Some sense please ... again

Spiggle

ETA: This has now become my diary but I can't change the thread name but if I could it would read Five years for Spigs to be Mortgage Free!

Can I please ask for your wisdom again please?

I'm in the lucky position of being able to OP another £200 per month off my mortgages. My first OP of just over £80 on each went out today about which I'm chuffed.

I have two mortgages the first and main one stands at approx £45,213 @ 0.19 above BoE (currently 0.69%)(lifetime tracker no limit on OP per annum). The second is smaller standing at approx £7,594 @ 0.99 above BoE (curently 1.49%) same terms as the main.

Logic tells me that I should add the whole £200 to extra OP on the second one as the int rate is higher. But I keep wanting to split it into £100 extra off each. Then I argue with myself that this is stupid and get all confused.

I also have a CC of £2,620 which is on 0% for 12 more months and is already budgetted to be OP at £230 per month.

So when I get confuddled about the mortgage OP I then start thinking should I chuck the £200 at the CC! AAaaarrrrgh!

Please would someone just tell me which is the most sensible option to get best value from every £1 I can OP please?

Thanks in advance,
Spigs

Tesco_points_addict

Have you got the money to off your CC in full once the 0% is over? If not I would pay it off that, otherwise pay it off the higher rate mortgage.

Both your mortgages are at fabulous rates well done!!

Good luck

TPAx

Spiggle

Thanks for your reply TPA,

Yes, no problem with paying off the CC when the balance reduces more.

I'll probably have a bit more than the £200 in all honesty but as its the first month with the new salary rate and with all the piggybanking, redated monthly payments, etc I just want to see how it all comes out at the end of the month if you see what I mean. But I want to set up my SO for next months OP so its all set.

The budget planner tells me I can afford a fair bit more than £300 (and I have been over this time and again to make sure I haven't missed something!) but I don't want to be too over ambitious with Christmas coming. Whilst I have piggybank accounts for this and everything else they're relatively new so don't have a huge balance in them yet and will be far better placed next year.

I've done all the calculations (back in August) and I retarted to 13 mths 0% and no fee in September for the CC. It will all be paid off by the end of the 0% term at £230 per month. (I don't use the card its purely a BT card.)

I keep chucking the numbers into the mortgage OP calculator and I'm just going around in circles.

I may just have to sleep on it and try again tomorrow. Trouble is I tend not to sleep when I have a money question on my mind!

Thanks again,
Spigs

tootallulah

I think that the right thing to do and the psychology of paying both work in this case. Pay the extra payments to the second mortgage and aim to get it completely paid off ASAP. That way you will end up concentrating on one debt (the mortgage 1) AND you will have paid off your cc debt and one of your mortgages in quite short order. It would work for me but in the end it is all debt on low interest so just paying it somewhere is a bonus!

CathT

Sounds like you have everything in hand, and what fab tracker rates!!

Spiggle

Thank you tootallulah and CathT,

I think I've just made a decision! I'll up the main mortgage OP slightly to £478 (total payment) as I have a rough idea that the interest per month is about £28. I'll increase the 2nd mortgage payment to £361 (total payment) per month as the rough interest per month on that is around £11. That way I know that I'll be paying £800 minimum per month off the total mortgage capital outstanding.

The mortgage calculator I downloaded from the site says that at that rate the smaller one will be paid off in 1.8 years. At that time all the money from the 2nd mortgage will get thrown at the main one.

The budget planner also tells me that at that rate I'll still have £174 per month 'free' cash which will help get me through Christmas expenditure.

When the CC is paid off I had already decided that the £230 currently being paid will be redirected to mortgage OP so that will help in a years time. We also have a fully budgeted for loan/hp (new kitchen last year) that is on 0% for the term and that will finish in two years. The £100 per month for that will also then be transferred to mortgage OP.

I somehow have to reclaim my midset that I 'forget' the CC and the loan/hp as they're budgetted for, set up and aren't costing anything in interest.

I haven't found anything that will calculate all of these variables and dates but my gut tells me that my aim to be mortgage free by the time I turn 55 in August 2015 is possible.

Once Christmas is over I'll reassess what we have as excess in the monthly budget and look to increase the OP again too. That should certainly help.

I was very lucky with the tracker rates. We've always been stupid having interest only mortgages and because we have always had loads of equity have remortgaged gawd knows how many times! We saw the light and started on repayment mortgages about 5/6 years ago with the first being a three year fixed rate. When that expired this tracker was available (it was just before everything started crashing) and I thought why not and went for it. The foolish thing was taking out the smaller mortgage to 'consolidate' CC, loans, etc.

We have since then of course had our LBM and are far more sensible now. The complete financial overhaul I undertook in August has really helped too. I have to be very careful though that having been lucky enough to get this rise we don't slip back into bad old ways. I didn't ever think I'd worry because a budget planner told me I had excess! (I have been back over it again this morning to see if there is anything missing and there isn't!)

Right off to readjust the SO for the 1st November. Thank you all once again for your thoughts and advice, I really appreciate it.

All the best,
Spigs

CathT

You seem really focused and I am sure you will reach your goals. I'm hoping as we increase our equity we can obtain better interest rates in the future (currently on base rate + 2.69%) Will be so nice when there is no mortgage to worry about.
We are some way off retirement 28 and 34 but I would love to get the mortgage to a point (if not MF) then we can survive on 1 ft and 1 pt salary so we can enjoy life more and perhaps have another baby.

Is this the start of a proper diary for you then Spiggle?

getmore4less

Don't pay anything of any mortgages

SAVE even with tax you are better off

2.5%+ instant access

More with regular savers
http://www.moneysavingexpert.com/savings/best-regular-savings-accounts

Spiggle

CathT wrote: »

You seem really focused and I am sure you will reach your goals. I'm hoping as we increase our equity we can obtain better interest rates in the future (currently on base rate + 2.69%) Will be so nice when there is no mortgage to worry about.
We are some way off retirement 28 and 34 but I would love to get the mortgage to a point (if not MF) then we can survive on 1 ft and 1 pt salary so we can enjoy life more and perhaps have another baby.

Is this the start of a proper diary for you then Spiggle?

Hi Cath,

I think it might just be the start! I do have a diary over on the DFW board. The trouble is on that board there are people in really serious dire straits and it sometimes feels a bit like I'm ... I don't know gloating or something and it makes me feel a bit odd/bad. You know there are so many in DFW that have DMP, are being chased by DCA and I'm very lucky to not be in that position.

I went over there initially because of the CC debt but now that is firmly in hand I find this board is more in line with what I'm trying to achieve and I don't feel bad about having the excess to be able to pay off the mortgage.

I'll keep posting here in future and just give the odd update over on the DFW diary I think.

ETA: By the way, yesterday I thought what's the simplest way of seeing if I really can achieve the five years, bearing in mind I have a lot of variables? So I just chucked the actual mortgages balance into the calculator and divided it by 800 (the monthly OP) and it gave me the answer of 66 which i think means 66 payments (more or less). Therefore, taking into account that my payments will rise in time due to possibly more disposable plus the available payments once CC, small mortgage and loan are finished this would indicate that my target of 5 years is very achievable. Yay!!!!

Thanks for your support and comments Cath. And as for having a head screwed on, I wish I'd been as wise as you when I was 28! Well done and I wish you all the very best with it.

Take care,
Spigs

gallygirl

I agree with the previous post. With such fab mortgage rates you should save as much as you can - start off with filling your cash isa's for the year if you haven't done so already. If you earmark it for paying off your mortgage you can 'offset' the balance on a spreadsheet so you can see what your net debt is.

Psychologically the mortgage op's are better, but if you see the savings as mortgage savings you can have the same boost

Spiggle

getmore4less wrote: »

Don't pay anything of any mortgages

SAVE even with tax you are better off

2.5%+ instant access

More with regular savers
http://www.moneysavingexpert.com/savings/best-regular-savings-accounts

Hi getmore4less,

Ooooh, the savings versus paying down capital conundrum!

Thanks for the link, I've visited that page many times. I've also thought very long and very hard about going down that route. So, I'll explain why we're doing what we are.

Firstly, with interest rates so pitifully low (for savers) they are a huge advantage for those of us with repayment mortgages as proportionally we can pay a much larger amount off the capital every month. However, this situation really can't last forever and rates will at some point rise reducing the level of capital pay down we can make. Therefore, the more of the capital we can clear now gives us some small future proofing against rate hikes and therefore monthly payment hikes further down the line.

Secondly, as I've said in one of the posts above, the OH and I have been pretty stupid through our lives and even though we've had our home for 22 years now we still have £52,800 of mortgage outstanding with 11/12 years left on the term. This would effectively take my OH to 67 years of age before its paid off. Neither of us are happy about this but it was the only way we could afford a repayment mortgage when we first took one out about 5/6 years ago. So, to take five years to pay it down now we are in a position to be able to, means that effectively we'll have had a mortgage for about 27 years which brings us back into line with the norm if you see what I mean. (A lot of this is about how it makes us feel, what makes us happy and gives us a sense of security.)

Thirdly, neither of us are getting any younger (oh, for the wisdom CathT has) at 50 and 54. Whilst we would both probably say we're in fairly stable employment, nothing is really stable these days and we don't know what is around the corner. This was brought more sharply into focus in late August when my OH was diagnosed with a deep vein thrombosis which if it hadn't been caught that day could easily have taken him out within days. None of us know what is coming but if the worst occurs either with employment or life, neither of us wants to see or leave the other in financial hardship.

Fourthly, (and now this is crude calculation not taking into account any compounding of interest over time/years), if I were to invest the £800 per month into a regular saver at 4% we would earn £165.70 in interest in one year. However, even at the very low rates of interest I have on my mortgages, we would pay £468 in interest over that same year (£39 x 12 = £468). Yes, I would still have the £9k investment available to pay off the mortgage at that time. And then I could drip feed for another year, etc etc but I know us. To have that sort of money around would be an almost insurmountable temptation. Even if we only used some of it for whatever it was we had decided was 'vital', it would be an amount that wasn't going to be paid off the mortgage. And we'd still be paying £468 in interest over the year which would reduce very little for the next year and would indeed rise if rates go up. For those who are rigid in their saving schemes to do as you advise is sensible. For people like us it's really not.

Finally, we do save each month. Granted nowhere near what we are OP on the mortgage but enough to get us what we need like a holiday or something nice. I've also fully budgetted everything for every month and have set up loads of piggybank accounts which have overestimated amounts going into them every month which are earning interest and will hopefully have credit balances in at the end of the year after their relevant functions have been paid for. (Everything else, utilities, etc are budgetted for and are paid every month by direct debit.)

So, weighing it all up, who and where we are as well as pure finance/interest, we will continue to pay down the mortgage as much as we possibly can. And if it's earlier than the five years and we are both still gainfully employed, that will be the time for us to max out on saving and we may get better rates then too!

Thanks for your thoughts and comment. I appreciate the opportunity to actually outline all of the various avenues of thinking I have been down to get to where we are today.

All the best,
Spigs