Patrick Souiljaert

This is an extract from Financial intelligence – part one

When I bought my flat in March 2002 for £100,000 I wanted to pay the mortgage off ASAP. However at the time, on paper at least, I could not afford a mortgage of £100K. Hence I had to get a two year mortgage from GMAC/Mortgage Express, which didn’t allow any overpayments

By 2004 I had investigated and knew exactly which mortgage I wanted to remortgage to – a two year 4.75% fixed rate flexible mortgage with Northern Rook. This mortgage allowed me to make unlimited overpayments and, if I needed, I could drawback money to the total of all overpayments I had made. I immediately started to make regular overpayments. I also created a very simple Excel spreadsheet which had my current balance and calculated when my mortgage would be paid off. I updated the spreadsheet every time I made an overpayment, which recalculated the ever approaching end date.

When it came to remortgaging in April 2006 I went to the same independent, whole of market broker who found me the Northern Rook mortgage in 2004. I said I wanted a five year fix rate flexible mortgage – and I wasn’t very impressed with the three mortgage illustrations he came back with. The best one only allowed me to overpay up to 10% of the outstanding balance per year. The broker tried to sell me the mortgage by saying “If you go with this one and invest in a share portfolio, you’ll pay off your mortgage in ten years.” He wasn’t a very good salesman! I didn’t want to have an overpayment limit and didn’t know much about the stock market (and look what’s happened with the stock market over the last two years!).

Therefore I phoned Northern Rook and asked what fixed interest rate they would offer me on a five year flexible mortgage. They said 4.95%. It was a no-brainer! The remortgage costed £300 in fees but I got £1,000 cashback! I also took the opportunity to increase my borrowing to £125K because I was thinking of buying a bungalow.

On 1 November 2009 I made my last regular monthly mortgage payment of £900. My outstanding balance is now under £100 and my mortgage direct debit is 70 pence per month! I haven’t paid the mortgage off in full because I’m tied into it until May 2011. However more significantly, my flat is now a complete asset and I can use it (drawdown on my mortgage) to buy more property/assets.

I don’t know how much money (in interest) I have saved in paying my mortgage off in 7.5 years – rather than in 25 years – but I estimate it’s about £100K. Is that correct?

I visualise a mortgage like an iceberg (surrounded by other icebergs, all of different sizes, melting at different speeds) in the Antarctic. If you leave it to melt away on its own it would take 25 years. However if you keep chipping away at it, it will disintegrate a lot faster. I would like to apologise to Greenpeace because I feel, by paying off my mortgage so quickly, I have contributed to the rising sea levels. 

Read Financial intelligence – part one in full.