@nelsonlife.ie
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