Tagged: Down payment

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 (my 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 😉 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 “broke” (well,no, not really, as I still have my emergency fund firmly intact), but it’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 😉

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 😉