Advice wanted please!

Mrs_Optimist

I have been reading this thread for quite a while now and this is my first posting so please be gentle with me!

My husband and I are currently deciding the best way to deal with paying off our mortgage early.

We have a mortgage of 42k with 15 years left to run. We are tied on a fixed rate of 5.74% on 32k of that and have just remortgaged for a further 10k at 5.89%. Our total mortgage is 42k. Our payments are currently 330 pounds per month. My husband gave up his job last September and is now a student training to be a plumber. We live on my wages, (957 pounds per month) Child benefit of 116 per month (we have 2 young children who are both at school) and WFTC of 250 pounds per month. The remortgage was used to pay my husbands not inconsiderable course fees. We have no other loans/credit cards etc. We can overpay as and when we want. Our mortgage interest is calculated daily. What I am wondering is, if we switched from a Repayment mortgage to an interest only mortgage, over a longer mortgage term, this would free up more money (because the monthly payments would be lower) each month which we could then use to make larger overpayments. - does this make sense? Our long-term goal is to be mortgage free by the time my husband is 40 in 3 years time. He is hoping to be able to start earning again in the next few months in and around his college course doing private plumbing jobs. Incidentally we live well within our means and even on our limited income we can afford to make overpayments of 200 per month at present. It is hoped when my husband starts working full-time again we can use all of his wages to pay off chunks of the mortgage since we have proved to ourselves that we can afford to live on my part-time wage. However our WFTC would go down. Our home is worth approx 170,000k

Your thoughts would be greatly appreciated.

pozalina

Hi there,

Well done for doing what you're doing on the money you earn!

I'm not one of the experts around here, but I'm sure they'll be along soon. I do think, however, that your idea of switching to an interest only mortgage to free you up to make more overpayments is flawed, though. It would surely be best to stick to a repayment one so you can actually pay off chunks of the capital owed. Just because they are called 'overpayments' doesn't make them any different than normal payments. What matters is the amount of cash you can throw at the debt each month, along with ensuring you have the lowest interest rate possible.

Maybe playing about with the repayments calculator will illustrate this better.

Best wishes with your plans.

in-need_of_money

Hi Mrs Optimist
I am not an expert, but if you can pay off any amount on your current mortgage without any penalty, then keep to to same repayment mortgage and just overpay as much as you can afford. This way the capital will reduce thus you will be paying less interest on the outstanding balance. Also, unless you do your homework you may incur charges to change your mortgage. By overpaying on your current mortgage (providing you have a good interest rate) your mortage will come down significantly and you will save loads of interest. Go to one of the mortgage calculators from links on this site and you can play around with the figures and type of mortage etc. It will guide you.
Best wishes.
in-need of money!:D

Mrs_Optimist

Thank you for your reply pozalina - your thoughts are greatly appreciated. I did wonder if the interest only option would be flawed, but am trying to look at every angle possible to try and clear our mortgage.

We manage well on our limited income because we do not spend unecessarily - we still have a foreign holiday once a year and take the kids away for a couple of weekends a year, but we do not smoke, eat out or even drink that much. Our income was quite tight for a couple of months but now that WFTC has kicked in again, we feel quite rich! It does make you realise how little you can live on if you set your mind to it. When my husband was working last year we used to spend both incomes every month without a second thought and too be honest we didn't live any differently than we do now - we just had credit card repayments (0% deal - we were too stingy to pay interest) Now that we have paid the card off we have surplus every month and want to concentrate on clearing the other debt in our life - the mortgage.

Joe_Bloggs

Is there a prospect for your husband to take on part time work in a DIY store for example. His experience will be useful to others and he could perhaps get a discount on tools and meet future clients. There are so many dangers linked to plumbing and associated electrics that it is wise to get in someone qualified.
J_B.

Mrs_Optimist

Note what you are saying Joe_Bloggs - he obviously would not tamper with boilers and gas appliances because he is not qualified to do that, but he is more than capable of fitting bathrooms etc he has done plenty of that in the past with his father who is a builder by trade. he is also doing "on the job" training with a qualified plumber (Unpaid at present) who has actually got him some paid private jobs lined up. The guy he is with at moment does major loft conversions etc so fitting a bathroom isn't worth his while since he used to earning major money. We just need to sort out the tax implications with Inland Revenue. He is constantly amazed at the so called workmanship undertaken by "qualified" plumbers who charge through the nose for substandard work. He is not the sort of person to take risks, although it is a thought to get other part-time work as you suggest. I will put this to him.

jockettuk

we moving to aylesbury and trying to get a plumber to move a few rads is like looking for golddust.. sounds like he doing the right thing in retraining .. good luck

madman2000

I am a newbie to this, trying to pay off my morgage early. I have been told that better than paying off the morgage now would be to invest any money I would normaly use as an overpayment in stocks and shares, and then sell the stocks in 5 years or so (hopefully should have made 50-60% increase) and then overpay that. Do you folks think that this ould be better than overpaying stright into the morgage? May not be as secure but could pay off big time? :rolleyes:

Im a little unsure. Im also looking at https://www.networkuk.co.uk which explains alot about how these morgage advisors make sooo much money out of us when we get a new morgage (amongst other things). :cool:

Mrs_Optimist

jokettuck - that is exactly the sort of job my husband can do - just a shame you live so far away! a lot of plumbers get greedy and charge extortionate hourly rates,and to be honest the sort of job you want done is so small many plumbers wouldn't want to touch it - they couldn't make enough money out of it. my husband just wants to do a job that he enjoys and that he is good at, make a reasonable (not extortionate living) and hopefully if there were a few more like him in our area the other plumbers would HAVE to lower their charges to get the work- win win situation for the consumer and my husband.

clarew

how envious am i of you! Living in london with 2 kids and a mortgage of 185k. Am trying to overpay, but normal payment is such a lot already!! I wanted to ask all you experts how you calculate how what difference small overpayments would make (ie:irregular payments of say £20/£40 everynow and then).

I have recently done a couple of overpayments, 1 of £40 1 of £80, and i remember one MSE'r saying she could work out how much interest she had saved on small overpayments of a few pounds. Any advice would be great.

But WELL DONE to you, on hoping to finish a mortgage by age 40. Think we will have to move to ever achieve that!

Gingham_Ribbon

http://forums.moneysavingexpert.com/showthread.html?t=155707

Check out this sticky, Clarew.

Good luck. It all adds up.