Meaningful Money | Jinesh Vohra - Part 1
Our founder and CEO, Jinesh Vohra, had the opportunity to speak to Pete Matthew on his podcast at Meaningful Money. He talks about what inspired him to start Sprive, why so many people in the UK are making overpayments, and his future ambitions to help more people become debt-free.
If you have 30 minutes, you can listen to the full podcast here, or alternatively here is an edited version of the interview available for you to read. Here is part 1 of the interview.
Tell us more about your background
I'm Jinesh, the founder and CEO of Sprive. My background is Investment Banking, I worked at Goldman Sachs for about 14 years. Then I left in late 2019 to start Sprive with two other guys. I've always kind of wanted to start my own business. My grandfather was an entrepreneur, my dad was an entrepreneur and then I paid off my mortgage, and so it gave me the freedom to follow my dream.
What inspired you to start Sprive?
It was inspired by my own personal mortgage journey. So when I bought my home I recall seeing my mortgage offer document and it said for every pound that I borrowed, I would be paying 50p in interest. I sat down with my wife and we decided that we wanted to pay this mortgage faster to help save interest. When we started making overpayments, we saw our monthly payments reduce which we thought was helpful. However, we later realised that our overpayments were not helping us become mortgage-free, faster and that I needed to call my lender and tell them to update my overpayment references. We also found switching mortgage deals to another lender cumbersome.
I was amazed that in this day and age, with mortgages being so important that managing your mortgage is so difficult. I was also inspired by apps like Chip, Moneybox, and Plum that helps people save and invest. I thought why can’t I build something similar but focused more on debt.
So your monthly payments went down when you made overpayments. Is this the default for most banks?
Yes, for most lenders, that is the default. Most lenders will show you on their website that your overpayments can save you interest and take years off your mortgage. However, strangely enough, lenders tend to add this awkward step where you need to call your bank and let them know that you want the payments to give you the benefit of helping you pay off your mortgage faster.
Many people are left frustrated as they're on hold for ages. Often there’s confusion around the request and the representative at the lender may think the individual is asking for a permanent reduction in term and therefore provide incorrect steer informing them that they need to speak to an advisor. What’s key when having the conversation is letting them know that you want your overpayments to keep your monthly payments the same. In my opinion, it shouldn’t be that difficult to do this and I’d love to do more lobbying with the FCA and lenders to challenge why reducing the monthly payments on the back of making overpayments is the default. The majority of people we engage with are making overpayments because they want to be mortgage-free, faster, and save more interest.
A lot of people are getting 40-year mortgages now and worryingly that will result in many people still paying off their mortgage throughout retirement. If they want to avoid that being them then making overpayments is a great way of doing that.
40-year mortgages, that’s scary. Is it really that common?
Unfortunately yes. Nearly 59% of mortgage products being sold have a standard term of 40 years. Property prices are rising, cost of living is rising, whilst salaries are not. For people to get onto the property ladder, the mortgage term is now being extended by lenders to keep the monthly payments low enough so that people can afford to buy their first home.
When I got my mortgage nearly 10 years ago, 25-year terms were the norm. That’s completely changed. Many people think about the present, and like that their monthly payments are lower, however, they may not necessarily appreciate that by borrowing for longer, you’re paying so much interest during the lifetime of the mortgage.
For those who borrow later in life, many savvy people will overcome the hurdle of having a mortgage late in their life. But there will be many people who will be hit very hard. They will be in their late 60s or even 70s and want to retire however they can’t because they still have a mortgage or they will be forced to take money from your savings and that could really eat into their future cost of living.