Onwards to freedom!

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  • SuperSecretSquirrel
    SuperSecretSquirrel Posts: 1,045
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    edited 11 October 2015 at 12:24PM
    This month's repayment has dropped the mortgage balance below £39k, that's another block coloured in on the spreadsheet house :) A balance of £38,911.95 puts us £11,307.26 ahead of neutral :D

    I've knocked up a spreadsheet to compare the various mortgage payoff strategies. To keep things simple I've assumed a simple 3% annual return on savings and no tax to pay. Reality is a little messier, some regular savings accounts at 6%, some current accounts at 5%, fixed ISA at 2%, impossible to predict S&S performance, account fees to pay and cashback to earn, planning to start dabbling in P2P soon, tax free savings not coming into effect for a few months yet, etc. It is effectively impossible to model accurately, so the simplified model will do just fine.

    The optimal solution which we are currently following would see us pay net interest of £1,360.10 between now and the end of the mortgage term. If we were to OP the max 10% as a lump sum each January instead, resulting in reduced monthly repayments each year, it's a net cost of £1,914.87. Not a huge amount in it (though of course we'd rather that money be serving us, not the bank). Having discussed with OH, there is no reason to reduce the monthly repayments in a hurry, we may well have the fun of trying to conceive ahead of us for a good few months, then there would be another nine months or so before maternity leave would start. Even then, we would save what we're currently paying for childcare during maternity leave so that would go some way towards offsetting the reduced income. Realistically, cashflow would be fine until the nine months paid maternity leave ended. From that point in time (which should be well over a year and a half from now) we'd either be facing very expensive childcare costs or temporarily become a single income household, for approximately one year, after which LO would start attending school full time and we'd be back to paying childcare for just the one child... Provided we don't end up with twins this time! :eek: We have enough saved to handle a reasonable length of time where we are paying out more than we earn, so even that expensive year shouldn't be impossible to manage without reducing our monthly repayments. All this boils down to - we might as well just stick to the plan. Certainly for the whole of 2015 and 2016, as there is no reason for us to do anything hasty, and perhaps until we've wiped out the mortgage completely.

    It's good to know though that if we do decide to reduce our monthly repayments for whatever reason, it won't really cost us all that much. The balance is low enough and the term short enough that even with quite a wide gap between mortgage interest rate and savings interest rate the cost in pounds can't really amount to a whole lot! :cool:

    Edit: Forgot to mention that I also modelled repayment in full in January 2016, wiping out most of our savings, and paying a 6% ERC. That would cost us £2,239.22 net. We would be nearly £1,000 worse off if we let our impatience get the better of us. Certainly not a good idea to do that!
  • Today's standard mortgage repayment has reduced our outstanding balance down to £38,258.30. With £51,666.85 offset we are £13,408.55 ahead of neutral :) I will now be aiming for over 15k ahead of neutral by the end of the year.

    My S&S ISA recovered a bit recently, hopefully the same can be said for pensions (not checked, I try to look just once every three months). I won't get too carried away though, my investing career to date has netted a "profit" of £234.78. I've not gone to the effort of working it out properly, but I'm guessing it's about on a par with a decent interest paying current account...

    I've decided to hold off on P2P until April, then I can use an IFISA from day one. The main reason for holding off is the simplified tax reporting. I only intend to put a small amount in to start, so I'm not losing out by much, a couple of percent more income than I currently earn on say £300 over a half year period is £3, I'm not going to lose any sleep over that kind of money :) Also, I get the feeling there will be some good signup deals around at that time - it seems IFISAS will be limited to a single provider each year, so holding off might prove to be profitable after all, cash in on the scrabble for new ISA money :)

    Christmas shopping is about one third done. Lots left to do, and a few spendy nights out planned. The 15k ahead of neutral end of year target should allow us to strike a good balance - plenty of fun and generosity without going too far overboard :)

    Our new OP allowance of nearly 4k will be available in about a month and a half's time. Money in the bank ready and waiting to be OP'd. Getting impatient! :rotfl:
  • I found myself in the queue towards mortgage neutrality as a target now too - my new mortgage rate is lower than what I can get from current a/cs and linked regular savings (after tax) so will be saving next year rather than OPing and then after a year hopefully make one off big OP.

    But it is soooo tempting to make OPs just to get the balance down even though financially it doesn't make sense - ended up making my monthly DD slightly higher than necessary..
  • I'm with you there penny - it just seems much more satisfying to see that mortgage balance coming down/daily interest reducing, than it does to see a small amount in savings. Even though I know that technically the savings earns more interest than the OPs save in interest, I know this, the figures are there in black and white, and yet *still* it seems more satisfying to decrease the mortgage balance than increase the savings!

    i think if I was saving £1k plus a month or similar then maybe it would feel different, but when my current savings are a grand total of £600 it feels like a silly little amount :o

    Squirrel, always pleased to read your updates :T:T 15k over neutral by the end of the year ...looks like you'll smash it :D:beer:
  • Thanks for posting pennystretcher and turtlemoose :)

    Sadly we are not able to beat the mortgage rate on much of our savings (a couple of heavily restricted 6% regular savers being the exceptions), but the ERCs mean paying it off in full or remortgaging would actually cost us more than letting it run its course. All we can do now is save as much as possible and OP the allowed 10% annually.

    I do know what you mean though... My student loan is currently charging just 0.9% interest, I would be crazy to pay it off sooner than I have to, but part of me would love to just wipe it out right now!

    You are so close pennystretcher, settling in full in a year or so will be immensely satisfying I'm sure! :D
  • I think if I was saving £1k plus a month or similar then maybe it would feel different, but when my current savings are a grand total of £600 it feels like a silly little amount :o

    :D I'm saving little extra a month (£1k - I wish!!!) - all that I can - adding a wee bit into my existing emergency fund though and making the few pennies I have work as hard as they can.. The difference is maybe a pound or two a month, but every little helps? ;)
  • It's the end of the MFiT3 challenge today! It has certainly gone far better than I could ever have imagined when first starting out back in 2012!

    End balance £37,607.06, and more importantly £14,390.68 ahead of mortgage neutral :D:D:D

    There's one more payday between now and the end of the year, and all the Christmas shopping is done and dusted. We're on course to end the year between 15k and 15.5k ahead of neutral :) All that's left to do now is sit back, relax, and have fun :D

    Merry Christmas to you all! :xmassmile
  • bexster1975
    bexster1975 Posts: 1,576
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    Many congrats SSS!

    I am about 10 months behind you in terms of savings above neutral but I also achieved mortgage neutral about two months ago! I hope you have lots of fun with your income now you are more free to do what you want!

    Fab story.

    Bexster :)
  • Thanks Bexster :)

    I'll soon be trying to come up with a good short term target for the next year or two... What's next for you now that you've achieved mortgage neutrality? Congrats by the way! :beer:
  • bexster1975
    bexster1975 Posts: 1,576
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    Thanks SSS!


    I plan to get an EF of a similar amount to your present one. That seems a lot but I plan to quit the day job and work for myself next year. If that works out I shall invest some more money for retirement ( I have some pension provision but it's too inflexible so investments are the way forward). Will see how things go but travel is part of the longer term plan. Good luck with the new targets. I think I'm going to miss my financial ones once they are gone! Will have to focus on others in the new year.

    Many congrats, yours and many other diaries have been inspirational.

    Bexster :)
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