Five years for Spigs to be Mortgage Free!

Spiggle

Hello All! :hello:

I finally have a diary with a proper title i.e. not one that has evolved from me asking for help here.

Ok, for those who are interested our household is me (hit 50 years 2010) and my OH (hit 54 years 2010). We have lived in our home since 1988 when we got married. I'm not going to go into the cost when we bought it as it's just too embarrassing but we have until 2010 :idea: been pretty stupid to say the least. Let's just say our original mortgage was about two thirds of what we owe today. :eek:

The current mortgage has about 11 years left to run which as you can see takes the OH to 65+ before it's paid off. We have over the last 22 years remortgaged on a fairly regular basis (and loads of consolidation included). :doh: The worst part was that until about 5 or 6 years ago it was all on interest only mortgages so we never saw it coming down at all. :wall: I suppose I first started getting a vague interest in the plan now when annual statements arrived that showed the amount we owed had reduced over a year! :shocked: A totally new experience. I did OP for a while a couple of years back but then circumstances changed and it went by the wayside. How sad and stupid I've been.

Anyway, the stats. As of today we have the following debts:

Mortgage one - £44223.93 @ 0.19% above BoE = 0.69%
Mortgage two - £ 6860.09 @ 0.99% above BoE = 1.49%
Mortage Total - £51084.02

Credit Card - £2160 @ 0% to Sept 11 (being paid @ £230 pm)

Total Debt Outstanding £53,244.02

(We also have another £2k approx on a 0% loan which is paid by £100 DD each month and has just under 2 years left on it. I haven't included this in totals as it's budgetted for and 'forgotten about' if you know what I mean.)

The required payments for the debts are:

Mortgage one £353.81
Mortgage two £62.64
CC (approx reduces monthly) £60 - £55

The plan is that we clear all outstanding debt by my 55th birthday in August 2015. That way my OH could, if he wished, retire at 60 the next year.

We started off by me taking a week of my annual leave in August doing a complete overhaul of our finances including a full budget to include everything. I set up piggybank accounts for everything that we spend on annually e.g. Car Tax, Insurance, House Ins, Christmas, birthdays, entertainment, tobacco, etc. We have a small amount put into savings every month too.

Then I calculated how much we could OP the mortgage and played around with the mortgage overpayment calculators to see how we could get it done in five years. Then I rang the mortgage company who kindly cancelled the DD as from October which was when I started a SO payment of the required amount plus £80 OP on each of the mortgages. I have been fortunate in recent months to have recieved increases in my salary partly due to increased hours and partly due to a rise. So after having a moment of complete confusion I rearranged the SO from 1st November 2010 to be paid at:

Mortgage one - £478 per mth
Mortgage two - £361 per mth

They may look odd amounts but the main mortgage charges £28 per month in interest (at current rates) so if I want to calculate accurately then I look at £450 off capital and the second charges £11 per month interest so £350 off capital. Effectively £800 off the total capital every month. According to one calculator this means the second mortgage will be clear in 19/20 months.

BUT, I intend that once the CC is cleared in September to throw the payments now made to that to the second mortgage. So it should be completely clear in about 16/17 months from now. (This is a little flexible at the moment as I may get an urge to throw it at the main mortgage) Then all the OP that has gone on the second mortgage gets diverted at the main mortgage. Using another mortgage calculator I've put in many variables using those figures and it shows whichever way I play the overpayments we will be mortgage free in December 2014 which would be truly awesome. :dance:

Right, I think that's enough for a first post. You must have a great deal of stamina if you got to here so thanks.

I will, in a minute, post a reply that I wrote on another thread some time ago as it is very relevant to this and I would like to keep it's content to keep me focussed over time.

So here starts the plan proper with the New Year. :wave:

Hope to see you soon,
Spigs

Spiggle

Ooooh, the savings versus paying down capital conundrum!

I've thought very long and very hard about going down the savings 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 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 advised 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!

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

XSpender

Good luck on your journey to be mortgage free in 5 years!

Don't give yourself a hard time about what 'mistakes' you made in the past with your finances. I read your first post and thought 'remortgage' yep done that, 'consolidation' yep done that, 'interest only', yep still got one of those. At least you have a goal and a good plan to get there now.

I have a 5 year goal too, to move rather than be completely mortgage free, so will be reading your diary with interest.:)

Long_tall_sally

Hi Spiggs! :wave:

I meant to say hello previousy on Michelle's thread.

I will look forward to reading your thread, more tome will be spent on this pc! lol And I agree don't beat yourself up about things you have done in the past, a lot of us have been there & done that. Just be proud that you are thinking sensibly now! And if your grocery challenges are anything to go by, you will soon be beating you target of getting your mortgage paid off early!

CathT

Hi Spiggs,

Nice to see you have a fresh diary, cheers for the mention!! I'm sure most of us have deviated from the mortgage free rules at some point so don't feel bad. At least you have your aim now and will hopefully achieve your MF goal sooner than expected.

Spiggle

Thanks X-Spender, LTS and Cath, :T

I really appreciate your supportive comments. I do try to look forward rather than backward but when laying it all out it's hard not to!

But onwards and upwards now I'm really looking forward to the New Year to be honest. It's going to be great to monitor it all and I will get a buzz every month seeing it going down.

I'll probably spend a couple of days in the Christmas break reviewing everything to see if I can do a little bit more either on the mortgage or actually upping the savings/emergency pot.

To be honest I fancy opening the FD current account to get their regular saver at 8%. :think: The only thing holding me back at the moment is that I'm with Santander, haven't experienced a single problem with them I have to say, but I'm worried problems may arise if I try leaving them. :undecided Having put everything in order the thought of it all going pear shaped is not attractive! _pale_

Ok, I'm off to browse the threads a while.

Take care,
Spigs

BeauBelle

Best of luck with your mortgage free journey! I look forward to reading about your progress!!

BB
xx

LilacPixie

spiggs - small sleeping child on lap so I will type full reply later. first direct looks to be an option. i am considering that too. i bank with satander too was fine until them. dumb company

Long_tall_sally

Spiggle - I was initially a bit confused by your figures & how you could clear it so quickly but I think I fully understand them. Where do you get the mortgage o/p calculator from - is there one on this site, as I wouldn't mind having a play myself with my own figures?

Spiggle

Long_tall_sally wrote: »

Spiggle - I was initially a bit confused by your figures & how you could clear it so quickly but I think I fully understand them. Where do you get the mortgage o/p calculator from - is there one on this site, as I wouldn't mind having a play myself with my own figures?

Hi LTS,

There are a range available here https://forums.moneysavingexpert.com/discussion/155707 There is a sticky on the front page of MFW section. I'm trying to remember which ones I used! The first one I think is tom strickland's in post #13 and then the more advanced one that I'm now using I can't find the link to! :mad: If you want to pm me your email address I'll attach it to an email for you. It works in Excel.

I used to get very confused with the overpayments and how quickly it would get paid off. Essentially, I'm making the overpayments on three things now (and there is a forgotten about loan). As the first one clears, the CC the monthly payment (£230) on that gets paid against the mortgage so OP on that increases. The second, mortgage two will be paid off next and the monthly payment amount (£361) from that goes against the main mortgage. Finally, the loan that I've described as 'forgotten about' finishes and there'll be another £100 per month to throw at the main mortgage. The result is that we complete in Oct/Nov 2014 seven years ahead of time. :T

Get in touch and I'll send you the calculator.

All the best,
Spigs

Spiggle

Hi All,

Just a quick update because I'm so chuffed that I now have an 'official' MFW number! Thanks to Cake who is setting up the MFW 2011 thread, I now have an official target of £5,766 in OP for the coming year.

It has also led me to rejig my signature so that I've separated out the 0% CC from the mortgage which makes life a little more clear. The CC will clear in Sept/Oct 2011. The second mortgage is due to clear in Mar/Apr 2012 and the main in Nov 2014 which would be well ahead of the August 2015 target date.

Of course, all of the calculations made today assume that there is no change in interest rates, our employment remains stable and nothing major happens that we haven't yet foreseen. I can't predict either the second or third of those options but I'm fairly sure the interest rates will rise before November 2014! So the beauty of the schedule in the last paragraph being so well ahead of the target date means we have some leeway for when they do rise. Hopefully our pot of savings will help with any unforeseen eventualities.

I'm going to spend a couple of days over the Christmas break re-crunching our numbers and see if I can scrape a little more into savings. We'll have to see how that goes later this month.

Ok, well that's it for now, No.40 signing off (who was it who said I am not a number! :rotfl:).

Take care all,
Spigs