new mfw

chirpchirp

I'm having second thoughts about how I'm going to pay the mortgage off. Firstly, I don't have an emergency fund but I'm unsure how much this should be as my income is made up of many different elements eg

Working Tax/Child Tax - unlikely to need to put this in emergency fund calculations unless a change of government.

Child Benefit - I don't think this needs to be in calculation.

Maitenence - At risk if ex's job is made redundant

Salary - job just made permanent this month - unlikely to be made redundant due to the job that I have.

I have started to build emergency fund and I am thinking 3-6 months of maitenence as the emergency - however I haven't made this a top priority. I currently have 1650 in a cash ISA and plan is to add to this £150 a month.

Mortgage decreases in June, going to keep payment as same which will give £700 overpayment. Dilemma 1: Should I let the DD decrease and pay this money into ISA? However, then I might end up spending the money rather than paying it off the mortgage.

Dilemma 2. In June, I should have some other extra money, thinking that instead of paying to mortgage to add to ISA (3.61%).

Dilemma 3: Once ISA is full, should I put extra money into Stocks and Shares ISA. Currents stocks and shares are worth about £15,300 at the end of March. The most they have been is about 21,000. If the stock market rose back to the 2007 rate they would then be worth about 25k. Therefore, buying shares at a low prices seems tempting.

Dilemma 3 contd: If not in ISA should I place the money into my new ING account at 2.25% or into mortgage repayments, interest 1.49%.

I'm not sure I'll get the same buzz from the savings as from paying off the mortgage. As soon as the interest rate increases on the mortgage I would intend to put the savings into the mortgage. Stocks and Shares would obviously be tied up for longer so I wouldn't get the benefit of not paying the mortgage interest but I would hopefully benefit long term.

Meanwhile, still working on electricity and gas consumption. Had lots of non spending days but still a high spending month due to insurance and paying solictor. Why is it every month seems to have a one off? ie car insurance, new tyres, music fees, other insurance.

Dithering_Dad

Hi chirpchirp, I've just read your thread and would like to (belatedly) welcome you to the MFW board.

Reading your points above, I'd say that if you were absolutely sure that your job is recession proof & secure, then I would consider only building up 3x months emergency savings,. which should cover any major financial surprises. You'll find that a lot of your emergencies will be covered by insurance anyway, so step 1 would be to check that you have all your bases covered there and that you're not paying over the odds for your existing insurance (when I started my MFW journey, I reviewed all my bills and reduced all my insurance premiums without affecting their cover - I also reduced my utility & telecom bills significantly).

If your husband's name is still on the mortgage, is there any chance that he can claim half of the current overpayments you are making? I'd double check with my solicitor if I were you, as your mortgage is the equivalent of a joint bank account (albiet one that is very difficult to withdraw monies from) and you don't want to be cutting back, only for your ex to benefit. I'd be inclined to save any overpayments in my personal bank account until the mortgage situation is resolved - you might lose a bit of interest and pay a bit of tax (if you have to save outside of your ISA), but that is better than losing a big chunk of your OP's to your ex.

I started my MFW jopurney with the intention of overpaying into S&S ISAs as well, as (at the time) they were returning a better rate than my mortgage interest. Luckily, I too decided that I would be more motivated by seeing my mortgage balance decrease, than seeing my savings increase. Since then, the stock market crashed and I would have lost a lot of my overpayments had they been in the S&S ISA. Direct mortgage overpayments are guaranteed to reduce your mortgage.

The only other advice I'd give is to make sure you have adequate retirement provision, especially now that you're single. If you employer does a scheme, then you should join (if you haven't already) and you should use one of the many online pension calculators to determine whether your current pension provision is adequate to provide you with the type of retirement you would wish for.

Good luck with your MFW journey!

chirpchirp

Some useful points there.

There is a court order in place for the house to be transferred solely into my name. However, the mortgage company won't allow him off the mortgage so he is still liable for the mortgage should I default. The benefit of a savings account will be that he won't be able to see what I am repaying and then use it as a means to have his maitenence decreased as he is highly likely to be redundant in the next month.

Pension, I'm not particularly worried about at the moment - partly as there is a pension sharing order. Secondly, I'm a teacher. Thirdly, the element of maitenence for me is to be paid for life unless I remarry. My Financial Advisor doesn't seem to see that as a priority at the moment.

I guess my main priority is to make my finances my own and the only way I can effectively do this is to get my ex off the mortgage. Hence, I need to decrease the mortgage outstanding so I can get a mortgage in my own right and his name can come off the current mortgage.

I've begun to decrease insurances. I realised too late that my buildings cover was charging me a "loan" for paying by DD so have paid that as a yearly amount. I'm loathed to change the whole thing until next year. However, car and contents are both due in June and by putting the contents with my current car insurer I can decrease the contents cover by half. Unfortunately it is too early to get a quote from them on how much my car insurance will be but I may consider doing an online quote and see if it is any cheaper than they offer me in my renewal.

Gas and electricity usuage is going down since I started to look at this carefully. In a six month period I realised i was using 18 units of electricity a day! However I have now reduced this to about 9 units. Although I noticed my bill was up until the 6 April and I did a reading for new supplier on the 23 April and realised that during the month my electricity usuage had soared to an average of 30 units a day. Which is astronomical as I was visiting relatives for 7 days of that 17 day period! I'm pretty sure the 6 April was an accurate date for the reading the electricity company supplied as I know they read the meters whilst I was at home - and the 6 April was the first day of the Easter holidays!

Dithering_Dad

chirpchirp wrote: »

Some useful points there.

There is a court order in place for the house to be transferred solely into my name. However, the mortgage company won't allow him off the mortgage so he is still liable for the mortgage should I default. The benefit of a savings account will be that he won't be able to see what I am repaying and then use it as a means to have his maitenence decreased as he is highly likely to be redundant in the next month.

Pension, I'm not particularly worried about at the moment - partly as there is a pension sharing order. Secondly, I'm a teacher. Thirdly, the element of maitenence for me is to be paid for life unless I remarry. My Financial Advisor doesn't seem to see that as a priority at the moment.

I guess my main priority is to make my finances my own and the only way I can effectively do this is to get my ex off the mortgage. Hence, I need to decrease the mortgage outstanding so I can get a mortgage in my own right and his name can come off the current mortgage.

I've begun to decrease insurances. I realised too late that my buildings cover was charging me a "loan" for paying by DD so have paid that as a yearly amount. I'm loathed to change the whole thing until next year. However, car and contents are both due in June and by putting the contents with my current car insurer I can decrease the contents cover by half. Unfortunately it is too early to get a quote from them on how much my car insurance will be but I may consider doing an online quote and see if it is any cheaper than they offer me in my renewal.

Gas and electricity usuage is going down since I started to look at this carefully. In a six month period I realised i was using 18 units of electricity a day! However I have now reduced this to about 9 units. Although I noticed my bill was up until the 6 April and I did a reading for new supplier on the 23 April and realised that during the month my electricity usuage had soared to an average of 30 units a day. Which is astronomical as I was visiting relatives for 7 days of that 17 day period! I'm pretty sure the 6 April was an accurate date for the reading the electricity company supplied as I know they read the meters whilst I was at home - and the 6 April was the first day of the Easter holidays!

Sounds like you're covered on the pension front, plus the A-day changes in pensions now allows you to make large payments onto a pension, so once you have gotten the mortgage under control and feel you want to top-up the pension, it'll be straightforward to do.

We saved quite a bit on our gas bill by buying a central heating timer that had dual controls (we don't have to have our water heating on all morning with the central heating). We also turned down the house thermostat and also the one on the water tank (it was set to 80 degrees and it's now on 60 degrees).

We also save money by buying food in bulk and batch coooking, ordering our food to be deliviered by tesco (stops you picking up stuff on a whim that you dont really need - plus saves on petrol) and from shopping locally (our local butcher often puts a bit extra in because we're good customers, the meat is better quality and fresher than from a supermarket and we're helping our local highstreet - everyone's a winner).

It's amazing how little savings here can make a huge difference when paid onto the mortgage. Plus you're not impacting your lifestyle in a negative way - you just pay less for the same things and often get better value.

I'm hopefull that I can reduce our mortgage from the £150k it was at two years ago, to £80k by the end of this year. We have already reduced it by £45k and I can't tell you just how much an emotional and financial impact that has had on us, especialy during these recessionary times.

setmefree2

Hi again,

Lots of good points from DD.

I'm not sure I fully understand your mortgage position re your ex husband. However, whether you decide to overpay your mortgage or save I would definitely consider you a MFW (for what it's worth) and I think you have found your right "home" on MSE. The Setmefrees still save into cash ISAs every year and overpay the mortgage. I think sometimes it's better to think of your net debt position - ie your mortgage less savings. This gives a more complete picture.

Well done on all your progress so far:T:T and keep posting:money:

SmlSave

Sounds like you're getting everything sorted chirpchirp

Is there no way at all to get the mortgage in your own name only? Have you had a chat with an advisor?

chirpchirp

Well, eventually I could get it in my own name but would be really silly to do it at the moment. As of June my mortgage will track the base interest rate at.99 above. To get the mortgage in my own name, I would need a company which would take working tax and maitenence into account. These mortgages are more expensive and when I last looked about a month ago were about 6.9%. Both ex and I agree that this would be a stupid thing to do in any climate. I also looked at one of these with the Yorkshire bank and it looked like the most they would give me would be £167,000.

So, five year plan - reduce mortgage by 100k. Then become full time as will be at top of payscale by then meaning hopefully earning 35k. Then look for a mortgage deal offering 4xsalary. In 5 years time my youngest will be at secondary school and should be able to get himself home.

shell1000

sounds like you are acting very wisely, i know its demoralising seeing how little we are paying off in the short term, but in the long term it will have a big impact!

Keep the faith!

RosieTiger

shell1000 wrote: »

sounds like you are acting very wisely, i know its demoralising seeing how little we are paying off in the short term, but in the long term it will have a big impact!

Keep the faith!

Absolutely !

chirpchirp

I thought I would post about my experiences with insurance over the past month - a result of which is that this months money is particularly low but future months should be good.

I received a renewal quote for my buildings insurance in February and didn't look at it carefully. This month I realised I was being charged for a loan on it as I was paying by dd when I could have paid as a lump sum. The amount due was £374.6 and the interest was £50.98. When I realised I was being charged the interest I rang up and asked to cancel the loan. Although the policy only took affect on the 6th March and I was calling on the April 7th I was told that I would be charged for 56 days of the loan. Apparently although it is a daily interest amount the first 28 days interest is charged after 28 days of the policy running and the following 28 days is also charged at the same time. Hence I needed to pay them £387.82.

Reading this forum I realised this was rather a lot but it was only slightly more than I had paid them last year so I hadn't looked into changing it. Anyhow, I decided it was time to look properly into my contents insurance which is due in June. It cost me £233.57 last year. I found a contents only cover which was approx £115. Then I decided to see if I could find a buildings and contents cover and got a quote for £327.60.

I have rang contents insurers who haven't made it clear if a cancellation fee will be charged but only 19.45 left to pay on their policy. Buildings insurance have said if I cancelled now I would get about £311 back and in a month this would be reduced to £290 ish. Since this phone call I have rang back to ask about cancellation fees and have been told these can't be caluclated until I cancel the policy but could be upto £75.

What I can't work out is whether it is cheaper to buy just the contents cover at about £115 or to take both and take the hit of cancellation charges on the building insurance I have already paid. Anyone good with maths?

Also, do you think it is advisable to start the policy on 29 May rather than the 29 June when the contents insurance is due?

Meanwhile I have made my first "overpayment" on my mortgage today of £17.92. Bringing my grand total down to 240982.08.

I had hoped to have had lots of money this month, as I had two lots of working tax credit due to it being paid 4 weekly but somehow it has all got eaten up with things such as the building insurance, payment into ISA. Looks like next months will be eaten into by contents and buildings insurance.

Here's to a better May.:beer: