I too am now an MFW!

md_14uk · 15 August 2006 at 4:45PM

Having been inspired by thefunkygibbons acheivement of 5 years and 8 months ( http://forums.moneysavingexpert.com/showthread.html?t=239210) I am now officially classing myself as a MFW!

Here are the details...

We took out the mortgage in Feb 2004 for £72,500 over 25 years. We then Remortgaged in Feb of this year and due to a change in circumstances managed to get a better rate keeping our payments the same and reducing the term from 23 years to 20.

We are now overpaying £103 per month (rounded the payments up to £550)and estimated end date is 2020!!!!!!

My first target is to reduce this to 2015 through a combination of regular overpayments and one offs where possible...

The first part of the plan involves moving house, porting the mortgage and using the income from renting out our old house to increase our monthly payment. Part two is a loan which has a final payment due in November, this cash will then be added to my monthly repayments...

I'll keep you all posted through this thread!!!

Get_Real_2 · 20 August 2006 at 9:52AM

Hi md

Nice statement and sig details, I'll look in on your thread from time to time to see how you're doing, and offer my support and eventually congratulations, all being well.

funky really has been an inspiration to me too.

We bought in 2001 originally on a 20 year term which had a 4 year discount period. When that discount ended last September we changed to a fixed 5.09 % over 10 years, and next month it's 9 years to go. I'm saving like mad and hoping to pay in some lump sums to reduce the capital whenever possible. It can be tricky, as we need to have access to some emergency funds, like most households, and it's always tempting for me to raid these rainy day savings beyond the threshold I've set, just to chase down some more mortgage interest. I'm chasing down the last years of my 40's myself, and want to be mortgage free in my 50's.

Your two part plan looks good. The loan completion will be a real boost to the finances, almost like a windfall. The first part about moving home and incorporating rental income looks promising too. Needs careful preparation, but you may already be familiar with the landlords reponsibilities and obligations and such so I won't elaborate, just say that I hope all goes well.

Look forward to hearing how things progress.

md_14uk · 19 February 2007 at 7:50PM

The MFW plan didn't quite work how I had planned!

Part 1a) went well, we moved house and remortgae the old one, a tenant moved in and were clearing £100 per month + any capital gains (fingers crossed!)

Part 1b) wasn't so good instead of moving into the £80k house we had ear marked as our next 'home' the dreamhouse came on the market and we couldn't resist.

Oh and we bought the £80k house too! So the picture now looks like this

House Number 1: Mortgage £151k 25yrs Part Fixed 4.29% and part tracker currently 5.74% (i think, it's gone up twice since we moved in!*) Currently £830pm.

House Number 2: Mortgage £85k 30 yr term interest only, £400pm rental £525pm Fixed for two years at 5.6%

House Number 3: Mortgage £68k 30 yr term interest only; £300pm rental £425. Fixed For two years at 4.24%

So Plan B as I'm calling it will kick off in the summer. At the moment the excess from the rental properties is going towards a "what if we don't have a tenant fund" once this has reached two months rent then it's all going towards the mortgage on house number two as this is the one with the highest rate... Unless Mervyn King and his mates push up the rates on my tracker anymore than they already have!!!

We're currently clearing off some post moving post christmas debt and once this is done i'll be getting back to the second part of the plan making regular overpayments. Although these will be much less than the £103pm we we're paying last summer.

It's going to be a hard slog but I'm 27 now and want to try to get rid of the mortgage on my own house before the kids come, who knows when that will be but hopefully not in the next 5-7 yrs!!!!

Oh forgot to mention, the loan got paid off and is now going towards my higher monthly mortgage payment.

Way down the line I have a student loan currently £100 pm that should end around this time next year if I've calculated the interest correctly (lets face it HR&C struggle so I can be excused!), that'll be overpaid!

* I budgeted for 3 rate rises so hoping the bank committee will relax a little after the next one!

MUSTBEFUNNY_2 · 20 February 2007 at 12:29AM

Good Luck:money:

Sloppy_Saver · 22 February 2007 at 11:47PM

Jeeze, in the space of 6 months you've gone from: a £72,500 mortgage, £550 repayment including an overpay of £103 per month on a boring but sound financial strategy.

to: £304,000 worth of mortgages, £1530 repayment including an overpay of £250 comprised of rental in a mad strategy of buy at the height of the market, on short term fixed rate mortgages over 30 years with no savings and student loan debts to the tune of £100 per month and "post xmas debts" to the tune of who knows.

Well, you're a gambler that's for sure, but I think the odds are stacked against you on this one. I suspect one of the following scenarios will occur:

1. The expected housing market downturn. The FSA are advising banks and building societies to factor in a downward adjustment of upto 30% on all new mortgages. If houses go down half that figure (15%), you will lose £45,600 - actually a bit more. You didnt put down how much the houses cost, so I calculated the 15% on the mortgage cost instead. I suspect though that you do not have much equity in the houses.

2. Loss of tenants. People who got into the BTL market at the start of the boom have plenty of equity in their houses and lower mortage to rent percentages. This means that if the market becomes flooded, they can compete for tenants by lowering the rent. You can't because your rent to mortgage payment ratio is already bare bones. If your houses are empty you will be picking up the tab.

3. You go under after 2 years. Your fixed rates end in just two years time. Your rates go up but your rents stay the same. You have to have 100% tenancy to cover your mortgage payments, building insurance, gas & electricity checks, letting advertising costs and most of all building maintenance costs.

4. By some amazing feat, you maintain 100% tenancy, housing prices keep going up forever and interest rates never increase. In 30 years time you are rich and make me look like such a fool.

md_14uk · 23 February 2007 at 12:47PM

I've just spent about 10 minutes out of my day writing a constructive reply to this but I got bored half way through.

Thanks for you constructive comments obviously there are risks involved in any investment strategy and I made sure I was fully aware of the potential downturn risks, interest rate increases, both short and long term. The risk of voids and the refinancing risk at the end of the two year period.

I'll let you know how it goes, who knows maybe my story will be a deterrent to all others when it all goes worng.

I will leave with a quote: from sloppysaver http://forums.moneysavingexpert.com/showthread.html?t=376779&page=2 post number 32!

...how about this idea. If instead of piling all your money into your house, you instead acquired two buy to let properties (as a retirement investment). You would have tripled your money when the house prices rose, have rental income from the two places to keep you in a nice retirement and if you lose your job, you'd have the income from the rent to keep you ticking over until you find another.

Kaz2904 · 24 February 2007 at 11:48PM

I think very few of sloppy savers comments are constructive. If at the end of the day it does all go mamaries skywards then you can just sell the two BTL properties using the equity on the other property to cushion the blow. You are still young enough to get over any debt and at least you can say you tried. I think it is a fair investment strategy and you bought last year before the rates went up. Property has tended in most areas to continue to make money although not at the same rate as it was. You've obviously thought through the risks and your money is no more or less at risk than that other investment place of shares that sloppy saver is such an advocate of. I don't expect that reply makes any sense but I'm glad that SS has been gagged for a short while.

md_14uk · 22 May 2007 at 4:26PM

Just a quick update for anyone out there that is interested....

We have now sorted out the "what if we don't have a tenant fund!" so as from 1st June 07 we will be overpaying the mortgage on our residetial property as this is the one on the highest rate (5.79%) by approx £90 pm!!! :j :j. With the rest of the letting income being split between a maintenance fund and an increased monthly income.

Per the channel 4 mortgage calculator this will save somewhere in the region of £34,000 over the life of the mortgage if we keep these payments going until the end!!!! :j :j

It also saves 6 years off the term of the mortgage!! :j :j

David_B_2 · 22 May 2007 at 4:52PM

Yes we are interested.

Well done.

PS: I'd take sloppy savers comments with a pinch of salt and you'll get use to him popping up here and there, I'll leave it at that.

Eyesparky · 25 May 2007 at 7:41PM

Any excess should go to your primary residence as this is the one you would least want to lose if things went pear shaped. Also you are allowed the interest as a cost on your investment properties but not on your primary.

auntie_brenda · 26 May 2007 at 8:13AM

Sloppy_Saver wrote: »

2. Loss of tenants. People who got into the BTL market at the start of the boom have plenty of equity in their houses and lower mortage to rent percentages. This means that if the market becomes flooded, they can compete for tenants by lowering the rent. You can't because your rent to mortgage payment ratio is already bare bones. If your houses are empty you will be picking up the tab.

SS is a troll who really shoudl be ignored... however...... what he has totally missed is the price you paid for the houses.....MD I'm guessing you are renting to 'council house' tenants. In which case, even if there is a recession, you are likely to be less affected by voids than those trying to let luxury 2 bed penthouses. There will always be a need for social housing, and HB will be paid if they are unemployed. And as far as I have seen they make just as good/bad tenants as any other random assortment of people.

As long as you are not relying on 10% capital growth every week

I think your strategy is a good one. Wish I'd been as sensible as you at your age!!!!

MD, can I ask where in the country your houses are?

I too am now an MFW!

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