Here we go - overpayment to the max :D

xlt_hunter

I posted this in the Anything Else MoneySaving board but I gather that its in the wrong place. Have regig some of the wording below:

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Right, taking the concept out of the "PYMOI2Y" (Pay your mortgage off in 2 years as shown on BBC2) I going to try something along these lines but for the term of 10 years running side by side with the 10 year fixed with the woolwich at 4.67%. At the moment, to pay off in 2 years sounds very dangerous to me as I can not commit to 2 years to a hard finical struggle, 10 years sounds better in my books. I know that my monthly repayments is going to be approx £450/451 on a mortgage of £78k - so after the 10 years are up and after all of the repayments I would owe £56.7k of the orginal £78k mortgage. I need/would like to find £56.7k in extra cash via second income/money saving after interest from savings in 10 years. See Below:

What my great plan is, even to work as I am at the moment with the firm I am with and everything else in place as it is now, I am looking to find a extra £380+ per month or £12.49 per day extra "after" TAX/NI. I am if can, want to use this extra spare cash of over £380+ per month and send it stright into savings like a ISA at A&L say 5.2% or while exploring the use of those new 10% Gross savings accounts with Barclays and A&L, max out per month of £250 and the remaining cash into an ISA. Or Max out the ISA every year and then the remaining into the 10% accounts with Barclays/A&L.

So, my question is, what can I do to find the extra £380 per month after TAX/NI so its all legal so I can pump it all into the mortgage and be free of this massive debt in 10 years. The following options I am looking at:

• I am looking at going for a new job to bring in an extra £3,400 per year before TAX/NI so in effect could bring in a extra £190 per month after TAX/NI. But never count ones chickens before they hatch
  
• Get a lodger in under the Rent a room scheme for TAX free earings upto £4,250 per year, or £81 per week, or £354 per month - to be honest, I have a 2 double bedroom house and 1 room is going to waste, I am unsure how to approach this as I need someone trustworthy? And the per week costs again not sure what prices I should be looking at.
  
• Second job at weekends/spare time - what is income tax and NI worked out at? Overtime at my current firm is out of the question at this point in time.
  
• Extra income via eBay/online selling - If done properly what rates does the IR work out TAX on this as I have been told by a friend that I should put away 25% to cover TAX on extra income?

So, any other ideas that I can explore to max out incomings to get an extra £380? (Outgoings are to the min!). At the moment, time is a factor, I work 40 hours a week over 4 days so I can spare 1-2 hours in the evenings and 6-8 hours on days off? What work suits to fit in those spare hours?

I have the overpayment option at the moment, but I figure that paying the "overpayments" into savings will make it work harder for me and pending on interet rates they can go up in the coming months/years? Also would be handly as cash with easy access to when needed (hope not)

I know its going to be hard, but the thought of owing outright in 10 years and at 33 is going to be very rewarding At the moment, nothing is set in stone so looking at all options at this point in time.

Thanks

Michael

gentlepurr

hi hunter, i guess this was in the right place this morning when i read it. this board didn't exist then!

good luck! i'm trying to do the same, but with different limitations!

chatter-box-charlie

Dont know if this will help or not but an old friend used to stuff envelopes for £100 per thousand, it was quite boring and time consuming but still, once a week would give £400pm. Shame I've not kept in touch as I wouldnt mind doing it myself and have no idea where to start to look as you have to watch there are many scams out there.

Ask around you never know the outcome.....

tanith

Pity I live in London Hunter as I my son is about to lose his room in a rented house and wants a house share with a reliable person.. he is a non-smoking , professional, clean young man ....... sounds like a match made in heaven to me :rotfl:

Maybe some of your financial accumen (sp) would rub off on him :T

Good Luck with your endeavours....

lipidicman

You say you need an extra £56.7k. If you spread the payments out then you actually need £380pm (x120months=£45.6k) to get this clear in ten years. That's the beauty of overpaying.

Just noted that you use £380pm but you dont relate this to the £56.7k (I used a loan amortization spreadsheet).

Beware of the 10% savers, they are taxed and empty each year, but could still be used to chip a little off. Just pay the money into the mortgage on maturity. They are especially useful for earned savings (ie you didn't have the money until it goes into the regular saver).

peterg1965

Problem is that Tax Free savings such as ISAs are not guaranteed to continue into the future. A question does the Woolwich fix permit overpayments? I would have thought this was the route to go down rather than using savings. If you were pushed for emergency money you could actually 'borrow back' some of the overpayments. I think what you are doing is very achieveable but requires a lot of commitment over a long period of time. As you say being mortgage free at 33 sounds great.

Question for Lipidicman I cant seem to get hold of the loan amortization spreadsheet from your link??

lipidicman

It is a standard excel spreadsheet template (certainly in Office XP and 2k3)

xlt_hunter

There was a bug in my workings in the excel when working out the % of interest gained on savings - what the mistake was I was working out the interest rate annually not monthly :doh: , but have used the sheet posted by lipidicman and its an excellent bit of kit

I have been doing some tweaking with this excel sheet include a 2 tier section on the savings side, 1 for the ISA and 1 for bog standard savings. A few little more mods to go to tailer for my needs

lipidicman I do understand that I can fire away £380 into the mortgage extra to get it £45.6k in 120 payments, "But" me been cleaver, If I made 120 payments into savings accounts with £250 per month into a ISA at 5.2% and £130 into savings at 4.79% after tax I will make 59k in total savings + interest and have only 56.9k Mortgage left to pay , not only the house be paid off but I would have £2k left over in the savings accounts to treat myself with a well earned holiday . Please someone tell me this is right and not flawed? :think:

tanith wrote:

Pity I live in London Hunter as I my son is about to lose his room in a rented house and wants a house share with a reliable person.. he is a non-smoking , professional, clean young man ....... sounds like a match made in heaven to me :rotfl:

Maybe some of your financial accumen (sp) would rub off on him :T

Good Luck with your endeavours....

Thanks Tanith, Its a shame - but there is someone always out there - neverless it can be done, I was thinking about one of my friends who is struggling to make end meet at his flat with the bills/rent/debts and thought about renting the room to him at £80 per week. But his personnal Hygiene puts me off totally. With renting rooms, how does one overcome the "trust" side of things, what I don't nor anyone wants is someone doing a runner with rent/your personnal stuff.

If this sheet is bug free and its true I would be gobsacked and it may/will encourage more users to think about not overpaying into a mortgage but using savings to do one better - with the woolwich at 4.67% at the moment, I think in the future interest rates will go up to 5-6% again so would work out in more sense to save in savings at the 5-6% rate than the overpaying into the mortgage at the fixed rate. - you would be 1.37% better off if interest rates was at 6% before IR takes their chunk out :think:

Michael

exil

In any discussion of overpaying, inflation shouldn't be forgotten. Basically £1 spent today is the same as 97p spent next year, 94p the next and so on.

If you could have invested the money you are using to overpay, then you should
also factor in the lost interest.

Even more so if you have debts at high interest and could have used the money to reduce these instead!

tanith

Hunter its a difficult thing when renting out a room in your own home to someone trustworthy... or sharing in general.......

The house my son has been sharing was with 3 work colleagues who he was very friendly with and had total faith in ... but its turned out that he being the only one of the 4 that was even a little bit savvy with his money (and I do mean a little bit ) , it ended up with him ordering shopping online expecting the others to pitch in with their share... but more often than not he ended up footing the food bill for all 4 of them............. he was too nice to complain and ask them to stop using 'his' food and consequently they took advantage........... oh well he's a big boy now and is now having to find another room....... or maybe I heard a rumour he'd like to come back home ............. :eek:

Is there not a relation that you trust who is in need of a place?
Good Luck

xlt_hunter

exil wrote:

In any discussion of overpaying, inflation shouldn't be forgotten. Basically £1 spent today is the same as 97p spent next year, 94p the next and so on.

If you could have invested the money you are using to overpay, then you should
also factor in the lost interest.

Even more so if you have debts at high interest and could have used the money to reduce these instead!

Exil - you lost me on the inflation - how would it effect the overpayment in laymens terms? If I get this right, Year 2 I make 3p profit of every £1 I put in and 6p in year 3 - this is something I am not sure of?

Regarding debts - I was debt free 2 months ago, but the need for tyres for car for the MOT in the fortnight (at a big cost) but come april/may when everythings starts to fall into place the credit card will be paid in full next month run and totally cleared (and destroy the Cap1 - but freezing the Barclaycard in the freezer as it has a very good credit limit on for those things that may crop up when you don't want it to)

tanith wrote:

Hunter its a difficult thing when renting out a room in your own home to someone trustworthy... or sharing in general.......

"Snip"

Is there not a relation that you trust who is in need of a place?
Good Luck

tanith - I know what you mean by your post above, TBH didn't we all do that when living with parents I paid my keep, but nicked the food :rotfl: . At the moment, there is no need within the family for place as brother and girlfriend (donna-dan on these boards) have a place of their own. Its a option, but getting someone in is the hard work, the trust can be a major issue and the thought of loss of the back room (even though it holds my junk ) is playing on me at mo.

What I am thinking at the moment now (was yesterday when I went to my uncles to sort out their PC problems) that I can look into IT work in the spare time - a user here states he/she charges approx £20/hr to businesses to sort out their issues and could be a venture to look into. Also what was brought up in my interview this afternoon was my excellent amount of IT skills going to waste. Now i've been out of the IT loop for last 2-3 years, but I have started making headways in producing a little website for IT services/web site for myself for local people and businesses to look at (not completed yet as the content is not upto standard, I would doing this as a little thing on the side at home and all Taxed and NI when required.

"Or"

Do the above to save up or get a CDL loan or get 0% Credit Card on purchases for £2k to invest in HGV training in Class C and C+E driving, as there is a local depot near where I live for a major supermarket> Whom I am aware via a family member working there, are crying out for HGV1 drivers and paying in excess of £26k per year for driving a wagon! (to me that would double my take home pay!!!) I know it sounds brill at the moment, but I love driving (have over the last 5 years, passed 1st time and not a smack yet ~ touch wood)

I am juggleing with too many ifs and buts at the moment, but the plan at the moment is to get the mortgage sorted on the house and done and dusted so I know where my payments are, then start moving jobs/training to get better salary / increasing my earning.