Officially beginning our Mortgage Free journey!

SkintGypsy

So peeps, it's official. We are debt free and now starting our mortgage free journey in earnest.

A bit about me/us, we took on a gargantuan mortgage of £175000.00 in 2007, at the height of the market, at 95% on a three year fix. We were on a repayment initially, but a job loss caused us to drop this down to interest only for 18 months. When back up and running we put all our extra cash into paying back our non mortgage debt. That point has finally arrived, and so we are now on the journey to being mortgage free.

I have already requested the forms from the building society to switch back to repayment, and as our fix ended last month, the repayment should be about the same as the interest only was. Added to this, now we are debt free, I intend to overpay by as much as allowed per year from our general earnings.

I am currently on maternity leave, yet to decide whether I wish to return to work. If I don't, we can afford to live off husbands monthly salary, but not to overpay. He does earn a bonus, which I can swipe for overpayments when not needed for anything else. Will have to see where we end up...

Am sure the motivation of seeing the mortgage come down will be enough to persuade me back part time.

My poor husband has been deprived of any frivolous expenditure for years, and now it continues. He'll be grateful in the end, I hope!

I see there are some calculators and spreadsheets around to see what my overpayments will do, so am off to have a play and motivate myself further. Am so excited!!!!

Gypsy xx

wantabetterlife

Hi Skint gypsy, i remember reading your posts on the DFW board a while back. Every so often i go onto this board as there are some really inspirational people on there who can do amazing things with a cooked chicken..lol. I think it really helps to think of the mortgage as another debt and not just a bill that we should pay the minimum off every month. Anyway, i look forward to reading about your journey :D
WABL

SkintGypsy

Thanks wantabetterlife. It seems that we can overpay by as much as we want and it goes into a reserve fund for if we ever need to reduce our payments, so that is better than savings in my book! I just can't wait to make my first overpayment. I can see me getting addicted.....

RenovationMan

Pffft "gargantuan mortgage of £175000.00", why that's just small change! :)

Good luck with your MFW quest and well done on becoming debt free!

SkintGypsy

Renovationman, I see that my mortgage really is small change compared to your start point! I covet your loan to value. One day. Sigh.

RenovationMan

SkintGypsy wrote: »

Renovationman, I see that my mortgage really is small change compared to your start point! I covet your loan to value. One day. Sigh.

That LTV consists mainly of huge price gains over the last decade and 10 year's worth of overpayments, some small and some large. I'm hoping to get to 50% over the three years, not because it will give me a better mortgage rate (I think most top out at 60% LTV) but because of a psychological feeling I'll have knowing that I own as much of the house as the bank does!

Keep plugging away, you'll get there!

SkintGypsy

Ok, so I need your advice. Having paid off all debts, bought myself a new old car, we have stashed the remainder of hubbles' bonus in an instant access savings account as an emergency fund. I have sent back the forms to the BS to change the mortgage back to repayment and reckon on having about £500 a month to either overpay or add to emergency fund.

I have worked out that without the mortgage we can live off £700 at a basic level if husband were to lose his job. Our interest only mortgage would be about £350. What I was wondering was, do I build up the emergency fund to it's full six month level first, or do I proportionately build up emergency fund and overpay mortgage to six months payments alongside each other? Our mortgage allows us to use any overpayments to fund any shortfall, so I was thinking it would be better to do that? Any advice appreciated.

Gypsy.

RenovationMan

I'd start by asking yourself if you really need 6 month's worth of savings in your emergency fund. Is it likely in your OH's industry for him to be out of work for 6 months? Have you factored in that certain outgoings disappear when you're out of work (such as travel costs, lunches, etc.) plus redundancy protection insurance often pays out after 1 to 3 months, so you may just need cover until that kicks in. Other insurances cover a lot of emergencies, so again you may not need so much money put to one side.

If you're changing your IO mortgage to a repayment one you'll also have to factor in the additional payments into your emergency fund. Your provider may not allow you to go back to IO in the event of a job loss. I'm on an IO mortgage and always will be - I like the flexibility of overpaying when we're flush and having the option of paying the absolute minimum if finances are tight. You might also want to ask your mortgage provider about payment holidays or retrieval of overpayments in an emergency. It all helps to get you through bad times and prevents you holding cash at crappy rates when you dont need too.

SkintGypsy

Thanks for that RM. Yes the calculations I have done are truly bare minimum. Food, insurances, gas,elec, council tax.

Having read the article posted above I think I may have made a bit of a b00b with regard to the repayment. When we took out the mortgage with Portman, our overpayments were restricted. Now our fix has ended and we are on a Nationwide base rate it seems that we can overpay as much as we like, which in hindsight would have given us the flexibility we desire.

In answer to your question about husbands job, it shouldn't be insecure, but experience tells me that anything can happen. I am too afraid not to have a strong backup plan in place! And yes, the overpayments seem to be kept separate so we can use them in times of hardship, although I don't think we can withdraw them, just use them to pay the mortgage if we run into trouble.

Am a bit annoyed with myself now. Wonder if I can get them to ignore the forms, since I only sent them back a couple of days ago.....

SkintGypsy

RM, you have made my day! I have put a stop on the repayment so will simply set up a standing order for the same amount, and then overpay on top as and when. I would have had to pay to switch it back if I had done it in September, so you just saved me a charge too!

I am tres relieved

Gypsy xx

RenovationMan

SkintGypsy wrote: »

RM, you have made my day! I have put a stop on the repayment so will simply set up a standing order for the same amount, and then overpay on top as and when. I would have had to pay to switch it back if I had done it in September, so you just saved me a charge too!

I am tres relieved

Gypsy xx

Happy to help SG.

A lot of people seem to have a downer on IO mortgages, but as long as you overpay the same or more than you would on a repayment mortgage, there is no difference. Apart from the flexibility you get with IO if things go wrong. I've seen a few people on the DFW board who are struggling due to job losses and such but whose mortgage lenders wont allow them to go IO to ease the financial burden. It seems shortsighted of the lenders because they're just adding to the burden on their customers and they could end up having to chase for defaults or having to reposess.

I got a lot of flack for my IO mortgage from a few people, both on here and in real life but due to overpayments I'm already 25 months ahead of where I would be if I had a repayment mortgage and made no overpayments.