Going to give it a go !

silver_4444_uk

Hello everyone,

After being inspired by many of the posts on this forum and perplexed by the seemingly ever-decreasing ISA interest rates, and having to continually chase a better rate. I have decided to try and clear my mortgage within 8 years or at least kick a sizeable hole in it !

Another deciding factor for me has been having to "live" through 3 rounds of redundancies at work over the last 7 years. It hasn't been pleasant !

I have a variable interest only mortgage of £142500 with 21 years to go at a rate of 0.99% above bank of england base rate. I am fortunate in that it is a flexible mortgage which allows me to make unlimited overpayments and withdraw unlimited cash up to my credit limit, should I be desperate enough to have to.

I have done a budget, as suggested by many of you, and I reckon that I can overpay by ~ 1200 per month and still live a little. I am also in the process of withdrawing my savings this week and bringing my mortgage down to a starting point of 120,000 from 1/12/09. I will still be keeping 3 months savings in a deposit account, for emergencies. I could put this into the mortgage, but it is purely for my own sanity, regarding future redundancies.

According to the Egg calculator I should be able (fingers crossed !) to pay it off within 7yrs 11 mths. The two things I am having to budget around are my 2 daughters and their education, which obviously is going to take priority !

So there you have it, that's my goal !

Outstanding mortgage wef 1/12/09 : 120000
Monthly overpayment : 1200
Mortgage free date :1/12/17

Thanks for reading.
Any thoughts, opinions would be greatly appreciated.

Silver4444uk

dimbo61

Consider the ages of your girls !
Having the mortgage paid before they go off to uni might help in supporting them with fees and living expenses
GOOD LUCK

setmefree2

and

financialbliss

silver_4444_uk wrote: »

I have a variable interest only mortgage of £142500 with 21 years to go at a rate of 0.99% above bank of england base rate.

Any thoughts, opinions would be greatly appreciated.

Hi silver_4444_uk,

Welcome to the mortage part of MSE forums. Here's my 2p. I've highlighted the important bits in your original post.

You have an interest only mortgage. Do you currently have a repayment vehicle in place? Was there a reason for going IO in the first place? Have you considered converting the mortgage to repayment?

Your mortgage rate is currently 1.49% I guess you're paying around £177 a month to service the interest on your mortgage.

You should be able to get a better savings rate than your 1.49% mortgage rate, eg regular savers, internet savings accounts, fixed term savings products etc, so I'd think long and hard before putting existing savings towards the mortgage - that's quite a low mortgage rate you have.

I'd consider using the £1,200 a month to build a savings portfolio with products that beat your current mortgage rate and continually review these products if the base rate changes.

Some people are "savings pot" people and some are "reduce my mortgage" people. You need to be disciplined enough not to tap into your mortgage savings pot should you decide you need a new car, new kitchen etc.

It's a tough call - I like to see my mortgage reducing month on month, but consider this:

Mortgage at 1.49%: £2,123 interest per year ~ £5.82 per day
Mortgage at 5%: £7,125 interest per year ~ £19.52 per day :eek:

You will need to make sure that you don't get caught out with base rate increases, as the only way is up now.

Financial Bliss.

silver_4444_uk

Hello Dimbo61,

They are 14 and 12.
So I know I should have started overpaying sooner.
But I should still be able to give them a helping hand, even if it does mean having to take funds out of the mortgage account.

Thanks.

silver_4444_uk

Hi Financialbliss and Setmefree2,

Firstly thanks for the welcome !

I think I'm definitely one of those sorts of people that wants to see my mortgage decrease in size. As you said Financialbliss, there is only one way that those interest rates are going to go and that is up.

I have one question for you Financialbliss and that is why should I convert from an interest only mortgage to a repayment mortgage ?

I thought that with my payments of 177 pcm + overpayments of 1200 per month I would be paying the capital off and it would take the same amount of time and money to pay the mortgage off, as if it were a straight repayment mortgage of 659 per month with a smaller overpayment of 717pcm.

Thanks
silver_4444_uk

pammyj74

Hi, have no advice as such but wanted to wish you good luck and hope that your job is safe.
Im not sure how it works with the interest only mortgage, do the overpayments come off the capital or the interest?

chirpchirp

Hi Silver

I also have an interest only mortgage at 1.49%. With that amount of disposable income I would suggest you take a look at the LLoyds vantage current account. On balances between 5k and 7k it pays 5% which must be about the best rate you can get at the moment and wouldn't take you long to get to at £1200 a month.

There is no benefit in changing from an interest only mortgage to a repayment mortgage, if like me you are attempting to pay it off and are on a flexible mortgage. The damage with interest only mortgages is when you are relying on a repayment vehicle such as an endownment which fails to reach the required growth. Due to the bad press a few years ago many still feel that Interest Only mortgages are always a bad thing. If you are disciplined I see no problem in retaining your IO mortgage.

silver_4444_uk

Hi Chirpchirp,

Thanks for that. I thought I was overlooking something about the differences between interest only and repayment mortgages.

Thanks,
silver_4444_uk

financialbliss

silver_4444_uk wrote: »

I have one question for you Financialbliss and that is why should I convert from an interest only mortgage to a repayment mortgage ?

I thought that with my payments of 177 pcm + overpayments of 1200 per month I would be paying the capital off and it would take the same amount of time and money to pay the mortgage off, as if it were a straight repayment mortgage of 659 per month with a smaller overpayment of 717pcm.

Hi, Silver,

I was just thinking out loud and the IO to repayment was something that popped into my head. With a repayment mortgage, you're guaranteed to clear your mortgage at the end of the term, but with IO, you'll still have your original amount unless you have made overpayments or have a repayment vehicle in place.

As chirpchip mentions - there's only a problem if you're not disciplined. I've actually had an interest only mortgage in the past with an endowment, and I'd not go down that route again, as I got my fingers (wallet) burned with an under performing endowment.

But, I've checked your sums and they stack up - so go for it.

Have you put any thought into joining a mortgage challenge - think there's a few knocking around... :rolleyes:

Financial Bliss.

silver_4444_uk

Hi Financial Bliss,

I have also had my fingers burnt with endowments, so I know your pain !
I am going to join the MFiT-T2 challenge, so there is no escaping the benchmark.

Thanks again for your advice , it is much appreciated.

Silver