The Mortgage Free in Three - Take 2 challenge (MFiT-T2)

Jock_Tight

Hi, I'd like to join too as this challenge fits in with my own plan to be hopefully mortage free in 3 years!

Background:

We bought our house back in 2003 and took out a 2 year fixed rate mortgage so we knew where we were financially each month. After the first two years we hunted around for another 2 year fixed rate deal. Our monthly payments were reasonable however after 4 years we had hardly paid back much capital as most was going on interest! At this point we would be mortgage free in 2028 :mad:

Months before the second fixed rate deal came to an end we started hunting around for another mortgage. It was now the end of 2007 and we had an outstanding mortgage of £74,000.

We had considerable savings so decided to look into an offset mortgage to reduce the term. We put £10,000 into the mortgage and took out an RBS offset mortgage for £64,000. With our savings and a lump sum from our parents we offset the complete amount so now we were paying 0% interest; every penny we paid in was reducing the capital. Estimated mortgage completion was now 2017; we had saved 11 years off the mortgage term.

I created a spreadsheet and with monthly payments (full capital) we could see exactly when we would complete and what difference further overpayments (no limit with RBS) would make.

Each time we make a monthly mortgage payment we take the same value out the offset savings account and stick in a high interest account / max our cash ISA allowance each year.

We switched life policy saving us £25 a month so this was put into the mortgage every month. We also have a 'spare change' pot which gets put into the mortgage. We then analysed our outgoings and decided to overpay even more. With the additional monthly overpayments we were now on target to complete by mid 2013, saving a further 4 years.

Major aim for me was now to be mortgage free before I was 40 (Jan 2013) so I set about looking at the spreadsheet again and seeing how we could complete by Dec 2012. We now increase the monthly overpayments in line with our company salary increases.

So plan is to clear our remaining 40k mortgage balance by Dec 2012 (3 years to go!)

Regards,
Jock_Tight

:beer:

golfiematt

hi i would like to join.
i currently have 45k left to pay off and by 12/12/12 im hoping to be at around 15-20k left

Scad

Bad news guys. I've been made redundant and had to take a lower paid job.

I'll need to review my target to £118,000!

VickyA_2

Hi folks! I'm challenger number 161! :beer:

DH and I are FTBs and we are hoping to complete (already exchanged) on 4th December and then we can start overpaying :j. Sadly, I've still got a new car to save up for, but money gets put aside for that every month anyway.

Just started up a MFW diary here.

financialbliss

Hi,

New challengers today. I'll PM you all shortly:
164 - milliemonster
165 - Jock_Tight
166 - golfiematt (and now linked to your mortgage diary)

132 - Scad. I've amended your goal. Sorry to head about loss of job.
161 - VickyA. I've linked to your mortgage diary.

FB.

SparkleBlack

weezl74 wrote: »

Is your house you're paying off now your 'forever house' or will you an DH be looking to upsize when you start your family?

Hi Weezl,

We're not in our forever house yet. We've got a 2 bed flat so will definitely be looking to upsize in the future. There's room for one kid in the flat although there's no lift and we're several floors up, so I'm not sure how achievable that would be. I've spoken to a couple of friends with kids and one said, "oh that would be no problem" and the other said I was mad to even consider it!

Once we get back from the uber-holiday we'll be trying to save as much as possible so that we can upsize when we want/need to.

Good luck with your goals

SB

weezl74

Jock_Tight wrote: »

So plan is to clear our remaining 40k mortgage balance by Dec 2012 (3 years to go!)
:beer:

welcome to the challenge Jock! (and vickyA and SB and other newbies like me )

I'm intrigued about the reasoning for keeping the mortgage rather than discharging the lot with the savings you've offset. I guess you're getting a really great savings rate as well on that cash?

I'm learning a lot about the MFW journey so don't know much about offsets :D

Weezl

black_taxi_2

i will hav to change my goal---builder i hired to upgrade my flat was in financial trouble--unknown to me until today.another source phoned me this morning.has only done 65%-of job----doesnt answer phone/or emails/been 3 weeks===im fooked---i could be 5k out of pocket having to hire new tradesmen.

Jock_Tight

weezl74 wrote: »

welcome to the challenge Jock! (and vickyA and SB and other newbies like me )

Thanks!

I'm intrigued about the reasoning for keeping the mortgage rather than discharging the lot with the savings you've offset. I guess you're getting a really great savings rate as well on that cash?

I'm learning a lot about the MFW journey so don't know much about offsets :D

Weezl

With an offset mortgage you sacrifice the savings offset against the mortgage, thus our RBS savings account does not make any interest.

We have the full mortgage amount offset (~£40k) so we dont pay any interest on the mortgage. I'd need to check but I think the RBS mortgage interest is currently sitting around ~3.9% which is far higher than the savings rates currently available.

Also a large chunk of the money in the RBS savings account is a donation from a parent (which they get back) so we cant just pay the mortgage all off. However by the end of next year 'our' money will have been completely removed from the offset savings account (its being removed each month as we make a mortgage payment) and will be elsewhere making interest. The remaining 'gift' money offset against the mortgage means our mortgage is essentially an interest free loan :cool:

Jock_Tight

golfiematt

thanks for registering me. good luck all on here!
ps. how do i make the mfit-t2, a link in blue on my signature