Becoming mortgage free is not just a practical goal to be sensibly evaluated as part of your wider investing strategy – although it is that for sure.
There’s an emotional component to getting rid of your mortgage, too. And we shouldn’t ignore our emotions because they hugely influence our ability to stick to our plans.
Feelings matter!
Mortgages and make believe
It’s always seemed to me that mortgages are deeply sentimental, in a way that other financial products are not. They’re like the Hallmark movies of the financial world.
Think about it.
Firstly, there’s the hackneyed but heart-warming narrative…
A young couple in love are chasing their dream to own their own home. They struggle to pull together a deposit. The bank agrees to help them. There is champagne (or cheap plonk). They sleep on the floor until their furniture arrives.
Soon they’re ripping wallpaper samples off the rolls at B&Q and picking up those little paint cards with the different coloured strips. The IKEA catalogue is suddenly intensely fascinating.
It’s not all plain sailing, obviously. Our couple have their struggles. Tight budgets and problem neighbours. Arguments about the damp patch on the kitchen ceiling.
A dog joins the cast, and then a couple of children. There are barbecues in the garden.
And all the while they’re paying off that mortgage.
At last – usually when they’re much older and the kids have flown the nest and the dog is buried under the barbecue – their mortgage comes to an end, as all good things must.
The end credits roll, and we see them sailing away into the sunset on a Saga cruise.
Living the dream
Being deeply gullible, I bought into all of that.
I remember going to get my first mortgage, and sitting in a little office in the shopping centre branch of a building society with a woman wearing a name tag and a stern expression.
I was 27 and completely petrified.
Would I make an unfunny joke – likely – and accidentally destroy my chances of getting a mortgage?
Might my asthma – an occasional cough – be categorised as potentially fatal for mortgage-gaining purposes?
Would my employment history – patchy – show that I shouldn’t be trusted with proper money?
When my application was actually approved, it felt like I’d been accepted as a Real Grown-Up.
I was thrilled. So I agreed to everything: payment protection, life insurance, you name it. Because that was what Grown-Ups did.
Shortly afterwards of course I went through the enormous reams of paperwork and realised what I’d done – and promptly cancelled most of what I’d been talked into.
But nevertheless, for a while having a mortgage was a great thing. Because having a mortgage allowed me to buy a house, and that was very exciting indeed.
True, it was a run-down terraced house opposite a patch of waste ground. Not exactly white-picket-fence material
But as far as I was concerned I was Living The Dream.
Questioning the dream
It only dawned on me later that a mortgage was still a debt.
I’d never thought of it like that before.
A mortgage was a necessary bill, surely? You paid a mortgage or you paid rent. That was how things worked. And at least with a mortgage, you got to have a house that was yours.
Right?
Well, sort of.
Unless the bank took it back.
The more I thought of about it, the more it bothered me.
Debt nightmares
The reality was that I was in debt – to the tune of many thousands of pounds.
I would never even consider that in any other situation. But I’d just blithely skipped into my mortgage.
I’d even thanked the bank for saddling me with a giant stonking debt!
What was wrong with me?
I read up. I learned that there was Good Debt and there was Bad Debt, and that mortgages fell into the category of Good Debt.
But knowing that didn’t help much.
I ran the numbers – easier to do nowadays with online calculators – to see how much I was going to pay over a 25-year term on the money that I’d borrowed.
The answer was a mind-boggling amount.
Rejecting the dream
Within a year of moving in and mortgaging up, I was furious about the whole situation.
I didn’t know anything back then about FIRE or investing. I hadn’t found Monevator and I didn’t realise that financial independence was an achievable thing.
But I still felt cheated because the world hadn’t properly explained to me that I was digging a hole that would take me most of my working life to climb out of.
It didn’t help that my parents had recently had a brush with the endowment mortgage drama, either. As a consequence I’d begun to see mortgages not as a necessary part of life, but rather a trap for the unwary.
So I decided to haul myself out of the hole.
Fortunately, when my mortgage was set up I had opted for a one that allowed me to make limited monthly overpayments.
I remember that it was presented to me in terms of a saving scheme – that if I built up a surplus through overpayments, I could tap that for a payment holiday at some point in the future.
Going back through the paperwork though, I found that overpayments could be used to reduce the term of the mortgage. Over time, this could slash the total interest that I’d be charged.
Just like that, I was off.
Mortgage repayment illustration
Let’s say you have a £200,000 repayment mortgage charging 5% with 25 years left to run on the clock.
According to Monevator’s mortgage repayment calculator:
- Your monthly payments will be £1,169
- Over the lifetime of the mortgage you’ll pay £150,754 in interest
- The total paid will be £350,754
Ouch.
But wait – you’ll see in the calculator there’s a box for ‘overpayments made per month’.
Don’t leave it hanging! Instead let’s round up the mortgage to £1,400 a month, by entering a £231 overpayment every month into that slot.
Here’s a pretty graph showing what will happen when you do so:
By finding £241 down the back of a sofa / side-hustlin’ / skipping lattes each month, you:
- Pay the bank £1,400 a month
- Save £46,248 in interest over the mortgage’s life
- Pay a far lower total cost of £304,506
Oh, and you get to pay off your mortgage seven years early!
My new mortgage-free hopes
You can see why doing these sorts of sums set my heart a flutter. I was racing to get started.
However back then it wasn’t so straightforward to overpay a mortgage. I didn’t live near a branch of the building society, and it all had to be done by post.
Also, I couldn’t commit to a set overpayment schedule. Instead I just threw whatever I could spare at it.
Every month I would write a cheque for whatever I could afford. I’d put my mortgage account number on the back, stick it into an envelope with a stamp, and post it off to the address of the relevant office.
And every month I would get a piece of paper back through the post stating the amount of my overpayment and the consequent reduction in the term of the mortgage.
Building a better dream
I hoarded those additional mortgage statements like treasure. I kept them in a special ring binder which I hid under the sofa, and I’d take it out and flick through it when times were hard.
That was important. Because mortgages are about emotions, not just money.
It was incredibly difficult, some months, to find any spare money. Often I resorted to selling things on eBay and sometimes Gumtree to make some cash. I very rarely bought anything nice for myself – for years. If relatives gave me money for my birthday, it went straight into the ‘mortgage-free fund’.
But because I got such a sense of achievement from my little file of paper statements, I kept going and I didn’t waver.
Even when my socks became more hole than sock.
Even when I messed up cutting my own hair and had to wear a hat for three months.
Squirrels gonna squirrel
The funny thing is that in some ways it was a very happy time for me. I was on solid ground. I had a mission and I knew how to go about pursuing it.
That walk to the postbox with my cheque every month – I don’t think I’ve ever enjoyed a walk as much since.
There were ups and downs of course. The course of true mortgage freedom never did run smooth.
Setbacks included a financially feckless ex-husband, a child with lots of unanticipated needs, an unwanted second mortgage foisted upon us by said ex-husband (before he was ex-ed!) and several banking shake-ups.
There was also a delightful episode when the building society refused to put the mortgage in my sole name because they didn’t like my job.
But in the end I became mortgage-free not long before my 40th birthday. I’d shortened my mortgage term by about 12 years and saved myself tens of thousands of pounds in interest.
Living the mortgage-free dream
Becoming mortgage free took more than a decade of dedication, but it was worth the effort. It was, financially, the best thing I’ve ever done.
Now that I’m mortgage free I don’t have to worry about being one calamity away from losing my home.
And all that money I had to find every month – not just the mortgage payments, but also the overpayments – isn’t going out with regular cheques in the post anymore. This meant I could readjust my finances and start investing.
But paying off the mortgage didn’t just bring practical benefits.
It brought emotional ones, too.
I’d done something that once seemed impossible, against the odds, through sheer determination and stubbornness, on a low income while parenting, and through multiple crises.
I prioritised my long-term goal over short-term comforts, year after year.
If I can do that then as others have said I feel I can do anything.
Mortgage free is one way to independence
Most of all, my mortgage freedom quest introduced me to the mindset of Financial Independence.
The FIRE acronym encourages us to think of Financial Independence as a very specific endpoint. It might involve retiring early or it might not. But the focus is generally on becoming independently wealthy.
But I think that misses an important point along the way.
Real financial independence starts when you step away from what you’ve been told, or from what other people are doing. When you reject the neatly-packaged Hallmark narrative of necessary debt and unnecessary spending, and do something bold instead.
There are probably a lot of people out there who are not and will never be financially independent, in the literal FIRE sense.
But they’re still reading and learning and dreaming big.
And they’ll find their own way to become free.
