As of July 2015, the average home was £257,000. Even at 6% interest and 20% down, your overall interest payments will end up costing you over £238,000 — doubling the cost of the home over the life of the loan. This means that a £285,000 home actually costs you a whopping £570,000.
We think of interest as a small percentage, but we don’t see the compound impact of interest. How would you like to put £285,000 — or a million pounds — aside for your retirement without making any other investments?
It’s easy; make small principal–only payments each month in addition to your usual mortgage payment and watch your mortgage get cut in half. For example, if your average home monthly payment is £1,233, then you’d write an additional cheque of £123 to go toward the principal amount. That means you never pay interest on that principal, which will save you hundreds of thousands over the (now much shorter) life of your loan.
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