It seems mortgage interest rates are going up again… Should I make early repayments?

Mortgage interest rates are rising again

It has been decided that mortgage interest rates will rise again.

Starting next January, interest rates will be higher than they are now.

The increase this time is a staggering 0.5%.

Honestly, when I first heard about it, I thought, ‘It’s going up that much?’

When I first started my loan, the interest rate was below 0.5%.

With this increase, the monthly interest payment will be more than three times what it was initially.

When I took out the mortgage, I thought I had considered the possibility of future interest rate hikes.

But seeing the actual future payment schedule presented by the bank, it really feels different.

What will happen to my monthly repayments from here on out?

Should I just continue making repayments as I have been?

I’ve started thinking about things like that.

Actually, I had intended to avoid early repayments as much as possible while the mortgage tax deduction was in effect, in order to take advantage of that benefit.

However, following this interest rate hike, my thinking has changed a bit.

Should I just do nothing?

Or should I pay it off as quickly as possible?

For someone like me who isn’t an expert on money, this is quite a difficult problem.

Because a mortgage is something you live with for a long time, I want to make the choice that minimizes my losses as much as possible.

While I think that, the more I research, the less I understand what the best choice is for me.

I had intended not to pay it off while the mortgage tax deduction was available

Actually, I had intended not to make any early repayments while the mortgage tax deduction was still in effect.

I thought that if there is a mortgage tax deduction, it is better to make the most of that benefit.

That was my reasoning.

If I have cash on hand, I shouldn’t force myself to pay off the mortgage, but rather leave it as is while I can still receive the tax deduction benefits.

And then, I planned to make a lump-sum early repayment once the tax deduction period ended.

However, with this latest interest rate hike, things have changed.

Hearing that it might go up by as much as 0.5%, I’m no longer sure if I should stick to the plan I had in mind.

Even if the mortgage tax deduction lightens the tax burden, if interest rates rise, the burden of interest payments will increase by that much.

Of course, I think it would be ideal to properly understand how the tax deduction and interest rate mechanisms work and calculate which is more beneficial for me.

But honestly, I am not very knowledgeable about financial matters.

Even when I look it up online, there are opinions that say you shouldn’t make early repayments while the mortgage tax deduction is active, and other opinions that say you should pay it off early if interest rates are rising.

Since there are reasons for both sides, it just makes me more confused.

I want to make the most of the preferential system since it is available to me.

But I also want to avoid the increasing burden of interest payments.

While thinking about all this, I realized that I can’t make a decision based solely on the mortgage.

My side business cannot yet be said to be on track.

My main job is also currently part-time.

Considering my future income and living expenses, I cannot easily decide how much of my cash on hand I should allocate toward mortgage repayments.

It’s not just a matter of thinking about mortgage repayments alone.

How should I manage repayments while also ensuring I have the money necessary for my future life?

I feel that I need to consider that as well.

Whether it’s refinancing or investing, the more I look into it, the more confused I get.

Since I found out that mortgage interest rates are rising, I have been doing some research on my own.

The first thing I thought about was refinancing with another bank.

I wondered if it would be better to refinance if there were a bank with a lower interest rate than my current one.

I thought so, but when I looked into it, I found that refinancing involves costs such as fees.

Even if the interest rate becomes lower, I won’t know if it’s truly beneficial unless I consider the costs of refinancing as well.

Moreover, other banks are in a situation where they are raising their interest rates as well.

If I refinance now, how much of a benefit would there really be?

Thinking about it that way, I couldn’t easily make a decision.

Furthermore, while searching online, I also came across this way of thinking.

Instead of making early repayments on the mortgage, invest that money instead.

The idea is that if the profit gained from investments is greater than the mortgage interest rate, you can increase the money you have on hand.

Admittedly, I understand the logic.

I think it is possible that it would be more advantageous in the end to grow my assets through investment rather than using all my available money to pay off the mortgage.

But, to be honest, that is where I got confused again.

While there is a possibility of making a profit with investments, there is also a possibility of incurring losses.

Besides, a mortgage is a debt.

Even if I make monthly payments, there is still a balance remaining.

If interest rates rise, the interest on that balance will also increase.

Thinking about it that way, I also feel like I want to pay it off as soon as possible and reduce my debt.

In the end, I think both refinancing and investing have their own merits.

However, the more information I look at, the less I understand what is right for me.

Someone who is knowledgeable about money might be able to judge by comparing the numbers.

But in my case, I have to think not only about which is more advantageous in terms of calculation, but also about my future life and income.

That is why I decided to think about what I want to do, rather than just choosing the method that is generally said to be profitable.

Even so, I decided to make an early repayment within the year.

After worrying about various things, I decided to make a small early repayment within the year.

Actually, I intended to pay it off after the mortgage tax deduction ended, but after this interest rate hike, I decided to change my mind a little.

If the interest rate is going to rise from January next year, I want to reduce the principal as much as possible before that.

I thought that by doing so, I could at least suppress the burden of interest after the interest rate rises.

Of course, if I make an early repayment, the money I have on hand will decrease by that much.

I want to keep a certain amount of money in case something happens in the future, and my side job has not yet led to a stable income.

Therefore, I cannot use all the money I have on hand for repayment.

I will repay within a reasonable range while securing the money necessary for my future life.

I think that is a realistic choice for me right now.

Besides, I still have a desire to reduce my mortgage debt as much as possible.

I am also doing a little bit of NISA accumulation for investment.

So, I hope to make a profit from investments while making early repayments.

But I don’t know how much profit I will make from investments, and my mortgage payments will continue.

If that’s the case, I want to start by reducing my debt.

And after I finish paying off my mortgage, I hope to increase my assets through investments and other means.

Of course, this is something I decided after much deliberation.

I really don’t know what the right answer is when it comes to mortgages.

Even when I research it myself, the way of thinking changes depending on the conditions, and it’s impossible to accurately predict future interest rates or investment results.

Even so, after researching various information, I want to make a choice that I can be satisfied with right now.

I want to make a choice that I can be satisfied with

When I looked into mortgages, I realized there are many different ways of thinking about them.

There are opinions that say you should make early repayments, while others suggest that while you are receiving mortgage tax deductions, it is better not to pay it off and instead invest the money you have on hand.

Since there are reasons for both, the more I researched, the more I sometimes felt lost about what was right for me.

Honestly, I don’t know if this choice will turn out to be the most profitable one in the end.

Even so, I decided this for myself after considering my current income, lifestyle, and how I plan to work in the future.

A mortgage is something I will be dealing with for a long time to come.

That is precisely why I don’t want to just choose someone else’s ‘correct’ answer, but rather make a choice that suits me at that time.