It never goes down!

ironman1ironman1 Forumite
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Hello,

I've posted about my mortgage on here before...

We have half a mortgage/half rent. The mortgage side was £95000, take off our 10% deposit and we owe roughly 86500. It is 6.1% over 40 years so its not the best mortgage deal ever...

In nearly a year of having the mortgage it still stands at 86450. It just never seems to go down! After reading about overpayments on here we have decided to set up a £100 standing order (the first one went in yesterday) and we are going to start paying off an extra 100-200 on top hopefully each month.

Will this actually make the online 'mortgage summary' change? I mean will those horrible red numbers go down more often if we overpay regularly? The reason I ask is although it's obviously a good thing paying over the odds each month, it doesn't feel like it if the actual numbers don't drop.

Sorry if this doesn't make any sense to some!
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Replies

  • edited 29 June 2009 at 7:55PM
    StuartGMCStuartGMC Forumite
    2.2K Posts
    edited 29 June 2009 at 7:55PM
    SHMW
    The situation you describe is typical for the repayment side; the early years your payments are mainly paying interest whereas as the term progresses more and more then contributes to reducing the balance.

    So, OP in the early years is REALLY beneficial as you are putting £100 each month in, and if you want to think that it's the last £100 owing, it is saving you £100xinterest ratexyears left to pay....

    Hope that helps your understanding?

    Now, turning to seeing how your OP etc are helping... it can be difficult in the early years to see, so one of the calculators such as Egg which help you to see the overall impact are very helpful. Also having your own small milestone targets (across all your financial planning) will help you to realise your long term goals.

    Sit down with your OH and go through your complete household budget so you know precisely where you stand on an annual basis for costs. Get a good handle on grocery spend, then see about reducing it without negatively impacting on quality.

    What emergency savings do you have? These should be 3, 6 or 9 months outgoings depending on your job security. Get these in place urgently.

    Do include some money for enjoyment, you'll not survive if your budget is predicated on no trips to the pub, cinema, meal out etc occasionally. These are requirements to enjoy life, so set them in your budget (then improve via coupons, vouchers etc so you actually spend less - the saving adds to the OP. Keep a record of these extra savings)

    Then look at all the things you need to save money for because you know you need them e.g.
    Annual holiday - how much per year?
    Replacement car - say every 4-5yrs? So divide the amount required by 4 or 5, that's your annual target that HAS to be saved to be ready to change cars
    Other things needed such as new boiler in 10yrs
    Allowance for white goods which fail - fridges and freezers seem to last only 5yrs now not the 10-15 we are used to.

    Then what about your pensions, are you contributing enough to them?

    So, by now you should have a really good handle on your needs and overall requirements which means you can then be certain the OP you can make without fail each month - this HAS to be paid (like you say £100 now), then keep a record of the extras you've put in above this - that's your incentive, over achieve against your target. Once you can do that regularly, increase your target and go for it again...

    I hope that helps; if you don't have a household budgeting spreadsheet, drop me a PM and I'll send you one.

    Best wishes in your journey.
  • ShelleyC_2ShelleyC_2 Forumite
    1.5K Posts
    I came onto this thread getting all excited thinking I could use the spam button as it was going to be an ad for viagra. Will skulk off now and leave other people to give sensible answers
    Looking for the perfect home and saving to make becoming a MFW easier
    MFiT3 48103/50000 Saved So Far :j
  • barnaby-bearbarnaby-bear Forumite
    4.1K Posts
    s.h.m.w wrote: »
    Hello,

    I've posted about my mortgage on here before...

    We have half a mortgage/half rent. The mortgage side was £95000, take off our 10% deposit and we owe roughly 86500. It is 6.1% over 40 years so its not the best mortgage deal ever...

    In nearly a year of having the mortgage it still stands at 86450. It just never seems to go down! After reading about overpayments on here we have decided to set up a £100 standing order (the first one went in yesterday) and we are going to start paying off an extra 100-200 on top hopefully each month.

    Will this actually make the online 'mortgage summary' change? I mean will those horrible red numbers go down more often if we overpay regularly? The reason I ask is although it's obviously a good thing paying over the odds each month, it doesn't feel like it if the actual numbers don't drop.

    Sorry if this doesn't make any sense to some!

    I like this one put in one mortgage with the overpayments and the other without and compare the progress....
    http://www.maggenhoof.co.uk/mortgage/index.php?
  • ironman1ironman1 Forumite
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    Cheers for the advice and websites, as usual!

    About talking to the OH about our spending etc, I wish it was that easy! Neither of us chuck money away but I wouldn't have a clue exactly how much we spend, say a week. It is hard to work it all out. I think I could do it for myself but it's murder getting through to the missus!

    We are only 23 and we rarely go out. We have the odd night out at the restaurant or pub with friends. I would feel like im pressurising her if I start going on about every penny...

    The only big payouts every year are a holiday or two (more likely one now we've moved in together) and my football ticket which is about £750!

    Im gonna check them sites out, thanks for the help
  • ironman1ironman1 Forumite
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    Another thing I wanted to ask next week I should be getting about £1100 Tax rebate. Would it be worth putting a few hundred into the mortgage or saving it?

    We have about £6000 saved at the moment
  • StuartGMCStuartGMC Forumite
    2.2K Posts
    s.h.m.w wrote: »
    Cheers for the advice and websites, as usual!

    About talking to the OH about our spending etc, I wish it was that easy! Neither of us chuck money away but I wouldn't have a clue exactly how much we spend, say a week. It is hard to work it all out. I think I could do it for myself but it's murder getting through to the missus!

    We are only 23 and we rarely go out. We have the odd night out at the restaurant or pub with friends. I would feel like im pressurising her if I start going on about every penny...

    Start with the easy stuff; all the direct debits and standing orders - that'll cover most bases. Then, if you know you will pay off the credit card each month, use it to buy everything (earn points/cashback etc as you do so) this means you'll get a record on spend for the main areas (groceries, clothing, shoes, petrol, car maintenance etc). Start with guess-timates in the spreadsheet then dial in these values to get a monthly or weekly average. Afterall, if you are both onboard with the idea then you know you need good data upon which to base your plans.

    You can also set an amount for pub, personal spend etc I've got just £50 for me per month for the pub when I'm down there in the local. I don't keep a tally, but, I know that for the average 2-3 nights a month that is about right for the rounds I buy. I also still have a restaurant lunch each day as well as a cooked meal each evening - not entirely MSE as I could in theory take sandwiches but to me the meal at £3.50 is still good value and saves me time as I leave home at 0600 to be in the office for 0630...

    As I said, this isn't about pressure on who is spending what, but, understanding where it is going and if you are gaining value from it (e.g. your season ticket, her own interests etc) not about cutting out everything. Only when you have a true idea of spend can you then plan, so build in personal spending as part of the budget so it is included not "guilt ridden" and hidden. Also, you will find if you put savings away at the start of the month, you'll probably save 15-20% more than saving the residual at the end of the month.

    You don't need to list how much you spend on bread, chocolate etc, just split if you wish to food (inc beer and wine :o) and cleaning & toiletries.

    If it makes you feel better, I plus OH and DD (11 going on 13!) apparently spend £207.28 per month on average on clothes and shoes according to my spreadsheet. DD is growing and we've paid VAT on her items for quite some time already, I usually get a couple of suits a year, OH likewise has suits etc for work.... I don't think we are particularly frivolous (at 44 we're not in the prime age group any longer for the big labels, but never went for them anyway!) but likewise I don't go threadbare - I lived like that as a child back in the 70s with raging inflation, strikes, 3-day weeks etc, standards have improved since then thankfully for many of us.
  • StuartGMCStuartGMC Forumite
    2.2K Posts
    s.h.m.w wrote: »
    Another thing I wanted to ask next week I should be getting about £1100 Tax rebate. Would it be worth putting a few hundred into the mortgage or saving it?

    We have about £6000 saved at the moment
    £6k sounds ok for an emergency fund to cover 3 months but not longer?

    I'd suggest you save the £1100 if you consider your needs for say, next three years, and the rate you can add to this in your "general" savings which you use to cover planned costs (the £6k is for all the horrible extras which come along to hit you!)
  • ironman1ironman1 Forumite
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    Thanks, good post...

    I did have about £12k at one point but the deposit and buying furniture swallowed that right up! I know we have on average about £800 left over after all bills, travel, food etc each month. Would love to somehow make that go some way to extra payments but it's hard when you live with a 23 year old woman!
  • baffcatbaffcat Forumite
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    s.h.m.w wrote: »
    it's hard when you live with a 23 year old woman!

    As a 49 y.o, I couldn't resist saying this, though I know I shouldn't....

    I bet it is ;)

    Stuart seems to give good advice on most of the threads he posts on, so try utilising his ideas. If you don't want to/can't be bothered to use a spreadsheet to check your outgoings, stick a notepad in your (and your 23 y.o. woman's) pocket and write down your expenses as you make them.

    At the end of the month, group them into categories, add them up, then pick yourselves up from the floor and decide where you can make savings. You'll quickly find the £800 'spare' cash increases.

    THEN get a spreadsheet from Stuart (he's done the hard part for you) and away you go.

    Good luck.
    Exclamation and question marks - ONE exclamation mark or question mark is sufficient to exclaim or ask about something. More than one just makes you look/sound like a prat.
    Should OF, would OF
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