Baby steps to being mortgage free

Baby_steps_2

Hi all,

Well I have been lurking reading other peopels diaries and it has inspired me to document my attempts to be mortgage free. We bought our house at the height of the market in may 2007. Being in negative equity makes it more important than ever to try and sort out our mortgage debt. We strafed out with no deposit and therefore we really want to get ourselves out of negative equity and get some equity in our property.

Our mortgage is currently £164,000 and we are on a fixed rate at 5.62% until July. We are still deciding whether it is best to fix again (at about the same rate) or move onto a tracker at 3.14% but risk interest rates rising. Any advice would be appreciated!!

Although we both earn good money we have some debts to pay off (shoul be done by September) and need to build up some emegency funds after this.

Following all of your inspirational stories we are due to make our first overpayment of £100 this month!!! We will continue to do this until July when we are due to re-mortgage. After this it will depend on what we re-mortgage to.

Now all I need to do is get the OH to commit to doing this together!

InaPickle

:wave: Hi Baby steps!

Nice to see you have a diary. Alas, I'm probably not the best person to advise on mortgages, but if I can help in any way about cutting your existing expenditure to free up some more money to put towards your overpayments, I would be more than happy to do so.

Take care and I look forward to reading more.

SmlSave

Welcome to MFW Babysteps

I've just come out of a fixed rate at the mo and am debating the same thing...fixed or tracker....?

I think I've finally decided to get the NatWest tracker at 3.5% as its got a special deal where after 3 months you can fix if you want. But I've still got to have the dreaded meeting when they decided if you're suitable or not! scary

Now all I need to do is get the OH to commit to doing this together

Good luck

THRIFTY_GIRL

Welcome!!

It is worth comsidering what your lenders SVR is and you will automatically be moved on to this when the fixed rate deal ends. I suspect you will struggle to find a better rate until you build some equity into the property. I would probably move straight to SVR and then save up.

Good luck with whatever you decide.

Regards
Thrifty

madeupname1

Hi Baby Steps

Your post really resonated with me. I also bought my place at the height of the market in 2007 too and whilst I did have some equity, that has pretty much vanished in the intervening two years.

I also came out of my fixed rate in November last year, fixed at 5.49%, and had to make the decision as to whether to try to fix again or whether to ride it out on the SVR, particularly as with zero equity no other lender would be willing to lend me money! The thing that helped me decide was looking at the actual figures. In my case, I worked out that fixing again would be costing me several hundred pounds more per month in interest (not including the fees you pay for refixing). That said, my mortgage is a lot bigger than yours, but I assume the same principles will apply. Over the term of the fixed rate (2 years) the cost of having certainty was several thousand pounds (assuming that interest rates stood still). Of course they wont - they will rise but the question you need to ask yourself is whether you think that they will rise to the level of the fixed rate being offered and beyond. I don't think anyone really knows the answer to this.

For me, I felt that that the cost of having the peace of mind of a fixed rate was simply too high and that money would be put to much better use by reducing the outstanding loan so that, even if the interest rates rise, because the capital sum was reduced, the actual amount of interest paid would be kept as low as I could get it. Also, by reducing capital, I felt I stood a better chance of reducing my LTV to a level that would give me more options for better mortgage deals later on down the road.

Anyway. Well done for making your first overpayment :T and welcome to the boards!

DansMum_2

Well done on your first OP I have to warn you that the whole 'Pay the Mortgage Orf' early thing can get soooooooooooo addictive.

I'm really no good at advising about mortgages, I'm currently with a VirginOne account offset thingy which is at 3.65% SVR. My problem was I've only paid interest since I took it out in 2001 so I have to get my fingers out! Aiming for 01/01/2024 but would like to shave a year or two off that if poss.

If you can £100 from now to July thats £500 gone so I look at it being 'X number of Payments'

Good luck xxxx:beer:

Baby_steps_2

Thank you all for your lovely welcomes.

Madeupname1 I'm sure we aren't the only ones in this situation. The only good thing for us is that we aren't in negative equity for mortgage purposes. We bought a new build house and the builder put in 25%. This is interest free for the first 5 years (so another 3) after this interest will be charged (I can't remember at what rate). We can then choose to buy the other 25% or we can leave it as a loan. They will take 25% of any profit or loss made when we buy the remainder or sell the house. This is treated as a loan against the house for mortgage purposes (allowing for falling prices) I reckon we have an ltv of about 80%.

I hope this makes sense I explained it as simply as possible. So although for mirgag purpose we are not in negative equity the reallity is we are and therefore we need to try and build up as mih equity as possible for when we sell or buy the remainder.

Dansmum - I know every overpayment counts so am just thinking by July that will be an extra £500 and looking at the overpayment calculators this small amount will save us £1030 in mortgage interest!!! (your right I can see this getting addictive - is there an MFW aa???!!)

So over the next week I'll be reviewing my budget, taking some ideas from these boards to try and work out what savings can be made to put towards this. Any ideas and help will be appreciated and I will keep u all updated here. I look forward to reading all ur diaries to keep me motivated!

Brallaqueen

Hi baby steps

I just wanted to wish you luck on your MFW journey & sorry to hear you are in negative equity - must have been a shock just after buying your house.

All the best

staceydaisy

wishing u lots of luck.

My inspiration is for every pound I borrow i pay something like £2.50 back

hope this helps

setmefree2

and Good Luck

Baby_steps_2

Setme free, thank you for the amazing welcome.

Well the good news is I have officially started, I made the first overpayment today

In addition I have paid £1000 off of our credit card bill, however some of this may go back on as we are hoping to book a weekend away soon. I have cashed in my air miles for flights to a zone one destination, now all we have to do is decide which one!!

I think I need to accept that this is going to be one long journey, the first step being clearing the credit cards. Allowing for some extra expenses (holidays, car insurance, mortgage arrangement fees in July) as well as contributing to helping the OH clear his realistically this should be done by the end of this year.

Therefore my list of aims for the next few months are as follows:

Clear the credit cards- This is the main aim, I want to have this done by 31 Dec 2010.
Overpay the mortgage- by at least £1000 (will try to do more than this but this is the minimum I want to achieve this year).
Saving for xmas - starting this month I will put £30 a month away for xmas 2010. This should mean i have £270 saved by December if i start this month which should cover most of the pressies.
Saving my pennies- as you all say the pennies add up to £££'s! Every Friday i will clear out my purse and everything in it below £1 I will put in a virtual whisky bottle (where do you get the real ones??).
Cashback sites/surveys - Following advice on here (notice a theme anyone) I have joined quidco and toluna. Have no idea how much i will get back but anything that I make from survey, cashback sites I will put in a savings account to see how much i can make in the year.

These are the big ones to start as of now. I have written it down so come the end of this year I can review and see exactly how I have done.

The next thing to do is sort out budgets (OH has promised to sit down on wed to discuss with me). If he doesn't then I willsort it out on my own when I have the chance this week.


Well that lists my key aims to start with. Looking forward to getting going properly now.