Mortgage free by September 2014 (or before!)

SmileyG_2

So here it is, my MFW countdown diary, inspired by all of the fantastic people on the MFW thread.

Background:
Without going too far back in time, I bought a property in July 2001 for £66,000 with a 100% mortgage. I had to sell a number of investments to clear negative equity on the previous property I owned, but that is a story for another day!

Status in August 2009:
My current mortgage balance is £56,410, and is scheduled to be paid off in November 2020. That’s too far ahead for me to bear today, but at the time I took the mortgage out, it made the monthly payments manageable.
Since January 2009, I have been overpaying by £250 per month and if I continue to do this, the September 2014 date is more than achievable.

Why September 2014?
Back in 1989, Endowment mortgages were all the rage. My first mortgage was supposed to be paid off by a endowment with a target maturity value of £49,000 in September 2014. Unfortunately, the “lost decade of investing “(sic) has seen the projected maturity value fall to £30,800 (at 6% growth). The trouble with endowments is a lack of clarity in what they are really worth in today’s terms. Surrender values, market value reductions (MVRs), and projected maturity values are all things that you don’t want to factor in when trying to work out what to do next!
Anyway, I have very few expectations as far as the endowment is concerned, and my current strategy can almost overcome any lack of performance in the stock markets in the next 5 years.

The September 2014 strategy
Assumptions:
The spreadsheet says the following:
Outstanding mortgage at September 2014: £48,941 (scheduled to run to November 2020)
To be paid by: Endowment (£30,800) and Investments (£18,141)
Deficit is: -£0

This is based on the following assumptions:
Fixed Rate mortgage: 5.18% to November 2011
Variable rate then reverts to current BMR of 2.5% until September 2014 (unlikely!)

Factors that could change the deficit include:
1) Interest rates go up (increases the deficit)
2) Value of investments go down (increases the deficit)
3) Projected maturity value for endowments improves (reduces the deficit)
4) Value of investments go up (reduces the deficit)

So what’s next?
My current mortgage balance is £56,410 (£16,410 repayment, £40,000 interest only)
My current valuation of the endowment is £19,125
My current valuation of investments is £11,750
Current deficit is -£25,535

This diary will be about eliminating the deficit.
The strategy will involve investing, overpaying (see MFW 2009 thread) and seeking out the best mortgage deals between now and September 2014.

There may be other factors as well (staying healthy and employed is important!).

The next post will be updated with progress data at least every three months, and anybody who has anything to add is welcome to post, even if it’s just encouragement (there is certainly plenty of that here and it shouldn’t be underestimated!). I hope you find it interesting.

Here’s to September 2014 (or maybe earlier).

SmileyG

SmileyG_2

Mortgage at 01/08/2009
Outstanding balance: -£56,410
Estimated endowment value: £19,125 (estimated)
Investments: £11,750
Deficit: -£25,535

Mortgage at 01/01/2010
Outstanding balance: -£54,694
Estimated endowment value: £22,016 (estimated)
Investments: £13,043
Deficit: -£19,635

Mortgage at 01/01/2011
Outstanding balance: -£49,428
Estimated endowment value: £26,123 (value @ 01/01/2011)
Investments: £14,685
Deficit: -£8,620

Mortgage at 01/01/2012
Outstanding balance: -£46,687
Estimated endowment value: £27,401 (value @ 01/01/2012)
Investments: £16,264
Deficit: -£3,022

Mortgage at 01/01/2013
Outstanding balance: -£45,759
Estimated endowment value: £30,229 (value @ 31/12/2012)
Investments: £20,223
Surplus: £4,693

Mortgage at 01/07/2013
Outstanding balance: -£44,284
Estimated endowment value: £31,379 (value @ 30/06/2013)
Investments: £21,785
Surplus: £8,880

Mortgage at 24/07/2013
Outstanding balance: -£44,284
Estimated endowment value: £31,379 (value @ 30/06/2013)
Investments: £22,445
Surplus: £9,540

Mortgage at 22/09/2017
Outstanding balance: -£98
Estimated endowment value: £0.00
Investments: £40,247
Surplus: £40,149


SmileyG

setmefree2

to the MF board and Good Luck with your MF journey look forward to reading about your progress

golfiematt

good luck, you sure you arent entitled to compensation for the deficit? someone at work got his paid off by seeking financial advice on a missold product.

SmileyG_2

golfiematt wrote: »

good luck, you sure you arent entitled to compensation for the deficit? someone at work got his paid off by seeking financial advice on a missold product.

Good point, but I went into the endowment with eyes wide open. Back in 1989, all the evidence suggested that the endowment would pay the mortgage. This was still the case until 2000, and then the stockmarket fell out of bed.

Unfortunately, the stockmarket got back into bed and then fell out the other side!

I consider it a lesson bought, better than a lesson taught!

Never buy a with profits endowment product, there are better products out there for investment purposes and if you want life insurance buy it as a seperate product!

SmileyG

SmileyG_2

Just checked the MFW 2009 thread.

http://forums.moneysavingexpert.com/showthread.html?t=1259563


According to Zavarony, overpayments in 2009 total £647,595

Any body else out there can help as push it over the £1 million mark?

SmileyG

Tesco_points_addict

Welcome SmileyG

This is a fabulous place to be...lots of advice and encouragment as well as the occasional smack on the bottom if needed! .

Good luck

TPAx

SmileyG_2

August hasn’t been a bad month to date.
1) My overpayment of £250 has left my account today, reducing the mortgage balance to £56,160.:j
2) Investments have picked up in the last 14 days, raising the total to £11,957 (+£257 since 01/08/2009):j
3) No change on my estimated value for the endowment, although I’m sure that will have improved.
4) Overall current deficit is now -£25078 (+£457 since 01/08/2009):j:j
(Post #2 updated with new numbers)

This also means an predicted interest saving of £437.62 since Jan 2009 until my MF date of September 2014, My £250pm overpayment is more than covering the mortgage interest (£243.96), which means the regular payment at the 1st of the month has become a capital repayment!

Continuing improvement on the investment front means that overpayments plus the endowment plus my investments could leave me with a contingency of £650, which could see me mortgage free two months early. As I wrote last month, this assumes that interest rates stay unchanged (most unlikely!). It needs to be nearer £2500 before I’m comfortable with it, so overpayments will continue.
On the down side, an estimated dentist bill of £169 has appeared:mad:.
I do have a contingency for these things but it also means some short term economies elsewhere, but as the bill is due either side of pay day, it shouldn’t affect my mortgage overpayments.
Hopefully, the recent upturn in the stock market is having a positive effect on my endowment although I won’t change my estimate for maturity until next year.

Keep the faith and prepare for success!!!

SmileyG

SmileyG_2

01/09/2009

August wasn't bad but could have been better.

1) My regular monthly payment of £351 has left my account today, reducing the mortgage balance to £56,051.

2) For the month of August, my investments managed to increase, raising the total to £11,888 (+£138 since 01/08/2009); today was not a good day, and my investments have fallen back significantly from what they were on Friday.

3) No change on my estimated value for the endowment, although I’m sure that will have improved.

4) Overall current deficit is now -£25038 (+£497 since 01/08/2009)

(See post #2 for numbers)

Out of a fixed amount of £500, I always include my buildings and contents insurance. However Nationwide have come back with a renewal quote. The buildings portion has gone up over 10%, so I think it’s time to do a price comparison check. Does anybody have any suggestions where to start?

An increase in home insurance premiums has reduced my contingency to £231. As I wrote previously, this assumes that interest rates stay unchanged (most unlikely!). It needs to be nearer £2500 before I’m comfortable with it, so overpayments will continue.

The estimated dentist bill came in at £185, not £169! It means that certain purchases this month (groceries, petrol, etc) will have to go on the credit card to smooth them over into next month, but I should be able to pay it off next month without incurring interest charges or stretching into the overdraft.

Sold some of my shares on Friday (took some profits) which means that any setback in the stock market might enable me to get back in a bit cheaper. I’m not confident about the next couple of months, so if the market goes pear shaped, at least I have some funds to get back in.

Keep the faith and prepare for success!!!

SmileyG

StuartGMC

SmileyG
Found your thread at last! Best wishes for the journey.

SmileyG wrote: »

Out of a fixed amount of £500, I always include my buildings and contents insurance. However Nationwide have come back with a renewal quote. The buildings portion has gone up over 10%, so I think it’s time to do a price comparison check. Does anybody have any suggestions where to start?

We found last year (in my thread for about mid-Sept 08) that it is very important to also look at the policy which is now becoming easier as they are often online in PDF so you can compare before you buy. One was a horror in terms of 6months before some legal aspects were covered!

We went with DirectLine (remember not in comparison sites so you'll need to go to them) which includes annual travel insurance and Experian credit check etc. Combined buildings and contents was a good price, hoping they will lift valuation on contents with CPI etc (something Zurich should have been doing automatically but didn't).

Sold some of my shares on Friday (took some profits) which means that any setback in the stock market might enable me to get back in a bit cheaper. I’m not confident about the next couple of months, so if the market goes pear shaped, at least I have some funds to get back in.

As I've noted, it really is a difficult time to gauge the markets on funds or individual equities. If you are in the short-term game then realising your gains since March is sensible; we're in long term and were in October 2008 50% down but now only 10% down (with the drop today). I anticipate a very bumpy ride through to Spring 2010 but guess you have your strategy worked out?

Personally, I don't have time to watch individual equities nor sufficient invested to get a good spread on the portfolio so we're invested across 7 different funds.

Where do you do your research?

setmefree2

well done on all your progress :T:T:T