My Road To Being Mortgage-Free Starts Now

La-Banque

Well this is it... as the recession commences and the BOE's strategy to assist in calming the economic downward spiral includes drastcally reducing the base rate month by month, I've decided that now's the time to make real inroads towards paying off my £141,000 mortgage.

I'm on a discounted rate mortage with the Alliance & Leicester and although they haven't reduced the SVR rate to coincide with the change in BOE base rate, it has reduced somewhat over the last few months. I now find myself with an interest rate of 3% and I'm managing to overpay by approximately £200 per month, with 20 years to go on the mortgage.

My mortgage comprises of part & part, with £110,000 on interest only and the remainder on repayment. I aim to gradually convert the interest only side to repayment (doing so bit by bit each time I remortgage, every 2 years or so).

It will be nice to hear from anyone else in a similar position and if anyone has any advice, it would be welcome. For example, although I've started overpaying, I don't know whether it will be best to concentrate the overpayments on the repayment side or interest only side. I'm sure there's benefits for either, but your views will be welcome.

The long term aim - pay off my mortgage a.s.a.p. Timescale currently unknown.......

Welshlassie

Welcome to the gang.
We have a £192k IO mortgage and are hoping to get it paid off asap, but looking around the 10-15 years instead of the original 30 years. Diary here.

You best bet would be to pay off the IO element with your OPs as this will save you more interest over the course of the mortgage, every IO OP that you pay will reduce the capital slightly and therefore mean that each standard monthly payment will be paying off more than the interest applied and therefore paying off a little bit more capital (hope that makes sense).

Plug the figures into a mortgage calculator and see the effect.

Good luck with your journery looking forward to following your progress.

setmefree2

Wecome to the MFW board.


http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings

Make sure you read the above. It's Martin's view on overpaying your mortgage. Do you have enough rainy day savings? Do you use your ISA allowance?

If you do decide that overpaying your mortgage is for you - all I can say is GOOD LUCK .

La-Banque

Thanks for your advice, it's really appreciated.

I've done a bit of reading around and have read Martins section on repaying mortgages. We've decided that although we haven't made full use of our cash ISA quotas this year, we're going to concentrate on getting the mortgage down. Anything extra that can be put into the ISA's will be a bonus.

We have savings in cash ISA's at the moment that are being used as "rainy day" savings but we're also having to dip into them a little bit while doing some work around the house. We're also pretty good at tarting the credit cards and make regular payments to get that "loan" down too.

I've just come off the phone to the A&L where I've set up a regular OP of £220. Currently our mortgage is £141,000 with an interest rate of 3%. Following the recent A&L SVR reduction to 3%, the regular payment to A&L is £460 so our OP's should eat into the mortgage nicely....

La-Banque

WL,

Can you please explain why OP on the interest only element of the mortgage is a better option that making OP's in the repayment element.... I understand the rationale that making OP's on the interest only element reduces the capital, therefore paying off a bit more with each overpayment. Is that not also true for the repayment element, or am I missing something obvious?

I though I had this understood yesterday morning but I've confused myself again. Or maybe it's because I've just got in from nightshift and I'm a bit tired..!

Welshlassie

The same principle works on a repayment mortgage, however you save more interest over the course of the mortgage paying off the IO element as without paying any capital off the interest stays the same over the full course of the mortgage, not the case with a repayment. Paying IO element saves you more money over the course of the mortgage if it is split.

HTH