The maths behind aiming for mortgage-free

ailuro2

http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings

This link has the man in the know's explanation:money:, and a handy little calculator to work out how high your savings need to be to beat your mortgage interest rate.;)

Rob71

Queen-Bee wrote: »

Hello Rob,

I agree, there's nothing quite like redundancy to focus the mind, is there? (It happened to me this June)

However, one point in particular struck me from your last mail..


... I buy my building+contents from my BS at the moment and I'm sure I ought to be able to get a better deal. Can I ask who you used?

Best wishes
QB

Sorry to hear about your redundancy - like you say, it focuses the mind and brings out your survival instinct. Like they say, every cloud has a silver lining!
As for who did I go with insurance wise - I just banged the details into Tesco Compare and MoneySupermarket, and wound up with Sheilas Wheels... It's gone from £349 down to £101!

To say that I'm happy is an understatement - the actual details of cover are better than what Aviva were offering. Having said that, I'm well aware I'll have to do the same next year in order to get a competitive quote - it's always a mistake to stay just because it's less hassle.

Rob71

StuartGMC wrote: »

My spreadsheet (see above) includes expectation of car replacements (me and OH) needing to put aside £4500 per year; computer will say yes (I'll make it do so) in Feb 2011 to the Jaguar XF 3.0 Diesel S (42mpg combined cycle, 178g/km CO2 - both better than the 3.0 S-Type SE petrol I have now; how can OH argue against that????)

LMAO! :rotfl:

That's the kind of thing I'm trying to balance against paying off the mortgage at all costs! Not sure I need a Jag, but the current motor is getting to the expensive stage in it's life (and besides, we all need something to enjoy in life, and the XF is rather gorgeous - it's just not something I can "afford" atm - mine will have to be a bit more modest). The OH has a decent car for ferrying around the soon-to-be-born bub - then again that's also a consideration (loss of an income)...

The devils in the detail, and it's all about planning...

Queen-Bee_2

Thanks Stuart, thank you Rob...

Direct Line and Sheila's Wheels (I thought they only did car insurance?!), will be definitely be on my list to check!

I'm afraid I'm absolutely one of those people who read the small print on everything, just to be sure and then again... after all... am I sure I'm sure...??
QB

StuartGMC

Rob71 wrote: »

The OH has a decent car for ferrying around the soon-to-be-born bub - then again that's also a consideration (loss of an income)...

The devils in the detail, and it's all about planning...

Rob
We were just three years into the mortgage when OH had our daughter; she has worked part-time ever since. The major impact financially was the massive reduction in disposable income (her salary was the same as mine) and how that stopped me changing cars every 2yrs etc. We have however, continued with foreign holidays etc for the nearly 12yrs since (our daughter gaining massively from the exposure to other cultures). Our OP dropped obviously and was as low as £50 per month for some time (which was also a disappointment) but slowly things picked up as our salaries increased and fortuitously interest rates dropped.

Very best wishes to both of you in terms of the MFW plans and also with the addition to the family.

Prudent

Maths is definately not my strong point, so I would ask the mathematically minded to be kind here.

I paid off my mortgage when rates were higher. There was no advantage in having more than emergency funds in savings. I steadily built up my savings (mainly in ISAs) until I was happy with the amount. Now I put the spare cash from being mortgage free into extra pension payments as I can gain from the tax relief. I am not sure if this is the best use of the money, but it seemed sensible to me.

StuartGMC

Prudent
It all depends on circumstances; with ISAs you choose what to do with the monies whereas the pension is locked into constraints on when and how much (25%?) you can extract. The pension gets tax relief but the ISA doesn't... You may want to discuss with an IFA.

Prudent

Thanks Stuart. I did see an IFA last year to try and help me get the right balance. I did get my savings to a decent level before locking extra money in a pension. I am 43, so potentially this money may be locked in for another 12 years at least. I continue to save for things like house renovations, a new car etc, so that the safety net savings stay in place in case of something like redundancy or major illness.

bigheadxx

ScoobyLoot wrote: »

Mock if you like, but unless you've got an accurate model of your mortgage's behaviour and have bothered to calculate your accumulated wealth based on different approaches to paying said mortgage, then you perhaps don't appreciate the nuances of how things interact over time.

My mortgage is very well behaved. I pay it once a month and it keeps a roof over my head.

It took me three months to find a mortgage "expert" at my bank (after being sent round the houses) who actually knew precisely how they calculate their mortgages. Without that info all I'd have to go on is my statements and two interest rates for comparison. I wouldn't be able to model how it actually behaves - just like most of my bank's mortgage "experts". Once you actually get talking to someone who knows what they're talking about, it's great. I was able to have a conversation with them and found a subtlety of their calculations that means you can be charged slightly more interest than is strictly fair. Result: I get sent a cheque that more than covers the difference. :j

You mean some guy listened to you for an hour talking bo***ks and sold you a mortgage for a big fat fee.

getmore4less

StuartGMC wrote: »

Prudent
It all depends on circumstances; with ISAs you choose what to do with the monies whereas the pension is locked into constraints on when and how much (25%?) you can extract. The pension gets tax relief but the ISA doesn't... You may want to discuss with an IFA.

Also have to factor that the ISA is tax fee when you start to draw, the pension is taxable. Age allowance is the one to watch later in life with pension income.