Diary of a Confused MFW

keld

Hi,

I started overpaying my mortgage a couple of years ago with no real aim other than to be mortgage free sooner rather than later, but now I want to give myself a target date to focus on.

So I've rang the bank and asked some questions and I've just discovered that as my mortgage is both repayment and endowment, that they've just been splitting my overpayment of £250/mth between them. (To tell the truth I had to ring up three times, as I kept thinking of additional information I should already know and I discovered this when I asked for a breakdown of the balance of mortgage.) It might be no bad thing, but I'm not sure, so what does anyone think.

Basically we've got £29,000 left on repayment and £28,000 left on endowment. Our mortgage has nearly 13 left, but the endowment matures in 12. Should I leave the overpayments being split or put it all towards the repayment, which was my original intention.

Either way how do I work out a date to be MF? I could probably up the overpayments a little if I had a target date to sell to my DH.

Welshlassie

What interest rates are the parts on?
Is there expected to be a shortfall in the endowment?
Plug your figures in an overpayment calculator this will give you an idea of how much will be saved and how much time taken off if you continue with the current OP and what will happen if you increase the OP.
The mortgage provider will be able to tell you khow much is left on the mortgage (not sure if the 13 years you mention is the original term or the adjusted term as a result of the OP's

Welcome to the world of MFW

StuartGMC

Good to see you joining us. Looking forward to you enjoying the ride too!

dimbo61

Interest rates ?
You have not given us the rates on your mortgage
If you can get a better rate on a cash ISA you might be better putting
the overpayments into ISA,s
You can save £3600 EACH every tax year and with rates of 6/6.5% at the moment this might give you a better rate of return.

financialbliss

keld wrote: »

I started overpaying my mortgage a couple of years ago with no real aim other than to be mortgage free sooner rather than later, but now I want to give myself a target date to focus on.

Hi Keld,
Thanks for saying "hi" on my thread. I've found that a target date to focus on helps enormously. Do share this when you decide on one!

keld wrote: »

So I've rang the bank and asked some questions...Basically we've got £29,000 left on repayment and £28,000 left on endowment.

You may have to ring them a fourth time Do you know the rates on each part of your mortgage? Is the endowment on target or is there a shortfall? If a shortfall, it may be better paying off that part first.

keld wrote: »

Either way how do I work out a date to be MF? I could probably up the overpayments a little if I had a target date to sell to my DH.

For my mortgage free date, I did an estimated statement of affairs (SOA), basically income and outgoings, threw this into a spreadsheet and then shaved a little of the date it gave me to arrive at 12th December 2012 (12/12/12). Essentially, what can you realistically afford to throw at the mortgage each and every month?

My budgeting was a little off, so I'm currently playing catch up. Suppose I could theoretically change my mortgage free date, but having a bit of a challenge is part of the fun !

Financial Bliss.

keld

Thanks everyone for your replies. I'd do the insert quotes bit if I knew how, but I don't so I won't.:o

The interest rate is 5.69% on both the endowment and repayment parts (5yr fixed which ends next Sept).

The endowment had a 10k shortfall:eek: , but I'd already switched that onto repayment (if that makes sense).

My mortgage was originally due to end 31/08/2020. However when I switched on to my current deal I unintentionally added an extra year so now its do to finish 31/08/2021. I think I've brought it down so it should now end 30/06/2017 - using FB spreadsheet:T .

Loving this idea.

Dithering_Dad

Hi keld, welcome to the MFW board!

I have part of my mortgage on interest only and had an endowment that was supposed :rolleyes: to pay it off in 2021. My endowment also had a shortfall and when I looked into it, I found that it was such a poor investment that I was better off cashing in the endowment and paying it, and my monthly premiums straight onto the mortgage than I was leaving the endowment alone. You may also be in this situation, so it's well worth looking into it. Pop into the mortgages and endowments part of the board for information.

I'm now just £4k away from having the interest only part of my mortgage paid off, and will have cleared it approximately 11 years early.

Good luck on your MFW journey!

keld

Thanks Dithering Dad.

Mine looks poor, but I'm not sure it's worth cashing it in. We are just going to pretend it's a savings fund and try and carry on OP.

We do have a little in a savings account which I was also going to overpay. However at the moment we are both worried for our jobs as we work in construction and the markets as flat as a pancake (I wish the papers would stop talking everything down) so it's probably best to keep it there as a safety net.

Well I'm off to investigate switching our contents insurance and see if I can save a few more pennies.

george_jetson

Congratulations on deciding to become mortgage free

keld wrote: »

Mine looks poor, but I'm not sure it's worth cashing it in. We are just going to pretend it's a savings fund and try and carry on OP.

I would encourage you to reconsider your decision about your endowment, especially given the length of time it has to run. Are you happy to risk throwing good money after bad for 12 years?

FWIW I cashed in my endowment earlier this year. This and an offset mortgage are the two main factors that enabled me to become MF this year.

It may be best to keep it going, but given the significant amount of money that it will cost I would research this first.

Dithering_Dad

keld wrote: »

Mine looks poor, but I'm not sure it's worth cashing it in. We are just going to pretend it's a savings fund and try and carry on OP.

I agree with george, you should reconsider your decision on the endowment. While you may consider it now to just be a savings account rather than a mortgage repayment vehicle, you can't get away from the fact that your money could be much more in a real savings account than in the endowment.

No point in having an endowment returning 4.5% (for example) when you have a mortgage at 5.69% and could get a saving account return at 7%. Remember also that savings accounts and mortgages have fixed returns whereas endowments have their foundations in the stock market and so can go up and down. Over the course of 12 years you could be throwing away an awful lot of money.

I would ask your endowment provider for a valuation and work out what your effective interest rate is to determine whether you're better off seeling or cashing in the endowment and either paying it onto your mortgage or placing it into a bank account.

I certainly haven't looked back since I sold mine and since the stock market has tanked and with recession looming, I feel more confident having a lower mortgage than I would having a dwindling endowment investment.

keld

george_jetson
I would encourage you to reconsider your decision about your endowment, especially given the length of time it has to run. Are you happy to risk throwing good money after bad for 12 years?

Dithering Dad
No point in having an endowment returning 4.5% (for example) when you have a mortgage at 5.69% and could get a saving account return at 7%. Remember also that savings accounts and mortgages have fixed returns whereas endowments have their foundations in the stock market and so can go up and down. Over the course of 12 years you could be throwing away an awful lot of money.

I would ask your endowment provider for a valuation and work out what your effective interest rate is to determine whether you're better off seeling or cashing in the endowment and either paying it onto your mortgage or placing it into a bank account.

Thank you both, I will write and ask for a valuation so that I can make an informed descision. Once I get that how do I work out what the effective interest rate is?:o