Our CEO shares his mortgage journey
With so many homeowners out there who aspire to be mortgage free, we thought we’d interview our very own CEO, Jinesh Vohra to learn more about how he paid off his mortgage at the age of 32, saving him over £70k in interest and how it inspired him to start Sprive.
Buying your first home
Getting on your property ladder isn’t easy, how did you make it happen?
If I’m honest, I’d have to thank my parents and my wife. Without them it would have been tough. I know it doesn’t sound very cool or independent, but I lived with my parents until I was 27. That allowed me to build up my savings, as I wasn’t paying rent. My wife also lived at home and so when we got married, we were able to combine our savings to put down a 25% deposit and purchase our first home.
How did you go about getting a mortgage?
I didn’t know the first thing about mortgages, so I asked my family and friends for their thoughts and I did some online research. I remember getting quite confused and I decided to go and meet a few mortgage brokers to get some advice. I remember one of the brokers I met, worked out of his garage and funnily enough he was probably the best one I saw. In the end I actually decided to go direct to the lender and completed a mortgage application myself to avoid paying additional fees to a mortgage broker.
Overall how did you find the experience?
Painful. Firstly, I had no idea whether the broker I was seeing was any good. They were just random recommendations from people I knew. Then I had to take time off work to go to see them. When I got there, I noticed they were writing down my personal information on a piece of paper which didn’t seem very secure. I was also recommended different products by different brokers which was confusing. I also didn’t really want to pay additional fees to the advisor, as I knew they were already going to earn a decent amount of commission from the lender for helping me get a mortgage.
When I applied directly to the lender that was cumbersome too. I had to book an appointment at their branch. I remember filling out lots of online forms, sending tons of paperwork and it taking ages.
Your mortgage journey
What made you decide you wanted to pay off your mortgage as quickly as possible?
I vividly remember that when I got the mortgage offer document, it read that for every £1 I borrowed, that I would be paying my lender 50p in interest. I was shocked. I remember thinking that interest rates are low, so why am I going to be paying my lender so much interest? We had taken a 25 year mortgage and so when I told my wife that I wanted to try to pay it off in 5 years, she looked at me like I was crazy. I was able to convince her that it was a good idea and in later years it was actually her who was more committed to making it happen. The other reason I was keen to pay it off, was that I liked the idea of having the freedom that not having a mortgage brings.
Did you face any difficulties along the way?
Yes, quite a few actually. Once we decided to pay it off faster, we had to work out how to do it. There was no one out there to help us, so we had to work it out on our own. I found my lender not to be particularly helpful and if I knew what I know now, I would have done things differently and saved even more money.
The first mistake I made was that I was making overpayments, but they were actually reducing my monthly payments and not having the effect of reducing my term. At the time I thought it was really great, as my monthly mortgage payments were getting smaller and I was saving interest. I didn’t realise that I could I have saved more interest, had I called my lender and told them to not reduce my monthly payments and to keep my monthly payments the same.
I was also making mortgage overpayments twice a year. I would wait to build a pot of savings and then would pay it off in chunks. Lenders calculate interest daily, so if I made mortgage overpayments more regularly then I would have saved more, especially as I was hardly earning any interest on the savings that I was building up.
Re-mortgaging was also a pain. I ended up sticking with the same lender throughout the 5 years I had a mortgage. We did find better deals at other lenders, but for some reason they struggled with the fact that my wife had changed her name, so we gave up.
How much interest did you save?
We didn't have a spreadsheet to track our savings, so I don’t really know the exact number. To be honest I had no idea how we were progressing. I just knew that directionally the amount I owed my lender was reducing over time. Since starting Sprive, out of curiosity I’ve gone and done a back of the envelope calculation and am confident that we at saved at least £70,000 in interest.
The birth of Sprive
You left a well-paying job in the city to start Sprive. Why?
First of all I would probably never had made the move if I hadn’t paid off my mortgage. Not having that financial commitment helped me feel more comfortable taking the risk. The other big motivator was I genuinely believe that the mortgages market is not setup to help homeowners save money. Based on my personal experiences having had a mortgage, combined with my financial services background, I believe I was well placed to help change things for the better.
What’s your vision for Sprive and how do you plan to change how people manage their mortgages?
Our focus is helping people be mortgage free as fast as possible. The market today is full of lenders, comparison sites and brokers who are only interested in helping you switch mortgage deals so they can profit from you. At Sprive, we wanted to build a more holistic product that is geared up to you paying the least amount of interest possible on your mortgage.
We want to do this in a number of different ways using smart technology. First, is to help homeowners chip away at their mortgage, hassle free. You’ll be amazed to how much interest you can save by putting a couple of extra pounds a day towards your mortgage. Secondly, we want to help homeowners improve their financial position to increase their chances of unlocking cheaper deals when they re-mortgage. This includes things like improving your credit score, reducing your loan to value (LTV) and adjusting your spending behaviour. Finally, we want to connect them to our FCA approved advisors to make sure they are always on the best mortgage deal.
With over 3 million people in the UK expected to have a mortgage past retirement and also half of homeowners making mortgage overpayments with no guidance, I think there is a lot of people out there that we can help.
Advice and reflections
What guidance would you give people looking to be mortgage free as soon as possible?
I would make sure you are comfortable paying your minimum monthly mortgage payments and would first focus on paying off more expensive debts such as credit card debt. Once you’ve done that, you’re in a good starting position to attack your mortgage. Managing your spending effectively is super important and chipping away regularly makes a huge difference. The other big things are selecting the right type of mortgage product and getting the cheapest deal possible. I personally like 2 year products that allow you to make unlimited repayments. Offset mortgages are also great for people that can build up a decent amount of savings over time.
For anyone looking to switch deals, what are your top tips to help them get it right?
If you can, I would definitely look at deals across the entire market and not just with your lender. There are over 100+ lenders out there, so there is a good chance you can get a better deal elsewhere. Also, just because you’re within your deal period doesn’t mean that you shouldn’t switch. You may find that the fees to leave early are smaller than the interest savings you will get by switching to a cheaper deal.
I would be wary of comparison sites. Whilst they are good to get an idea of what’s out there, they typically don’t tell you which deals you’re eligible for and don’t provide advice. You also have to complete the mortgage application form yourself which is a pain. I would suggest finding a reputable FCA approved advisor that doesn’t charge you any fees and is whole of market. One thing to look out for is that some brokers have a natural tendency to recommend products with lenders they know well and so may not suggest to you the cheapest deal out there for you. The only way to mitigate that risk, is to reach out a few different advisors and see what products they recommend, so you can compare.
Your background isn’t mortgages. Is there anything that surprised you, as you started to learn more about the industry?
Yes, how smart mortgage lenders are at making money. In very subtle ways, they have become very good at maximising the amount of interest they earn from homeowners. For example I was surprised to find out that the majority of my monthly mortgage payments went to paying my lender interest and not actually going towards reducing the amount I borrowed. I thought it would have been the opposite given interest rates have been relatively low over the last decade.
I also think lenders make it difficult to pay off your mortgage faster. Most lenders require you to call them before any overpayments have the desired effect. There is a lack of transparency to how you can become eligible for cheaper deals and also the whole process to switch mortgages is overly cumbersome.
Is there anything that homeowners can do to help change things for the better?
Yes, you can join us on Twitter and join the conversation. At Sprive, we're building a community of like minded people who aspire to be mortgage free as soon as possible and want to help us bring about positive change. It is going to be super important if we want things to change for the better. Whilst we’re doing everything possible to make things simpler, we are, to a certain extent, reliant on lenders making changes too.
Mortgage lenders are finding it difficult to compete on price, with interest rates being so low and therefore are finding ways to differentiate themselves. The more vocal our community is, the more influence we will have with lenders to help bring about positive change to help make it easier for all homeowners to save money on their mortgage.