I wrote this in response to someone asking me how did we pay off our mortgage?
This is all based on two adults only. NO kids involved I can not base anything on how expensive it can be with children. The mortgage was paid off before I had my breakdown I was still working and my partner died. I worked for a few years after his death. This is why I encourage everyone to become as financially stable as possible.
If we had not paid off our home, I believe I would not have been able to manage the mortgage payments on my own.
My first point is always get rid of all debts before the mortgage. Mortgages at present are low, credit cards with fees and higher interest rates, get rid of them. YOU CAN live without a credit card. Personal loans, car, student loans may all incur higher interest than your mortgage. Get rid of them. Here in Australia I believe most credit cards have an annual fee. So your are paying to have that convenience on top of any interest.
Interest rates will go up I promise you.
Disclaimer Compared to those living on Newstart (benefit I receive ) or low incomes, who are renting, and living in the cities, which are so expensive to rent in or purchase a home. I do not know how anyone can survive even with the rent assistance, my hat is off to all who are in that situation. The costs involved with looking for work, adds to the difficulty of living off this payment. As to paying off a mortgage I bow down before you in awe!
My CPTSD makes me unemployable so I don’t have to do all involved in looking for work. I also know how fortunate I am that my country provides money for those of us who find ourselves out of a job, for what ever reason.
I have all I need and more, I do not have any wants, that makes me rich. Money does not make you rich. It might make you RICH as in oh look at my Corvette and my six bedroom six bathroom house I live in on my own kind of thing, If that is the RICH you are aiming for go for it.
I live in a state that has some of the cleanest air in the world. I have clean water to drink, I can access medical services for no charge, as I have a concession card, so my GP bulk bills me. Public Hospitals are free, but waiting times can be huge. I have wonderful neighbours and a exceptional community in the valley I live in which was demonstrated this time last year when we had bush fires and smoke from before Christmas to late May. This makes me rich!(not the fires and smoke the community)
I have superannuation that will not be accessible for 13 years. Only other assets apart from my home are my two dogs. Who are priceless.
I do not look at life in such ways. Our mortgage was joint effort and no I received no financial remuneration from any where when my partner died. All money went to his daughters. As it should. Our home was a place that his children had never lived in. I am not a financial person, in fact I find all the talk of how much money you need for this and that is ridiculous. As here they talk of how much you need to retire and it is so out there for me. I am supposed to have $3million to retire on. No wonder people are so scared.
Now again, I don’t live in a city like Sydney,Melbourne or even Hobart,where houses and units cost so much. Where many retirees enjoy eating out, the theatre, golf, traveling overseas, around Australia. Some will have several cars, may be a boat, a holiday house. Some will still be paying of their homes and some will be renting. Some will be doing fine and others not so. Maybe if you want to continue with the lifestyle you had you might need that sort of money. I have never seen and probably never will see that sort of money personally in my lifetime.
I could get all worked up and think lots of negative thoughts and worry myself so that anxiety and panic attacks increased and out bursts of anger because I felt no control over it all. Concerned about not having the $3million dollars I need to retire on .
Instead I take a leaf, no many leaves out of my partners life. He was older than I am. He had no debts, he had some savings not a huge amount by what you should have standards, he helped his daughters out with the deposit for their first homes. He was content.
We traveled to NZ for 6 weeks in a campervan. Most of the time it was wonderful..a couple in a tiny vechicle no escape..we were a normal couple!
Apart from beds, (mattress is over 18 years old and still going strong. Fridge 13 years old, microwave 16 years old, freezer 13 years old washing machine over 30 years old, oh and two beautiful Huon pine small coffee table he made me, all the other furniture is second hand. Our TV is smaller than most peoples computer screen. I don’t have air conditioning and survived fine today 40dC/104dF with just a fan.
I have no stocks no bonds, no gold no money hidden anywhere.
My assets are way below the cap for Newstart. Sorry not going into my Net worth but it just the value of my home and superannuation and that is just under $100,000.
I am not qualified to advise anybody on what where how they invest. So cant help you there. I have always looked at if you cant afford to loose it don’t invest.
For me the way to pay off your mortgage faster is to realise that it is compound interest you generally are paying. So if you say as we do here have mortgages that you pay only interest off to begin with and you just pay that amount you it will take the full 30 years. That is what banks and other lenders hope for.
Now this is just very rough values done on a mortgage calculator, online.
Again I am not a financial advisor or in any way an expert.
These figures are based on Australian AUD and interest rates. They are only a demonstration. Say you had a mortgage amount of$360,000 3 bedroom home in Hobart State Capital and an annual interest rate of 4.5%. fixed loan On going Monthly repayments $1824.00 every month for 30 years
- Total Interest and fees Payable $296,691.00
Now if you paid just an extra $50 a month of your mortgage would be paid out in 28 years and 5months $278,023.00 in interest and fees payable.
If you paid an extra $100 a month$261,734 interest and fees you would pay out your loan in 27 years.
It doesn’t seem much but every little bit extra you can pay off your mortgage reduces time and interest taken. If you pay your loan fortnightly you save even more. If you can pay your mortgage weekly and add an extra $20 to the payment.
If you could pay $2000 a month your mortgage would be paid in 25years and interest would be $240,553 ($56,000 saving on interest and fees)
Extreme example if you could afford a repayment of $1924 a week you would pay your mortgage in 4 years and interest and fees would be $32,902
Paying your mortgage weekly as we did saved even more not that we were paying the full amount but we would put something even if it was $10 on the mortgage every week on top of the due payments. We were paying 8.5%averaged out and we paid it out in 10 years. I was working so it was a lot easier.
Most people (not all) can give up things. Do you really need to have the painted nails manicure and pedicure every week? Or is it a want? Some people do need it than don’t give this up.
People managed to go to work and not get a coffee on the way to work every morning a couple of decades ago. It can be done. Drink water instead of sodas. Bring it from home don’t buy water in plastic bottles. These are all the things I am sure you have heard, and read.
I stopped buying two take away coffees a day, $7 a day $35 a week, $1820 a year saved. OK I had to drink instant but it was what I was drinking at home back then and it was provided free at work. If you add that $140 to your monthly mortgage repayment. wow. Such a little thing, but it will reduce the time and money you pay to the bank. Most importantly I survived doing it. It was worth doing all we could to be debt free. I kept looking at all the ways to knock off some money here some there.
Every time we did, into the money box(jar) the money we saved went and once a month on the fortnight between the mortgage payment I would take what ever we had in the jar to the bank. By taking it in on the fortnight opposite the regular monthly payment was taken out, the time, and interest grew shorter and less. We also paid extra regular weekly payment of about 25 a week I think it may have been more. So add that to the extra $10 a week payment, another payment of varied amounts, plus our monthly required payment. It all adds up and reduces the capital owed plus the interest.
We both put any loose change in it at night. We don’t have any tolls or paid parking where I live. I took a book to read and sat outside on breaks or in the staff room ate my bought from home meal. I stopped going to shops and malls, and wondering aimlessly about to fill in time.
I assessed what clothes and shoes I had and just wore them, I had a pair of 3 pair of dress shoes, walking boots, and joggers a pair of sandles and thongs. (flip flops) I wore a uniform to work that was paid for by work. That was helpful.
But when I did work in offices and training, I basically had a very simple wardrobe that I just lived in. Two pair of shoes that were comfortable for standing in to train people. Ive never followed fashion and own very little jewellery of any value. Again you may love jewellery than this might not be something that you want to stop buying.
I had a couple of handbags. Good quality but not labels that went with my ‘uniform’ I created. I stopped buying books and magazines and went to the library. We still would go out for meals and to the movies, theatre occasionally (two three times a year)
My partner loved the symphony so for combine Christmas Birthday gift, I bought him (and I ) season tickets for the Symphony. We did not need lots of gifts, and both our birthdays are January If we did go out for a meal for a birthday celebration it would be lunch, because we would go to Hobart to pick up things we needed and go to a really nice restaurant or cafe, and have lunch food was great but much cheaper than dinner. It was not that we were cheap. It was just we wanted to get out of the city and get home again. We loved being in our home. Together.
The other thing I have heard people talking about is what to do with any extra payments ie tax return, bonus! Put it if you can on your debts first! Having a holiday I promise you will be great but than you will come home and have more money on your credit card, and increased stress because you spent more than you intended. Put a bit aside for a treat.
Do you need or want a brand new car? They depreciate so fast . If you bought a brand new car in Australia, and drove it around the block tried to sell it You would only get about 2/3s of what you just paid for it. (a bit extreme but not far off)I have always bought second hand cars. I don’t need all the computerised things. I do like automatic windows I admit handy with dogs. But if you look at a brand new car for lets say $30,000 and within a very short time it will be worth lets say $22,000 why not just buy a vehicle for $22,000 these days it may still be under some warranty, any problems should be ironed out, and as long as it hasn’t been driven around Australia (or the states) deal. then put the $8,000 on the mortgage as one lump payment. Or pay off debts.
Now for those renting and trying to save for a mortgage, this might be hard. But do two people a couple really need a two bedroom unit? In Australia a second bedroom adds approx $120-200 a week to the rent. if you are paying $200 a week extra for a second bedroom you are wasting $9600 dollars a year, in a few years that would give you a great deposit!. Yes you might be able to get someone into help pay the rent but watch Judge Judy and you might reconsider..
You might read this and go well they must have been miserable but no. There are lots of things you can attend for free. I love reading and used to buy book and magazines. I joined our wonderful Tasmanian Library LINC and they had free internet access. Air conditioned in summer heated in winter. Go in read free newspapers magazines and the cost of heating air conditioning is the State Governments. Great free school holiday programes and free early childhood story times. I love it we also have in our small town a free library on the edge of a park. People leave books and others can take them. I have read some relatively new releases from it. Also have free internet access very helpful if you are not a big user, saves money on having a internet service at home.
Pay as you go phone. Don’t keep updating your tech items. Save the money your phone and apps will still work, as will your laptop.
Parks, your own garden, make your home somewhere you love and you might find like I have I don’t miss doing so much. Gym fees, instead go for walks garden, stack four tonne of wood. Dance. do steps by going up and down stairs, get together with friends at each others places take plates to share, babysit for each other, have clothe swaps with friends You all bring things you don’t wear need like whatever and someone else might love it. Sell stuff on ebay or gum tree you no longer need or put it on for free it will go. rather than throw it away.
Have a good pantry and learn how to cook from scratch, you will save a fortune, Its work but hey its exercise for free shopping in the supermarket or farmers market. It is more work. I understand but its fulfilling and you will have be reducing debts and getting that mortgage paid off. Plenty of free info on the internet.
If you loose friends because you are doing this I question the friendship. Stop subscribing to things that cost you money. Look at the fees and charges your bank charges you. You may see ways of saving there. When you are paying for things with cash ask if there is a discount I saved $60 on my fridge because I paid cash. Buy seconds in white goods. They are new they will still have a warranty, and if you have a problem as I did once they gave me a new stove, to replace the second (which was a second because it had a dent in it) as it was cheaper than fixing the one I had and the warranty began again. Do you pay to have direct debits done? Save the money and do it yourself.
My mechanic lets me pay off service costs because I do it fast reliably and in cash. The tyre company let me have a deal on four new tyres and I paid them off because I paid cash. Again quickly reliably. Worst thing that can Happen is a no. If that happened we tightened our belts even more. Within a month we could usually pay it.yes we might only pay the two mortgage payments or one that month, but we would still put what ever we could in on top after the bill was paid in full.
When my partner became ill with terminal cancer I stopped work to care for him, after he died, I returned to work for four years, I worked casually and only two nights a week. I was working when I had my breakdown. I have not worked for four years three of which I have been on Newstart Benefits. The first twelve months I had to live on my savings as I had too much money to get benefits. $12,000.AUD. New Start is$15,000approx a year so if you are ever applying for Newstart take any savings out of the bank before you apply.
If I had not owned my home and was debt free you can imagine what might have happened. I never ever thought I would be on unable to work again, and I never ever thought I would not be making a good living. I can not imagine where or how I would be living now after three years on Newstart. I certainly would have no dogs, no garden, I would probably be in a house sharing with other people I do not know. I know it is hard to think like this when You are young, and even if you are older. If you can do it get rid of your debts, regardless, cut up your credit card.