A little helping hand to financial freedom...

slowlow

Dear all,

I have been reading your threads for many months and feel very humbled by your financial acumen.

I find the all British financial market very complicated and the fail to really understand the system of interest rates, SVRs, APRs...

My aim is to get rid of my mortgage(one day) and would appreciate some help in getting there. Your advice would be much appreciated.

We have a mortgage of £32,000.
Our mortgage is a fixed offset deal of 5.49% until 2011.
We get a balance (ie we get paid) of £2300 every month.
We have a balance of around £1000 savings.
We are paying interests and repayments every months (about £225). We could probably pay another £50 a month at the moment as I am studying.
We would like to get rid of our mortgage by 2018.

Should I change mortgage? Is it worth switching lenders (would they lend us money for small mortages?). How much should I increase our payments?

Your wisdom would be appreciated.
All the best.
Slowlow.

SmileyG_2

slowlow wrote: »

Dear all,

I have been reading your threads for many months and feel very humbled by your financial acumen.

I find the all British financial market very complicated and the fail to really understand the system of interest rates, SVRs, APRs...

My aim is to get rid of my mortgage(one day) and would appreciate some help in getting there. Your advice would be much appreciated.

We have a mortgage of £32,000.
Our mortgage is a fixed offset deal of 5.49% until 2011.
We get a balance (ie we get paid) of £2300 every month.
We have a balance of around £1000 savings.
We are paying interests and repayments every months (about £225). We could probably pay another £50 a month at the moment as I am studying.
We would like to get rid of our mortgage by 2018.

Should I change mortgage? Is it worth switching lenders (would they lend us money for small mortages?). How much should I increase our payments?

Your wisdom would be appreciated.
All the best.
Slowlow.

Hiya Slowlow

Your priority is to build up a savings pot of 3 times your monthly income. Then you can consider diverting your savings each month to overpaying the mortgage.

SmileyG

Floxxie

The OP has an offset mortgage so any money saved will have an effect on the mortgage, whether it is in a separate savings pot or in the current account.

I personally do not have emergency savings as I have a reserve pot of almost £50k which is part of the offset and includes all overpayments I have made which I can borrow back.

slowlow, if you have a look at one of the mortgage calculators (I use https://www.jeacle.ie) and input the figures you have, you can see the effect of your £1k savings and overpayments.

You will need to speak to a mortgage adviser on your situation to find out if it is worth you changing mortgage.

Floxxie

StuartGMC

Slowlow
An offset gives you the same "benefit" in terms of interest charged whether you overpay to reduce capital or you have the savings offsetting. This will mean more of your monthly payment will then pay down capital. Obviously overpaying, once this is viable, will then bring forward the date when you'll be mortgage-free.

We offset and if you read my thread you may find some tips to help. I assume from your post that your current account and savings offset the mortgage. If you are good in managing your money then one way to increase the offset each month is to buy everything on the credit card so the money stays offsetting until say 5 working days before the credit card bill has to be paid in full. This could increase your offset by several hundred pounds per month.

I can also send you a household budgeting spreadsheet if that would help you?

You asked about changing mortgage; firstly check if you would have to pay a fee to leave the offset early, but you may not find this benefits you a lot. Many lenders have a lower limit of £30k but in offsets that's fine as you then immediately "pay back" extra.

Secondly as Floxxie recommends, build up your savings to give a cushion of about £5or6k. This will reduce interest you are charged as if you overpay to the same amount, helping you during your studies. Then you can think about overpaying which will help to reduce the time until you are mortgage-free.

In summary, save up now then later think about the overpayment, if you stay on the present mortgage.

Good luck and do post your questions here, it's a great group of people who want to help where they can.