Mortgage payment difficulty advice

epsilondraconis

Hmmm, an interesting thread this one.

Incogni2, I have to say when reading your posts I detect almost an air of superiority. I'm not sure what it is, but you clearly have financial issues and yet you don't feel the need to address them with the same tenacity / detail as you seem to take when replying to these posts.

It just seems to me that you are focusing your attention on the wrong things. Instead of spending time posting very detailed and well constructed responses, I would have thought a better spend of your time would have been to seek alternative employment until your business picks up again.

Four and a half years ago I was made redundant and we had about £2k in savings (no debts). I was the main wage earner. That experience made me very worried that we wouldn't be able to afford our mortgage - which incidently is about £700 per month. Fairly quickly after redundancy I was fortunate and found fairly well paid employment. Since then we have been saving as much as we can each month and now I have enough saved that I can be out of work for at least 2 years before we use up our savings. My wife earns approx £16k per year. I truely hope your wife doesn't find she is made redundant or find herself unable to work because you would be in a whole heap of trouble.

I guess because we are all different people, we see the same problem quite differently. If I were in your position, I would find it difficult to sleep at night because I would be worried about what might happen. Even though we have all of this money saved, I am still concerned about the future and so don't spend on frivilous items.

Also, from your posts it seems that you are an Arsenal fan and want to keep Setanta so you can watch the games. From what I've seen of them this season, they are unlikely to win any silverware. Therefore I would recommend cancelling Setanta and reducing your Sky package.

I agree that you need to keep broadband; however can't you find a cheaper package anywhere?

Anyway, good luck with everything. For both of your sakes, I hope your wife keeps bringing in the money.

Please don't think that I am having a dig - I guess I'm just describing my reaction to your position and how I would handle it.

Editted: Poor spelling and clarity etc

Blunty

We took out a mortgage for £236,099 with Nationwide in June 2008. The mortgage is over 25 years, fixed for 5 years at 6.23%; 95% LTV (i.e. 5% deposit). The current monthly payment is £1554.56 per month.

This means that we have made 7 payments so far, totalling £11,947.55 (due to a higher first payment than the standard) of which £9458.22 has been interest, leaving a balance of £233,609.67. (So little paid toward the capital!)

Sometime next year, your house could be 'worth' £166,099 - or less. Here's my advice, for what it's worth:

- Buy a bigger TV, and enjoy as many footy matches as you can
- Keep the company going - you never know!
- Point your wife in the direction of this thread (or make sure a work colleague of hers does the same)
- Don't give up the cigarettes - you'll need them to see them through your future
- Let us have the details of your postcode: I'll need it to look for your house when it shows up on Rightmove and Property Bee as follows:
Initial Listing: September 2009 - £199,950
January 2010 - Price reduced OIRO £189,950 for quick sale
March 2010 - Price reduced £179,950
Meanwhile, your wife meets a guy at work who seems, well - just a bit more 'sensible', and maybe less football-focused than her husband. Maybe the same guy will turn up at the auction where Nationwide show no compunction to offer your house for sale at £166,095. If you're lucky, it might realise that price.

The rest, as they say, is history.

If you've read A Christmas Carol, you'll appreciate that, sometimes in your life, you might just get the chance to redeem yourself. You've had lots of sound advice on how to deal with your situation. If your response is 'Bah! Humbug!' then I can promise you, there'll be a big queue at that auction to buy your house.

Good luck.
-

ILW

I am getting more and more convinced that this thread is a wind up from the OP.

RecoveringAlcoholic

Congratulations OP.

You are a featured thread on HPC.

The Party is Over.

The Hangover will last for Years,

Mistymaid

How to tell the difference between a man and a boy:-

A boy does what he wants to do.

A man does what he has to do.

In this equation, forget the money. Simply deduct the want to's from the have to's and you have your answer. Solvency.

opinions4u

It is very simple.

In times of difficulty you need to reduce your outgoings. If you have no cushion (savings) you need to drastically reduce your outgoings.

In the good times, you need to set aside funds for the bad times.

If you don't succeed on these things, you will lose your house.

Trying to get my head round how HM Government should apply these thoughts too.

Is the post a wind up? Possibly. The OP certainly seems to have moved the goalposts a little throughout.

But for anybody who spends more than they earn, it is well worth a read.

Don't bury your head in the sand.

Mistymaid

opinions4u wrote: »

It is very simple.

In times of difficulty you need to reduce your outgoings. If you have no cushion (savings) you need to drastically reduce your outgoings.

In the good times, you need to set aside funds for the bad times.

If you don't succeed on these things, you will lose your house.

Trying to get my head round how HM Government should apply these thoughts too.

Is the post a wind up? Possibly. The OP certainly seems to have moved the goalposts a little throughout.

But for anybody who spends more than they earn, it is well worth a read.

Don't bury your head in the sand.

It doesn't matter what advice you give because the situation is simple.
If the OP went out tomorrow and got a job on 150k a year he would still exceed his earnings - it's his mind-set that's the problem, not his income.

Birdy12

incogni2 wrote: »

Hi,

We took out a mortgage for £236,099 with Nationwide in June 2008. The mortgage is over 25 years, fixed for 5 years at 6.23%; 95% LTV (i.e. 5% deposit). The current monthly payment is £1554.56 per month.

On a bit of a separate note, can I ask the OP is the amount of £1,554.56 based on the mortgage being a full repayment mortgage or are the figures based on part repayment/part interest only? I note that you said that the Nationwide wouldn't allow you to go fully interest only due to the LTV.

getmore4less

Since they did have a couple of flaws as an exercise I thought I would revisit the mortgage calcs to see what the real costs are.

incogni2 wrote: »

Okay, sounds interesting. These are my calculations, which are liable to be flawed...

Current mortgage...
Loan amount: £236,099
Interest rate: 6.3%
Load period: 25 years
Monthly payment: £1564.78
Total payment: £469,433.37 (£233,334.37 of which is interest)

Extended mortgage...
Loan amount: £236,099
Interest rate: 6.3%
Loan period: 35 years
Monthly payment: £1394.11
Total payment: £585,526.30 (of which £349,427.30 is interest)

Clearly this is an over-simplification, assuming the same mortgage and rate for the entire term and taking 25/35 years rather than 24.x/34.x. However, on the face of it, I’ve achieved a payment reduction of £170.67 per month but, overall, I lose £116,092.93 (due to interest). Since this loss is across the whole 35 years, I’m losing around £276.41 per month.

If, however, at the end of the first year my circumstances have improved and I am able to overpay by £500 (the maximum the deal allows) across the remainder of the loan period, nominally 24 and 34 years but the term will be shortened by the overpayment. I’m also assuming that my circumstances have improved enough that I am able to afford to overpay either mortgage by the maximum allowed.

Current mortgage at the end of year 1...
Total payment so far: £18,777.34 (£14,759.54 in interest, £4,017.80 toward the principal)
Balance reduced to: £232,081.20

Extended mortgage at the end of year 1...
Total payment so far: £16,729.32 (£14,819.72 in interest, £1,909.60 toward the principal)
Balance reduced to: £234,189.40

[I then begin the overpayment...]

Current mortgage from start of year 2...
Monthly repayment: £2,064.78
Total payment (from now to end of term): £351,673.81
Total payment (from beginning): £370,451.15
Term (25) reduced by about 9.8 years (so mortgage-free in 15.2 years from start of year 1)

Extended mortgage from start of year 2...
Monthly repayment: £1,894.11
Total repayment (from now to end of term): £378.837.19
Total payment (from beginning): £395,566.51
Term (35) reduced by about 17.3 years (so mortgage-free in 17.7 years from start of year 1)

So, in fact I lose only £25,115.36. However, this loss is again across the entire term which has been reduced to 17.7 years, leaving the monthly loss as approximately £118.25.

I will use www.whatsthecost.co.uk for the calcs which look like what was used above

Starting point for the mortgage(same as above).

Current mortgage...
Loan amount: £236,099
Interest rate: 6.3%
Load period: 25 years
Monthly payment: £1564.78
Total payment: £469,433.37 (£233,334.37 of which is interest)

Extended mortgage...
Loan amount: £236,099
Interest rate: 6.3%
Loan period: 35 years
Monthly payment: £1394.11
Total payment: £585,526.30 (of which £349,427.30 is interest)
FLAW 1.
You can't get something for nothing so we need to take account of the difference in the payments.
That gives a difference of £170.67 since this money does not exist if you continue with the full mortgage payment it will be borrowed so lets borrow it 12months at 0%, 10% and 20%. with no payments so after 12 months you owe
0% £2,048.04
10% £2,145.38
20% £2,248.32

and the mortgages are now (same as above)
Current mortgage at the end of year 1...
Total payment so far: £18,777.34 (£14,759.54 in interest, £4,017.80 toward the principal)
Balance reduced to: £232,081.20

Extended mortgage at the end of year 1...
Total payment so far: £16,729.32 (£14,819.72 in interest, £1,909.60 toward the principal)
Balance reduced to: £234,189.40

Flaw2
you need to put the same amount into both debt from now on to get a fair comparison.

Times are now good so we no longer need to borow the £170 and we have an extra £500pm so thats a payment of £1564.78 + £500 = £2064.78

corrections in red

Extended mortgage from start of year 2...
Monthly repayment: £1,894.11 £2064.78
Total repayment (from now to end of term): £378.837.19 £356841.33
Total payment (from beginning): £395,566.51 £373570.65
Term (35) reduced by about 17.3 19.8 years (so mortgage-free in 17.7 15.2 years from start of year 1)

Actual total time of loan is 12m + 173m = 185m

The non extended loan now has the other debt which needs paying off.
So for this we will use the snowball calculator forcing the non mortgage debt to be paid off first and have a min payment on the mortgage as the normal repayment over the rest of the term £1564.78.
http://www.whatsthecost.com/snowball.aspx

we have 3 senarios, all with the same payment of £2064.78
1. borrow at 0%.
Total paid is £353647.24
Total from begining is £372424.58
time to pay off is 12m + 172m =184m

2. borrow at 10%
Total paid is £353957.58
Total from begining is £372734.92
time to pay off is 12m + 172m =184m

3. borrow at 20%
Total paid is £354286.52
Total from begining is £373063.86
time to pay off is 12m + 172m =184m

So as you can see the differences are relativly small the end of the debt is within a month and the difference in cost is between £500-£1.1k

1 £373570.65 £372424.58 (1146)
2 £373570.65 £372734.92 (836)
3 £373570.65 £373063.86 (507)

Now these are a lot closer to reality BUT do not feel 100% right so I may have got something wrong or the use of the snowball gives slightly different results to the mortgage.

I would expect borrowing at 10% and 20% to cost more overall.

If you ignore flaw 1 and just deal with flaw 2 using the original calc you get

Current mortgage from start of year 2...
Monthly repayment: £2,064.78
Total payment (from now to end of term): £351,673.81
Total payment (from beginning): £370,451.15
Term (25) reduced by about 9.8 years (so mortgage-free in 15.2 years from start of year 1)

Actual total time of loan is 12m + 171m = 183m

Extended mortgage from start of year 2...
Monthly repayment: £1,894.11 £2064.78
Total repayment (from now to end of term): £378.837.19 £356841.33
Total payment (from beginning): £395,566.51 £373570.65
Term (35) reduced by about 17.3 19.8 years (so mortgage-free in 17.7 15.2 years from start of year 1)

Actual total time of loan is 12m + 173m = 185m


So a couple of months and £3119.5 over a 173 months thats £18pm abit different to the £118pm the op calculated

incogni2

Birdy12 wrote: »

On a bit of a separate note, can I ask the OP is the amount of £1,554.56 based on the mortgage being a full repayment mortgage or are the figures based on part repayment/part interest only? I note that you said that the Nationwide wouldn't allow you to go fully interest only due to the LTV.

It is a full repayment mortgage. There are pretty specific figures above in the posts above (somewhere) if of interest.