Being debt free is a nice feeling. I found myself remembering when we paid off our mortgage and the huge weight which had been lifted from us. We only had a mortgage for about eight years and I hope I’ll never forget the immense joy and relief when we paid it off.
We were fortunate in having an interest only mortgage with the ability to repay capital off when we could (once again this is where having great financial advice is so cost effective). This was in the days when our savings were giving good returns and we were achieving a higher return compared to the interest rate we were being charged by the building society.
After a few years I had a little “windfall” and plonked it straight into the mortgage, paying off about half the mortgage. This then gave us the impetus to get the damn thing paid off. I remember saying to Rachel how it was the right thing for us to do as good interest rates on our savings wouldn’t last long. Besides, morally it seemed the right thing to do.
How to annoy the building society!
Every time we had a cheque come in the post or sold something on eBay, even if it was for just £2 or £3, we would pay it into our mortgage account. Each time we had a little spare cash, the same would happen.
As Rachel was at home most of the time, it was Rachel who used to pay these amounts into the building society. Whenever Rachel did this, she would ask the building society to recalculate the amount of interest we were paying and this seriously annoyed the counter staff. They would have to press a few buttons on their computer and sometimes they would say how minuscule the difference was. They would get annoyed, huff and puff, but still do it. And yet for us, it was symbolic, every little bit made a difference.
It was so nice seeing our mortgage balance gradually coming down and I remember we were so excited when the end was in sight. Once we had paid it off, I think we celebrated with Heinz deluxe beans on toast that evening in a truly frugal-living kind of way. We loved doing it like that!
When we asked the building society to send us the deeds, they offered to hold onto them by offering us a further mortgage. Perhaps we would like to buy a bigger house, or perhaps to have an extension built or to buy a new fancy car or something? No thank you, just send us the deeds.
Perhaps we were a little unusual?
I wonder if the usual trend or pattern in life is to take out another mortgage or loan, to buy a better house. We certainly could have done with a bigger house and yet there is something to be said about being content.
It would have been so easy to borrow some more, I had a good salary and we could easily have climbed the property ladder or splashed out on any number of things. Knowing we could do those things was a nice thought; even nicer was deciding not to.
You have a mortgage?
I remember learning about compound interest at school. Was it in Maths or perhaps Economics? Doesn’t really matter. What does matter is paying interest every year on a debt, which is what a mortgage is. Even better is to gain some interest, or profit, on savings and then get interest on the interest, year by year.
So looking at whether you can repay some capital on your mortgage has to be a good thing no matter whether it is a lump sum or simply through over paying a little every month. Providing you don’t run any cash reserves down too far, it must be a good thing to do. In the current economic climate with low interest rates, getting the mortgage paid off quickly still makes sense, surely?
The overwhelming point of this? The nice feeling of seeing a mortgage paid off once and for all. You own your property, it’s completely yours and the bank owns none of it.
Don’t get me started on this! Neoliberal capitalism requires banks to effectively ‘create’ money through debt, to feed into the economy, in order to fuel consumerism. They then make profits on that debt maintenance. If we all paid-off our personal debts the economy would basically fall into recession! The model is broken, at least for us, not the banks, of course. It is also immoral. We need a different approach. The vast majority of this ‘bank-created’ money is in the form of mortgages for home ownership. The state needs to get back into house building, on a massive scale. None of this should be for sale. It should be kept within the National asset estate for future generations. We need to turn around this area of the economy so that house-ownership is not a necessity. And then we can squeeze out private landlords. (But that’s a topic for another day…).
You’re spot on and the Government simply isn’t doing enough about the housing crisis in the UK. I imagine things are getting worse and radical action is needed to address the supply /demand imbalance.
Actually I’m reading all about Gordon Brown’s views on the neoliberal approach in his autobiography. Interesting stuff.