Crocc's Mortgage Reduction Challenge

crocc

Hello

Can I have a good at this too? I suppose I’m little different as I’m not going to set myself a target for being mortgage free but you will see when I explain about myself the reason I want to post on here.
Where to start – well I saw Martin’s guidance about this being a public board so will keep this in mind.

I’m Croc 28, single and bought my 1st house last year, after years of waiting for the property prices to drop. I took the keys in May 2009 and got a two year fixed rate mortgage for £79,000 at 4.19%. I finally moved into the house in December last year. Payments are £423 per month. Mortgage allows overpayments of £499 per month without penalty. I think (not sure) I have already made 4 overpayments so mortgage is at £77,004 (ish).

My new job which pays me £38,000 a year is I think only going to existence until November 2011. I was brought in for 2 years to manage a contract. The group of customers I account manage are dissatisfied with the service and will not renew in Nov 2011 – they have told me that. So my job is to do my best with them and ensure that the company delivers to the contract and we get paid. After 7 years of failing to deliver you can understand the reason my customers are not renewing. So after that I may get another job with my company but been as the market is declining year on year I’m assuming not.

So I want to make as many overpayments to my mortgage as possible (whilst earning the money) as I think any new job will probably pay 8-10k a year less until I work my way back up again.

Here are my incomings and outgoings. Some of these are an estimate as I am getting used to living on my own for the first time.

Net pay £1962.37 (includes £161 per month student loan deduction)
Water £75.00 (assuming per month as I like to overestimate)
Mortgage £423.00
C/Tax £80.00 (assuming paid up until March)
TV Licence £23 to start going down to £11
Petrol £200.00
Food £100.00 (no idea a guess)
Credit card £250.00 (will pay off my April but want to save this amount for a redundancy fund)
Gas/ Energy £75.00 (complete guess)
Internet £20.00
Gym £27.00
Phone £42.50
Dating website £20.00 (this will be binned in 3 months no luck on it lol)

If I have worked this out correctly it leaves me £627per month left over on a very rough guess.

I would like to make 12 monthly over payments of £499 to reduce the mortgage by 5988 or probably more realistically 10 months @ 499 = 4990.
Although careful with my money I do want to enjoy my life and still have a holiday and go out.


So any tips, does this seem feasible? I know its not mortgage free, but cant really plan because of the job situation, but at least taking the steps to mortgage freedom.

chirpchirp

Welcome and good luck.

I had a quick look at your outgoings and I'd query the amount you are paying on groceries and your guess for water. My council tax is £50 more than yours meaning my rateable value for my water should also be more than yours. I pay £30 or so a month for my water so I think this amount has been way overestimated.

I'd question your grocery shop too. Remember groceries include washing powder etc. I shop for myself and two children. I don't think it would be any cheaper to feed just myself as they eat very little and I don't spend ridiculous amounts on snacks for them and I pay for school dinners for all three of us. I'm presuming you will need to pay for lunches which you need to include in this grocery spend. I would expect this is likely to be between £150-£200. Also being on your own makes it more tempting to buy ready meals which are more costly than making your own. To keep your grocery spend to the amount which you are budgeting for you will no doubt find the old style board full of helpful hints and tips.

abouttimetoo

Hi there Croc :hello:

Welcome to the board. Don't worry about not having a mortgage free date, lots of people on here don't and all have different and plans but with the one aim of reducing their mortgage.

My one big concern for you is that most people would recommend you have an emergency fund built up of 3-6 times your monthly committments before you begin overpaying (please note that not everyone does this) but I'm concerned about how you would pay your normal monthly payments if you do lose your job and have a period of unemployment.


In no particular order some random thoughts are

• find out if you can get your OP's back if needs be - some mortgage providers will give you them all back so you could view it as a form of emergeny fund in itself. Some providers (like mine) won't give them back but will let me stop making normal monthly payments until the OP's have been used up as it were and others will just not give you anything back
• I know it's an estimate but your water bill seems wildly high for one person
• don't just think about what 'spare' money you can use but think about what you can reduce and how you can make the most of it e.g. some companies give you discount if you pay by direect debit, some give discounts if you go onto paperless billing
• how organised are you? If so, think about getting a 0% credit card for purchases then instead of paying it off in full every month put the full amount in a savings account and earn some intrest on it. Do this for a year and you will have made a bit of money
• Look at sites like Quidco and Topcashback before you make any purchases
• Do you have everything you need for your new home or might there be some largish expenditure you might have coming up
• Might you think about getting a lodger to boost your income - you can earn a certain amount tax free

Best of luck with your plans, keep us updated, we're a friendly lot (i think:rolleyes: ) and lots of people to support you or bounce ideas off

pawlala

good luck!

Your phone seems high, any way to reduce a monthly payment to around 20 or lower?

crocc

chirpchirp wrote: »

Welcome and good luck.

I had a quick look at your outgoings and I'd query the amount you are paying on groceries and your guess for water. My council tax is £50 more than yours meaning my rateable value for my water should also be more than yours. I pay £30 or so a month for my water so I think this amount has been way overestimated.

Hi,
Thanks very much for your reply. I havent paid a water bill at my new home yet for the year so I dont know how much the bill will be. When I moved in I paid £75 from January until March. Then I will be given my yearly options. I over estimated this on purpose so that I had less free money to budget with each month on purpose.

Your right about the groceries I think £150 a months is probably nearer the mark. I'm learning about living on my own all the time... I didnt think I eat that much

crocc

pawlala wrote: »

good luck!

Your phone seems high, any way to reduce a monthly payment to around 20 or lower?

Just yesterday I phoned up my mobile provider and scrapped the monthly insurance saving £7.50 per month and managed to get the same package but instead of £42.50 (inc insurance) I now pay £20. Result and I keep my iphone :D

crocc

Hi all,

Sorry I've not been updating this. Work has been mad and I mean mad. However I have been speaking to some customers informally and they wont be staying with us past contract in Nov 2011. That means that the job situtation could change then or shortly after .

However despite being mad busy some progress has been made:
1. I got a mobile phone bill of £53 for the month talk about giving me the kick up the backside I needed!!. I phoned provider got the same package for £20 per month and cancelled the insurance. Saving £22.50 per month
2. Rather un-money saving I have gone for Virgin tv, broadband and phone for £28 per month. The reason is I'm on PAYG internet dongal thing which £15 lasted me 2 weeks. It was only a interim step until I got sorted. I joined through a friends recommendation. I got £30 off month 2 and so did they. Its only a 12 month tie in so can search the market better then.
3. I'm put a couple of things on ebay that I dont need. I wont make much but it'l help
4. I have managed to make this months maximum overpayment of £499. Its not going to be an easy week and day until pay day but its been done. Good job I'm going back home to parents at weekend and I've plenty in the freezer.
5. Checked how much I have o/p my mortgage since I got the house in May 09. (only moved in December) anyway with this months op is £2994. So balance is at £76006 :j

So thats me a couple of small steps but getting there. At least I managed to make the o/p.

Crocc
P.S abouttimetoo I'll reply to your post soon - promise

SmlSave

Hi croc, just popping in to say well done on the OPing and getting your mobile bill down.

setmefree2

and Good Luck

crocc

Hi all,
Well other week has passed by and just when I think work couldn’t get any busier.

Anyway had a few light bulb moments this week:

My expenses at work are paid at least a month after I have incurred them. So January’s expenses will be paid on 1st March. This has never bothered me before but I realised this month in car park tickets alone I had £35 owed me. Its not like I can put these on a credit card as most car parks are pay and display. So what have I done about this? well I have found a couple of cheaper places to park so hopefully this wont impact my own cash flow as much from now on. I have a further £86 in train tickets on a credit card and £114 in mileage due. In future I’m going to order train tickets through work and try and eek out the petrol usage I use.

Done a signature as a motivation tool! Hope it works

I did my main monthly shop tonight £96!!! There’s only me!! I have to attack this and get it down. I still have my £12 a week milk, bread, yoghurts sandwich filling etc on top if this. I was shocked when I got to the till. ChirpChirp mentioned I got this wrong on my SLA and boy have I!! I wouldn’t care I didn’t buy any alcohol. (which I hardly drink!)

I have just had to pay for the sofa and chair for my house. (as you may recall this is my 1st house and moved in, in Dec) I got an expensive sofa and had to credit card £1,300 this evening. I’m going to keep my over payments on my mortgage going but slowly pay this off. I’ll have it cleared in 3-4 months.

Finally I put a couple of old books on ebay last week and got £30. I was dead chuffed and now starting to look around for other things I could sell. I seem to be so time poor at the moment!

Its hit me that I’ve still not got a handle (as this is my 1st house) on when bills are due and they take me by surprise. I have just realised that I have to pay £161 council tax (from Feb to March) on Monday.

I think my overpayment plan is looking a bit optimistic. Did anyone else find this at the start?

Crocc

chirpchirp

Croc, it's easy to over or under estimate things.

I set up a spreadsheet to help me each month. I can see how much I have coming in for the month and every time I write a cheque or debit my account by other means I put it in the spreadsheet. Payments are in a different colour until they have cleared but the balance left to spend assumes these payments have been made. Without this I would have been scuppered as I have two kids and lots of payments are termly and by cheque. I built up a reserve in my current account to take care of these payments before I began overpaying. For the first few months I paid about £20 and then when my interest rate decreased I just paid the amount I would have paid normally. I increased my payments once I became full time at work and put surplus amounts into savings accounts as they pay more than my mortgage interest rate.

I have a seperate account which I pay a monthly amount into to cover yearly debits such as: Car insurance, Contents/building insurance, Car Tax, MOT.

As your only on a 2 year contract, think carefully about building an emergency reserve first.

The fact that you've started to look at paying your mortgage off is the first step, maybe it will take longer than anticipated as it takes a while to realise just what is needed. The beauty of doing a spreadsheet, is that you can look back and see what payments are due when, once you have built up a years worth.