Wot?! 25 years until mortgage free? -- Our dream to reduce our term --

Rose_Crow

Thanks SmlSave!

Received a letter from Santander today. It said: thanks for your payment of £50 received on.... Please note that we were unable to reduce the term of your mortgage as a reduction of even 1 month would make your monthly payments higher than the previous amount of £893. It then goes on to say that our direct debits will be altered as follows:

1st payment: £893.33
2nd payment: £893.28
Future payments: £893.27

Now they said that they now accepted payments of under £500 as I've mentioned before.

Can anyone shed any light on this?

Colin_London

grn.w.nv wrote: »

Thanks SmlSave!

Received a letter from Santander today. It said: thanks for your payment of £50 received on.... Please note that we were unable to reduce the term of your mortgage as a reduction of even 1 month would make your monthly payments higher than the previous amount of £893. It then goes on to say that our direct debits will be altered as follows:

1st payment: £893.33
2nd payment: £893.28
Future payments: £893.27

Now they said that they now accepted payments of under £500 as I've mentioned before.

Can anyone shed any light on this?

I expect it'll be because you asked for the length of your mortgage to be reduced. The minimum they can reduce is by 1 month at a time. However, your £50 overpayment is not enough to be able to do this - if they did reduce the term by one month then your monthly payment would actually have to go up as there would be a shortfall at the end of the revised mortgage term.

If you are really wanting to reduce the length of your mortgage rather than just pay less interest then you'll have to overpay by at least the amount required to reduce your mortgage term by one month each time you overpay.

If they are now letting you overpay by very small amounts like £50 then this would normally be just to reduce the amount of interest you pay whilst keeping the length of the mortgage the same.

Rose_Crow

Thanks Colin, I may give them a call tomorrow to see what the minimum is required to reduce by a month. I think I mentioned earlier that of our monthly payment, only £200 is paying off the capital. Would £200 suffice to reduce the term by one month? Are we thinking along the right lines here?

liuhut

Hiya
Love the chart that you have made, I'd like to do something similar but OH isn't really interested in what I'm up to as long as he has enough money in his pocket...and I dont want him to know how much I'm sending to the mortgage!
How did you get on ringing them about the monthly reduction? Did you find out how much you need to send?

Good luck with it all
L x

getmore4less

grn.w.nv wrote: »

Thanks SmlSave!

Received a letter from Santander today. It said: thanks for your payment of £50 received on.... Please note that we were unable to reduce the term of your mortgage as a reduction of even 1 month would make your monthly payments higher than the previous amount of £893. It then goes on to say that our direct debits will be altered as follows:

1st payment: £893.33
2nd payment: £893.28
Future payments: £893.27

Now they said that they now accepted payments of under £500 as I've mentioned before.

Can anyone shed any light on this?

Santander are incompetant bunch of numpties.

All they need to do is fix the payment and it sorts itself out over time.

Check how the interest is calculated and if it is daily just overpay and don't phone it should reduce the interets imediately and avoid the recalculations.

But with Santander you never know.

getmore4less

I await any questions or comments

AS you discovered over 12% of your income is unacounted for.

have a look over the last 12 months statements to see if there is anything obvious and count up your cash withdraws.

The usual next step is a spending diary for a month or 2 to identify the spends.(they tend to stop or go down anyway)

Have a think about ongoing tracking, with a tool, I used MSmoney for years still works but it is unsupported there are other option even a simple spreadsheet

I would probably think about splitting the cars cost into essential and hobby just to give yourself a clearer picture. the fuel seems very high given one is on company car.


Mobile phone............................ 50
Definately room to reduce this look at cash back deals if you need the minutes/text/data, used to be able to do this for free now it needs a few £ a month
eg. http://www.e2save.com/mobile-phone/contract/?type=HAN&effectivecost=ten

Groceries etc. ......................... 160

Not unrealistic but looks a bit low for 2 ususly includes household stuff booze etc. might account for some of the missing money.

Clothing................................ 0

Nothing bought in the last 12 months. and a wardrobe so full nothing in the next 12, not even a pair of pants? more of that miising money perhaps?

Holiday................................. 0
Not even a weekend away with the cars?


Think about the things you need to buy over the next year and onwards for 5 years so you have a savings plan for them, unlike the Sofa

How much is the horse worth? saving for another?

Devil is in the detail, track down the £350 and you will have a decent picture to plan ahead.

getmore4less

grn.w.nv wrote: »

Thanks Colin, I may give them a call tomorrow to see what the minimum is required to reduce by a month. I think I mentioned earlier that of our monthly payment, only £200 is paying off the capital. Would £200 suffice to reduce the term by one month? Are we thinking along the right lines here?

Mortgage...................... 137811...(893.6)....5.99

To simplify a bit take a £139042.03 25 year(300m) term at 5.99% payment £895pm

to pay this loan off in 299 months you need to reduce the capital to £138841.08


So around £200 will reduce by a month if the normal payment is kept at the same level

BaconandEggs

very interesting - subscribed.

I have a couple of questions:

a) would it be better for you to save a lump sum up and pay at the end of the year - or over pay each month? I assume the latter if interest calculated more frequently than annually.

b) is it better to use overpayments to reduce your term or to reduce monthly payments - then use the amount saved per month to overpay?

Does that make sense?

Anyone know?

pavlovs_dog

its scary seeing how much of what goes out is just servicing the interest on the loan. We are FTBs and are fortunate that we have the money and wisdom to start OPing just 3 months into the life of our mortgage. What we pay off is a drop in the ocean at the moment, but it all adds up eventually.

our mortgage amounts are quite similar, as is our OP target so I'll be watching your progress with interest.

pavlovs_dog

BaconandEggs wrote: »

b) is it better to use overpayments to reduce your term or to reduce monthly payments - then use the amount saved per month to overpay?

Does that make sense?

Anyone know?

I think I'm correct in saying it's generally better to keep the monthly payments the same as then more of what you pay is actively servicing the debt.

Of the almost £900 grn currently pays each month, only about £200 is going towards paying off the debt. The remaining £700 is the monthly interest bill for the debt outstanding. With every normal and overpayment s/he makes, the amount s/he owes the bank decreases, and so (albeit v-e-r-y slowly) more and more of the £900 goes towards reducing the balance as the bill for the interest is also decreasing.

whereas if you reduce the term, the amount you pay each month remains roughly the same, you're just giving yourself less time to do it. This is why you do see people extending the term of their mortgage, so that their monthly payment falls, giving them more cash to OP with.