How I Managed to Pay Down My Mortgage 20 Years Early

Wai Ken Wong, our Country Manager of StashAway Malaysia, shares his journey paying down his mortgage over 10 years – and what he’s doing with his cash now that he isn’t saddled with debt. 

Ten years ago, I walked into a bank branch with my father to secure a mortgage for a property I had just bought. I needed my father there because the bank wanted a co-guarantor just in case I defaulted, and he had an existing lending relationship with the bank and significantly more income.

The loan officer walked me through the basics: the loan amount, the tenure (in this case 30 years), the interest rate, and the monthly repayment. In my mind, 30 years was an eternity, and the monthly instalment was a daunting 25% of my monthly salary. In what I consider the moment I entered financial adulthood, I signed the documents (there are a lot of documents) and henceforth had a mortgage.

You got this, right?

The first few months were difficult. I had to adjust to a quarter of my modest salary going to these monthly instalments by being disciplined. Less eating out, less lifestyle expenditure, and buying champagne at Zouk was out of the question.

Not to mention, moving into my new condo came with the need to decorate, which meant digging deeper into my already-depleted savings. Incidentally at that time, at work we were learning about leveraged buyouts, where acquired companies were saddled with debt to enhance returns - after which sacrifices had to be made at the company level to cut costs in order to meet the debt obligations. Talk about debt being the great disciplinarian.

At times I felt like Sisyphus carrying the boulder up the hill, only to repeat the task repeatedly without purpose. The outstanding amount continued to be immensely large as I chipped away at it. Even when I made early repayments with a large portion of my yearly bonus, it felt like throwing money into a void.

Grit and grin

Over time, the monthly instalments became more manageable as my salary grew. Interest rates also fell in 2019, which meant the monthly repayments were revised downwards.

Every year, I made a point to put half of my bonus into early repayment, which helped put a dent into the outstanding amount. Like Andy Dufresne in Shawshank Redemption I was scattering rocks and sand in the prison yard, while digging a hole to freedom. In those moments I didn't know when I would be free, but I knew one day I would be.

Friends would ask me why I would not rather invest my bonus instead. And while there is no right or wrong answer, I liked the certainty of paying down the mortgage, because it was a sure thing. Paying down a mortgage of 4% early is similar to making 4% on an investment. And in my mind, having no debt would allow me to take risks in the future knowing that at the very least I can eat Maggi Mee in the house I own.

Using a mortgage calculator, taking a 30-year loan of RM500,000 at 4% interest would result in paying a cumulative interest of RM359,000, or a whopping 70% of the loan amount.

If you were able to make early repayments of RM10,000 once every year until the mortgage is paid off, you would only pay RM209,000 in cumulative interest, or 42% of the loan. Not to mention, you would pay off the mortgage in 18 years as opposed to the full 30 years.

Get busy living

On the fateful day I had enough to fully pay off the outstanding balance, I walked into the same branch I had visited ten years ago. I spoke to a loan officer who asked me if I was eyeing any other properties with a slight smile. While I don’t intend to live debt free for the rest of my life, I told him I was in no rush to jump back onto that debt treadmill.

After finishing the paperwork to end this Faustian bargain, I left the bank with very little ceremony for what I would consider a significant financial achievement.

Now that I no longer have this millstone around my neck, there is a real sense of freedom and achievement. I look forward to the extra bit of obligation-free income each month, or not having to halve my bonus to do the responsible thing.

While it’s worth celebrating the milestone for a moment, the last thing you should do is to inflate your lifestyle. I intend to use the additional funds for investing, and while I work out which long term goal to best allocate it to, I'll stash the extra funds away in StashAway Simple™ to earn a decent risk-free rate.

Now that I’m here, I'm reminded once again that financial products are there to serve us and help us reach our goals. And while I resented having to make those monthly instalments, it allowed me to purchase and build a life in a home.

A home that I now own in entirety.