When Jinesh Vohra, 42, bought his first home with his wife for £440,000 in Watford in 2012, he agreed to repay his mortgage over 25 years.
But after running the numbers, he soon realised that for every £1 he has borrowed on the £330,000 mortgage, he would be paying 50p in interest over the full term.
This alarming discovery was enough to propel him on an intense savings journey that would see him pay off his mortgage by the time he was 32, just four years later.
Inspired by his own struggles trying to overpay on his mortgage and in a bid to help others make the same savings, Jinesh created a mortgage overpayment app, called Sprive, in 2021.
Tonight, the entrepreneur is appearing on Dragons Den, in the hopes of securing funding to take his business to the next level.
Jinesh Vohra is appearing on Dragons Den tonight. He’s pitching for funding to take his mortgage overpayment app Sprive to the next level
Jinesh and his wife succeeded in clearing the entire mortgage within just four years, when he was aged 32
Speaking to This is Money, he says: ‘Early on, my wife and I made the decision to make mortgage overpayments. In the first year, we started making big overpayments from our savings.’
Homeowners can overpay their mortgage by making an extra payment – on top of their minimum monthly one – which can shorten the length of their loan term and reduce the total amount of interest they will pay over the years.
Alternatively, by overpaying you can reduce subsequent monthly payments but this won’t reduce your mortgage term.
Most fixed-rate mortgage deals allow borrowers to make overpayments amounting to up to 10 per cent of the total outstanding amount each year.
But any more than this and you may be slapped with an early repayment charge, which would cancel out the benefits of overpaying.
Neither Jinesh nor his wife Breena wanted a mortgage hanging over them until 2037, but this penalty was an obstacle, he says. It means they would have to wait to remortgage at the end of their fixed term in order to use their savings to pay down a large chunk of the mortgage.
He says: ‘I was worried about overpaying by more than 10 per cent. I had an excel spreadsheet to try and track it all.’
When Jinesh and his wife remortgaged after their initial two-year fixed rate ended, they were able to pay a considerable amount. The pair switched to a variable mortgage which meant they risked facing higher interest rates but were able to make unlimited overpayments.
Jinesh says he found the process of overpaying confusing. He says every time he made an overpayment he would spend hours calculating how much he was reducing his total balance by and how much he was saving himself in interest costs.
‘We just wanted to pay off our mortgage sooner than what was allowed,’ he says. ‘I had to call my bank to say I wanted my monthly payments to stay the same so that I was in effect paying down the debt faster.
‘When we came to remortgage that was also painful. We had to provide a hundred bits of information. It took eight weeks to get an offer and they made a number of mistakes along the way.’
Jinesh and his wife succeeded in clearing the entire mortgage within just four years. He was 32 years old at the time.
While this was helped by the fact that Jinesh had a well-paid job at Goldman Sachs while his wife was also earning a good salary as an accoutant, he says it did require sacrifice and discipline.
‘We cut back on everything,’ he says. ‘No takeaways, no holidays, we didn’t do anything else with our money other than pay for essentials and overpay the mortgage.
‘We paid off the mortgage in four years and saved £70,000 in interest doing that.
‘We didn’t pay into pensions or investments. I believe if you are debt free you can take bigger risks, which means bigger returns.
‘In my case it allowed me to leave my corporate job and start my own thing. Being mortgage free gave me the financial freedom and inspiration to start up Sprive.’
By not paying into their pension it meant forgoing their workplace pensions and the accompanying employer contributions as well as all the tax relief they would have received by doing so.
Jinesh says he is concerned by an increasing tendency for homebuyers and owners to borrow later into life, with 40-year mortgages becoming more common.
This could end up with millions of people still paying a mortgage into retirement, according to Sprive, with some lenders now allowing mortgages to run on until the age of 85.
By lengthening the term of a mortgage, a borrower spreads their repayments over a longer period of time and therefore reduces the monthly costs. This means that many hopeful home buyers can get on the property ladder and afford homes that would once have been unaffordable.
However, it also means interest racks up for longer and the total paid to the bank will increase – potentially by tens or even hundreds of thousands.
For example, someone with a £200,000 mortgage paying 4 per cent interest over 20 years would face monthly repayments of £1,212, paying a total of £290,769 over the lifespan of the mortgage.
Conversely, someone with a £200,000 mortgage paying the same interest rate over a 40-year term would face monthly repayments of £835.
However, they would pay £400,981 over the lifespan of the mortgage – £110,212 more than on a 20-year term.
Jinesh says: ‘Our mission is for people to take control of their mortgages. I want to help more people avoid having a mortgage for the rest of their lives and I want to create a community that prioritises getting debt free earlier.’
Paying debt for longer: people signing up to mortgages with 40 year terms will end up paying much more interest that they would if paying over a shorter time period
What is Sprive?
Sprive is a free app that Jinesh created in 2021. Its aim is to make it easier for people to make regular overpayments on their mortgage, potentially saving them thousands in interest and making them mortgage-free faster.
The app is currently used by customers across 14 different lenders – but that number is set to increase, according to its founder.
Jinesh says in the last month alone, 100,000 homeowners have used the app to make overpayments. To date, Sprive users have made £7.84million in lender overpayments.
It helps people to overpay predominantly by offering users cashback on their shopping that goes directly towards overpaying their mortgage.
The way it works is that users buy themselves shopping vouchers on the Sprive app each month from various retailers such as Tesco, Morrisons and IKEA.
These can be redeemed either online or at the till by scanning a QR code or entering the code. Customers receive a cash reward for buying the voucher that gets paid directly into the Sprive account, which can be used to pay off a mortgage.
This means that for every voucher purchase, a certain percentage goes towards their mortgage in real time.
Jinesh says: ‘The main reason to use the app is to help you shop away your mortgage. The app essentially turns people’s spending into savings. You shop through the app and get cashback when you do so with loads of brands.
‘Take a supermarket shop for example. You spend £100 at checkout on your weekly shop, you scan a barcode which immediately goes towards your mortgage.
‘On a £100 Tesco shop you might get £2 to £4 in cashback. That not only reduces your mortgage balance but also saves you paying interest so it adds up to being a much bigger saving over the lifespan of the mortgage.’
The app can also round up any payments you make to ensure that your digital spare change is going towards your mortgage. For example, if you spend £2.59 on a coffee, 41 pence would go towards the mortgage.
Is it safe to use?
The app calculates the overpayments a user can afford each month based on their spending habits and allows them to make overpayments with one tap. This is an optional feature.
To do this, customers will need to link their bank account to the app and agree to share their spending data, as well as details of their mortgage account.
Jinesh says the app does not store or have access to any bank login details and uses sophisticated ‘cryptography’ security to store any sensitive data.
If their mortgage lender has a minimum threshold for overpayments, Sprive can put funds into a holding account until this figure is reached and the payment can be made.
Any money saved on the app is placed into a secure account with an authorised bank or covered through an insurance policy or similar guarantee. The company is regulated by the Financial Conduct Authority, however, any money is not covered by the Financial Services Compensation Scheme (FSCS).
The app also shows a running total of the percentage of your home that you own, your total debt and the timescale in which you can hope to pay it off based on your earnings and spending.
As users keep overpaying, they will see these figures reduce over time – meaning they could be mortgage-free more quickly.
Aside from chipping away at mortgages via cashback and other functions, Sprive can also help with remortgages, allowing customers to book a call with a mortgage broker through the app. It says customers will not be charged broker fees.
The app makes its money from commission from banks and building societies when a user remortgages through the platform. It also makes money from rewards generated when you shop.
Is it a useful tool?
With many households currently on mortgage rates of 4 per cent or higher, Sprive could be a great way to get into the habit of overpaying without it feeling like hard work.
Most fixed-rate mortgage deals allow borrowers to make overpayments amounting to 10 per cent of the total outstanding amount each year without incurring early repayment charges. Some are more flexible and others may be more restrictive.
Someone wanting to pay more than their lender allows in a given year without incurring a charge will have to wait until their existing mortgage is up for renewal.
Early repayment charges typically range between 1 and 5 per cent of the total mortgage amount.
Jinesh says that Sprive makes the process of overpaying ‘easier and less stressful’.
‘Unlike lenders, we can monitor people’s overpayments and stop people going over the limit by tracking their payments and warning them if they are getting close to it.
‘I am hoping Dragons Den will boost the profile of our business. Hopefully with the backing of Dragons it will give us some extra gravitas and get us closer to fulfilling my dream of helping millions of homeowners become mortgage free.’