new mfw

chirpchirp

After much reading, I've decided to join you. However, my mortgage feels extremely high at £241,000. It's an interest only mortgage which I can pay overpayments on from June without incurring any penalties. It's fixed at the moment but will become a tracker as of June.

To begin with I have increased my mortgage repayment to £1000 for the next two months which will pay off a whole £36 ( every little helps). I intend to keep repayments at £1000 once my interest rate drops to 1.49%. I will then start adding money that I have left over at the end of the month.

I have already been saving hard this year by cutting grocery bills, insurance and switching energy suppliers. So should begint to see the rewards for this soon - which can then be made as OPs.

I currently have a shares ISA as my repayment vehicle and I don't use my full ISA entitlement for this. I can't quite decide whether to throw money into this or to throw it at the mortgage directly. I realise I'll be buying more shares if I do but I'm worried that mortgage rates will at some point increase and the more I cut now the more I will save in the future. Your comments would be appreciated

StuartGMC

Chirpchirp
Welcome to the "family".

You've already started well and have obviously been planning for this which is good. You haven't told us the remaining term of your mortgage?

You note you have a S&S ISA for the capital growth but you aren't achieving £7200 per year on this, if I understand correctly? Obviously you do need to reduce the capital owing as well unless you have some 30years to go?

Whilst the S&S ISA can go up it can also go down, so you'll want to manage that carefully so you are detrimentally affected by a down-turn close to the end of the mortgage term. You ask whether to put funds against the mortgage or into the S&S ISA, and of course, once the money has reduced the capital it will "always" benefit you - if it is added to your present S&S ISA it "may" help depending upon growth.

Regarding interest rates, yes they will surely go up in future, the question is by how much and when?

I'll leave others with experience of interest only mortgages to comment on the recommendation to move to a repayment or part-repayment mortgage and hopefully they'll be along soon.

chirpchirp

Thanks.

The remaining term of the mortgage is 18 years but I know that this will need to be extended if I continue at the current rate. Hopefully, if I begin to make overpayments I will be able to pay within the current term.


I'm not in a position to change my mortgage as my financial situation has changed considerably since the mortgage was taken. The mortgage was granted on my ex-husbands salary etc which means that he is still on the mortgage and officially the mortgage company sees me as having little official income. One of the reasons I want to overpay is so that in a couple of years time I can have my ex released from the mortgage and can get a mortgage solely in my own name. This obviously isn't possible at the moment with £241,000 outstanding.


I'm worried that a repayment mortgage will stretch me too far in years to come if interest rates take a hike and as I can overpay as much as I want I think the most flexible situation is to stay put for the moment making overpayments whilst I can.

Whilst I have the S&S ISA, I have just taken out a Cash ISA to start to build my emergency fund. So as things stand will be paying £1800 a year into my S&S ISA and will hopefully make the full £3600 into the Cash ISA. The S&S ISA as you can see does not have a hope of paying the mortgage with the current amount going into it. As part of the divorce settlement I gained the house but my ex walked away with his ISA which was also supposed to go towards covering the mortgage. Even so, I was aware then that we weren't paying enough to cover the mortgage but at that point we had lots of debts.

Anyway, now that I am debt free, I can build my emergency fund and make overpayments at the same time.

setmefree2

and with your MF journey. The SMF2s had a mortgage of £250K to begin with, so you can do it.....:T

chirpchirp

Thank you SMF. I have been reading your diary over the past few days and it seems amazing to be able to decrease it so much. At least with mortgage rates so low at the moment, I'll be getting a head start. Just keeping my payments the same when I come off the fixed rate should give me £700 a month as an overpayment. Once I have finished paying my legal bills then I should be able to have another £500 to hit the mortgage with.

setmefree2

Hanging around MSE probably means you will think of lots more ways to save money. It does for me, anyhoo. And posting on this board keeps me focused too and I know there are likeminded people who understand...

....tons of good luck:T

RosieTiger

Journey of a thousand miles begins with a single step - congratulations on taking the first one !

chirpchirp

I have been doing some morgage calculations, to pay my mortgage over 18 years as a repayment mortgage I would need to be paying £1703 and a few pennies per month. Which is actually £721.13 a month. This in fact means that I need to pay at least this amount each month and can really only count anything over this amount as a true overpayment.

Feels a bit demoralising when looked at like this. But anything over this and I'll be making official overpayments!

maro11

Hi Chirpchirp,
You inspired me to write as I am in a similar situation to you. I have 210,000 remaining on my mortgage with 11 years left. I have a lifetime tracker and have seen my rates drop. I have knocked over 2K off since November. I too cannot change to a repayment due to my financial situation having changed dramatically since we took the mortgage. I am worried about the interest rate rising but am throwing everything at the mortgage at the moment to reduce it. Can't wait to get it under 200k.
Good luck with your journey.
Maro

StuartGMC

ChirpChirp and Maro
Best wishes to both of you on your road to MF; I hope that financially things will also improve for you both to help ease the burden

Keep us posted here and we'll try to provide some encouragement and ideas to help you along.

RosieTiger

StuartGMC wrote: »

ChirpChirp and Maro
Best wishes to both of you on your road to MF; I hope that financially things will also improve for you both to help ease the burden

Keep us posted here and we'll try to provide some encouragement and ideas to help you along.

Absolutely - recognising your situation is a great first step and deciding to actually do something about it is the next. Most people don't make either so you are already making a difference good luck. As stuart says, you will find only good advice and encouragement on this forum so welcome and good luck !