Mortgage free in 3 years please.

shimster1_2

I have 8 years and 6 months left on my mortgage which i have fixed at 5.48% for the length of the term. The amount i have left to pay is £25000 of which i have £10000 savings which i would be willing to use leaving a debt of £15000 including the small redemption. Can anybody advise me on what to do to clear this debt as quickly as possible as i really want to get out of the mortgage rat race, preferably within 3 years. I can pay up to about £500 max each month and had thought about getting an unsecured loan and also had considered the 0% free balance transfer credit cards and changing when the deal ends. Are these ideas any good and are they possible? Any other ideas would be gratefully received.

Cheers shimster1

northum

If you pay in the 10000 and pay 500 a month at that interest rate you should have paid everything back by May 2009 by my calculations, beating your 3 year target anyway. :cool: You could always aim for 2 years!

Moving debt to interest free cards can help but does take some effort and concentration. The major benefits of that technique are when you're avoiding paying normal credit card rates not just mortgage rates.

shimster1_2

Thanks for the post but i am only allowed to overpay by 10% each year or i will be charged an overpayment fee based upon the amount i have overpayed and those fees look quite hefty. Have you any other ideas?

northum

In that case I would overpay by as much as possible without incurring fees and keep building up the savings (in an account paying good interest!) until they match the amount remaining on the mortgage then pay it off in a lump sum.

You're in a strong position really, you could consider saving harder by cutting back or increasing your income somehow, but only you can decide how badly you want the mortgage paid off and what level of effort it is worth going to!

shimster1_2

I have just done my sums and that looks quite a good way of doing it. I will work it out fully and hopefully will find the solution soon.
Has anyone else got any thoughts on this?
Again thanks for the post.

mocolo

I think you could easily do this. At the beginning of the year, I owed about 25,000 on my mortgage. I am now tied in till next year, but I currently owe 13000. I am saving everything I can, and aim to pay off before next June. I used some savings and windfall to reduce it when I could overpay. Now I have paid the allowed 10%. My penalty is 1%-so I will pay this once I have enough saved up/

good luck with yours-get yourself a mortgage pig and mortgage grid of some kind to motivate and look at extra ways to earn

mocolo

Dan29

Unless I've misunderstood, you're going to have to pay early repayment charges if you pay off the mortgage early aren't you?

In other words, if you overpay 10% a year won't you be repaying the full balance before the 8.5 years is up, meaning you'll be hit with penalties then anyway?

Is the penalty the same throughout the life of the mortgage or does it come down in steps?

shimster1_2

Dan the penalties start at 5% and start going down by 1% after year 7 but as i have only been with this lender for 16 months i am hoping not to reach 7 years hence requesting for the help.cheers for the reply.


Mocolo thanks and yes i am thinking of getting a mortgage pig but i dont know about the grid maybe i have to investigate this site some more.

Dan29

shimster1 wrote:

Dan the penalties start at 5% and start going down by 1% after year 7 but as i have only been with this lender for 16 months i am hoping not to reach 7 years hence requesting for the help.cheers for the reply.

It sounds like you'll have to pay a penalty then - it's worth making sure that it's worth it compared with the financial/psychological benefits you'll get from paying off early.

liz.._4

could you change your mortgage to another provider? maybe a current account mortgage so you could still have access to the 10k if things get bad? The start up fees (if there are any) would negate the redemption fees you would be liable for on your present mortgage.

shimster1_2

Thanks liz but i dont understand what you mean, surely if i go to another provider i would pay twice because i would pay a redemption on the old and a start up on the new so how does this negate?