A lump sum – 14% worth

In Norway, as with a lot of countries, the interest rates are down. Now this is great news for mortgages (myย mortgage interest rate is at an all time low), but is sucks for any money you might possible have in your bank accounts.

I’ve been mulling this over and I have made a decision to pay a lump sum on my mortgage rather than keep that money in the bank.

Now, I have to explain my mortgage conditions to you, so that you see that how this makes sense.

I have a very flexible type of mortgage that you can get if you stay within 70% of the value of your property.

The flexibility is as follows;

  • you decide yourself when, and if, you want to pay on the principal. You can pay nothing one month, and a bunch next month, you can pay monthly, quarterly, every second month, once a year.. whatever floats you boat
  • you do however pay interest monthly, on your outstanding balance
  • you can treat it almost like any other “bank account”, if you need some extra money for a project, you can withdraw funds from your mortgage account, without reapplying and without additional fees, as long as you are staying within your approved credit limit

Now there is one thing abut having this type of loan, one has to be pretty disciplined about it. It is such an easy thing to “use” from the approved credit line, that you need to have your finances under reasonable control, or you can suddenly find yourself “using” more than you planned! And you do have to pay down that mortgage at some time!

Now, me, I’m probably way more disciplined than my bank wishes me to be ๐Ÿ˜‰ as I work really hard on paying down my mortgage much faster than I really need to.

And I just made another dent in it! As my savings don’t generate much interest, sitting in the bank, I just took a bit of a portion of them, and paid a lump sum into my mortgage account. It brings my mortgage down another 14% out of my original loaned amount.

Now I might feel a little more โ€œbrokeโ€ (well,no, not really, as I still have my emergency fund firmly intact), but itโ€™s the right thing to do. I “lose” money (if you factor in inflation) keeping them in the bank. Putting them into the mortgage instead, saves me one hundred dollars in interest a month, and I’ll take that ๐Ÿ˜‰

So here I am, down to one third of my original mortgage… and it’s only been 8 years. Not too bad if you ask me ๐Ÿ˜‰

15 comments

  1. Simply Save

    Wow congrats! That’s awesome! That type of mortgage is interesting and so different than what you’d find in the US. I doubt many are disciplined enough for it, but sounds like you have all your finances in order! ๐Ÿ™‚

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    • Anne Lene

      Thank you ๐Ÿ™‚ Yes it takes a disciplined financial mind to have this.. now I know I don’t really have to be quite this disciplined (according to my bank lady ๐Ÿ˜‰ ) but I’m just old fashioned enough that I want to be mortgage free… I think this is a type of mortgage they won’t necessarily give everyone, I would assume that they take a good look at your credit history first. I obviously passed ๐Ÿ˜‰ I used to have a regular type mortgage, but after having had this for a few years… I will never have a regular one again.. I really like the flexibility, and being able to decide myself, when and if I pay ๐Ÿ˜‰

      Liked by 1 person

  2. Lois

    That’s really fantastic! It does make much more sense to pay down the mortgage than to let the money sit in the bank earning so little. It’s a shame we don’t have those options on our mortgages here in the US. We do have a couple of options but it’s hard to get the mortgage company to put it towards the principal.

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    • Anne Lene

      I used to have one of those regular mortgages (like you also have in US) and I used to pay down extra then as well, but it was a pain since I had to talk to my bank woman and have her change the monthly principal deduction, and then if I wanted to change it again.. we needed another talk. I changed my mortgage to the type I have now in 2011? I think, and it saves me a lot of trouble if I want to change up my payment. When I got it, I started with a routine of paying on my principal once a year, and just pay interest the rest of the months. But the last couple of years.. I’ve thrown in even more… and it shows ๐Ÿ™‚

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    • Anne Lene

      Thank you ๐Ÿ™‚ it feels kinda nice, being down to a reasonable amount left on my mortgage. Hopefully I can keep a good momentum going and be done in another few short years ๐Ÿ˜‰

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