I will climb my mountain!

Leokiss

Hi all,
Im fairly new here came to this site to find info on tax credits i look like having to pay:mad: But the the good news is its pee'd me off so much its sharpened my focus on my money wasting lifestyle.
Ive never been bad with credit cards and my credit rating is excellent.But im great at wasting money on nothing.
So its time to make this money work for me.
And more bad news im gunna be in a bad way when my fixed rate deal ends in march.I got a £125000ish together deal with NR which was 100% and interest only.£112700 on a secured and £12300 unsecured:( .At 5.75% for 2 year.(actually 1.5 years as it started at my offer of loan date which i didn't see till well into mortgage).
And i'll be honest i still dont understand my statements,Heres the summary of my last one: Opening Balance for secured is 112.697.95 Closing Balance:112.697.90!!!
And 2.150.20 spent on 2.150.15 of total charges!! And a similar picture for unsecured.
Will this balance always remain the same as its interest only?
I want to get onto a repayment mortgage where i can make regular overpayments or offset mortgage, which i haven't looked at yet so dont fully understand how it works.
In anycase my hand my be forced when choosing a mortgage due to my lack of equity in house so may be stuck with NR SVR soon.
Ive done a budget and i can afford to pay an extra £500 a month!!(god ive been so wastful with money).
So i plan to overpay my unsecured loan with the £500 taking my monthly payment to £580.
The idea behind this is to get some equity in house to hopfully help me get another mortgage come march.And from then on continue to overpay with the aim of been mortgage free inside ten years.I've got hell of a long way to go but reading the threads on here has been really inspiring.I will post my progress.
I apolagise if this is long winded i didn't realise i had so much to say!
Any advise and tips is most welcome

evab_2

HI, I don't know anything about interest only mortgages but just wanted to say hi and I'm sure someone will help you soon.

Ev

Snaggles

Hiya, yes, if you are on an interest only mortgage, unless you have made any overpayments during the year, the opening and closing balances will be the same.

Have you checked with them if you can make overpayments? You might be able to, even though it is interest only - any overpayments you make will reduce the capital.

Dithering_Dad

Looking at the description of your mortgage statement, you seem to have a £112,697.90 mortgage which includes £2,150.15 of charges (probably mortgage arrangement fees, etc?)

You're correct that because you're on an interest only mortgage, none of the balance is reducing. You just pay off the interest at a set amount each month - as some months are longer/shorter than others you will find a fluctuation in pennies on the balance.

If you stay on an interest only loan and continue to put your arrangement fees onto the loan, your mortgage balance will increase by the amount of your arrangement fees.

If I were you, I'd open a cash ISA and put your savings into that initially. This will be your emergency savings and wil provide a pot of cash to pay the next arrangement fees ratehr than placing them on your mortgage.

Once you have filled the £3600 maximum in the ISA, then start overpaying onto the secured loan to increase your equity. Unsecured loans do not have an impact on your Loan to Value mortgage calculation because they're not secured/attached to your mortgage.

Hope this helps!

Milly1974

Hi there and Welcome!

Dithering_Dad wrote: »

Looking at the description of your mortgage statement, you seem to have a £112,697.90 mortgage which includes £2,150.15 of charges (probably mortgage arrangement fees, etc?)

Don't want to disagree DD, but I have a NR mortgage as well. The charges on the statement are the interest for the period of the statement. I should imagine that, like me, the statement is for a 4 month period. If arrangement fees etc were added to the mortgage, they are hidden within the mortgage balance.

Do not know what sort of mortgage you have Leokiss, but sounds similar to the 'together' mortgage I have. I am on a repayment basis, and can make overpayments. NR seem to have a fairly flexible policy about OP, as they will allow you to 'borrow back' if necessary once you have overpaid £500 or more.

Good luck with the mountain!

EssexHebridean

Ours is a NR Together too - a repayment version though. NR told us that at the moment we can OP as much as we want - well I guess they're not really in a position to turn down any money anyone wants to offer them, are they!

Welcome to the board - sounds like you already have your head screwed on right with getting some OP's sorted out, so very best of luck with it.

StuartGMC

Leokiss
Welcome to the board. Good to hear you have done your budget, hope you've got all your annual recurring costs plus allowance for variable spend (eg car service etc), plus some allowance to enjoy a drink or two each month (you need to live as well as pay off the mortgage). As DD notes, do also include in this budget the amount you need to save towards the fees for the next re-mortgage and your "emergency fund" (3-6x monthly income is typical for the latter).

Regarding offset, do remember that the interest rate will often be more for offset than other products, but, provided you have capital to offset with then it is definitely worth looking into in your comparison of offers available as the "effective interest" is what you need to look at. Some years ago the interest rates were such that you needed some 20% to offset before it became viable; more recently this has improved as the interest rate differential has improved. The key thing you need to then do is your calculation on the interest lost on savings and current a/c offsetting (remember to deduct tax) plus the interest you will pay on the remaining capital to work out effective interest rate (I'll PM you).

Do look carefully at the market before opting for offset, but the advantage is that you can keep your existing mortgage term, just plan to overpay and offset and you can repay early.

Not all offsets are the same; some will only offset against savings, others include your current account, whilst others still can offset against Cash ISAs....

If you can manage your credit cards to pay in full each month, then put all your spend (inc the groceries etc) on the card so your Current a/c remains at maximum until say 5 days before credit card is due to be paid, thus maximising the offset.

A question to other MSEs is the limitation on offset; I'm with NatWest and can offset 100%, but I think some products may limit to a maximum consideration of 85% offset?

You're on the right track, do let us know how things progress and pop by regularly to the other threads here.

Leokiss

Cheers for all replys,i'll try n answer sum Q's now:Milly1974 you were right about my mortgage statement and yes i do have a together mortgage.
StuartGMC, after looking at offset mortgages i think i'll have to knock that one on the head for now i dont have the capital to make it viable or even get one but thanks for the help.
DD mentioned paying on the secured loan but ive checked my NR mortgage conditions and if i go to another lender or other NR product my unsecured loan will jump to 8% above SVR makin it about 16%!!So im gunna Have to pay that off first i think.My understanding is then that i'll own £10,000 of my house(my product fees went on this loan making it 12,700) plus what ive paid in interest on my mortgage giving me sum hope of eventually getting on repayment mortgage.
How do they take interest only paid to what equity you have in house? not sure i quite understand that yet.
Oh and back to my unsecured loan that jumps to SVR in march too.
Another option i think i have is to get a better loan somewhere else to pay off the unsecured remaining loan as long as i could afford the repayments as it would have to be over a short time.
I think im going to make that my first step in my mountain climb clear the unsecured loan it gives me a target.
Again im open to any advise im not even a year into my first year of having a mortgage so im still very green in the whole mortgage world.
Just getting excited about making my first overpayment,i feel so nerdy! Ha!