The Tip: Pay one mortgage payment extra every year to save money

Paying one additional mortgage payment each year, whether in a lump sum or monthly increments, can lower a 25-year loan down to 15 years.  If you pay more than one extra payment, the number of years will decrease even more.  Since this additional payment will be applied only to the principal and not the interest, you end up saving thousands and thousands of pounds on the Total Amount Repayable

This is a good idea if…

You have the spare money and a flexible rate mortgage. A mortgage is by far the biggest financial burden most people take on in their lifetime (apart from taxes!) and if you can reduce the time it takes to pay this down, you will be far better off in the long run. And if you are a long term planner with good financial discipline then this would be a good idea..

However…

In the current financial climate it might be a better idea to pay off any debt that carries a higher interest, like car loans, home improvement loans and credit cards and store cards. The store cards usually have the highest interest rate so you may want to pay those off first, then the credit cards and so on.

Paying off your credit cards also means that you would be able to use the money available on your credit card should the need arise, where as most mortgage products would not let you have your money back.  Having an available line of credit (lots of money available on your credit card) is also good should you suddenly find yourself jobless.

Does anyone else feel angry with the banks for the way they have caused the current recession?

I know I’m not pretty sympathetic to their current situation and with savings interests at an all time low I have added reason to be frustrated. When I had debt and overdrafts they were very keen on fining me, taking 1.25% interest a month and other charges that I felt weren’t particularly fair.

And now that I have a little saved up, they give me nothing at all.

I did buy some banking shares a few months ago and they have done REALLY well for me, but you never know.

Then yesterday I found an alternative that gave me the chance to give back directly to people or companies that need it; Zopa

Are you familiar with Micro lending or person to person lending? Organisations like Kiva connect people usually in the poorer parts of the world with other people that have money to lend. But we are talking about small sums.  The beauty of micro lending is that anyone can lend the borrower a small part of the loan they need, say if I needed five hundred pounds, 5 people could lend it to me – or 25 for that matter.

What this means is that anyone can lend money directly to anyone else, provided systems like Kiva are in place. Which it’s not if you live in the UK.

And that is the gap that is being filled by Zopa

For people with money, Zopa gives you the chance to earn a higher interest rate, set by you, and accepted by the borrower. It also gives you a chance to put money where it is needed – directly to the people that need it. If you hate the banks, then this would surely feel great!

For people who need money, you get to borrow it from real people, not banks. People who have put their trust and money in you to get your business idea going.

However, if you have defaults, CCJ’s or can’t prove you earn more than 12 thousand pounds a year and can afford to pay, then there is no point in trying to borrow.

But in my case, I want to earn a better interest on whatever savings I have so I have joined Zopa as a lender. Are you joining me there too?