Just about to get my first Mortgage - question

Lois_E

VJ_, you've done really well to save so much so far, and with that kind of self-discipline, you'll do really well at getting rid of your mortgage quickly too. Just remember to keep checking what the deals are (for ISAs etc as well as your mortgage) and switch when it would be advantageous to do so. Get to know the various calculators that are available on the main MSE site, and it won't be hard for someone with your mindset to work out the best thing to do at each stage.

Don't plan to pay off too much too quickly just at first. If you've always lived at home, it will be difficult for you to predict just how much your living expenses will be once you're in your own place. Try living in it for a while and see how things go. Keep putting money into your ISA as your emergency fund as others have suggested, and while you are doing that you will get a feel for how much you can afford to OP on a regular basis.

Congratulations on getting your own place (assuming it all goes ahead OK), and good luck with your MFW plans.

Lokolo

adwat wrote: »

In fact, the example dimbo61 (sorry dimbo, not criticising you at all) gives of an ISA at 3.1% highlights the problem of savings vs. overpayments. £1000 at 3.1% would give you a yield of £7 per year over and above making overpayments. So say you're able to make £10k overpayments per year you'd be better off by £70 per year having a cash ISA - very little gain considering you could fritter away those savings on a whim if you so chose to! If interest rates rose by 0.5% then that would add an extra £217 per year onto your mortgage - more than offsetting your £70 gain on your ISA.
If you had paid that £10k off your mortgage balance that would save you £525 per year at your current interest rate of 2.4% and the effect of a 0.5% rise in interest rates would be £370 LESS in interest compared to your current repayments. As you can see, overpayments are the way to go big style.

I'm sorry but this makes no sense. If interest rates do rise, money can be taken out the ISA to go against the rise and is very simple and therefore no extra money is being lost because of it.

It makes no financial sense to overpay a mortgage when savings rates are higher.

edit - could you explain the bold bit as it doesn't make any sense to me.

VJ_

Peonie wrote: »

We have just opted for a HSBC repayment mortgage but got it the month before your deal and had to pay the product fee etc. For ours we can overpay as much as we like but check the small print of your documents so you don't pay any extra fees.

I think I have a similar deal with unlimited overpayments.

As to whether you have any savings or not, that comes down to financially what type of person you are. Personally, I need to know I have savings in the bank for a rainy day or else I might have a few sleepless nights. You need to do what's right for you.

I'm very much the same, whatever happens I'm going to rebuild my "rainy-day fund", it's really just do I over-pay at the same time, or save, save, save and then over-pay. As I still have some limited savings it looks like I might split savings & over-payments, unless I'm allowed huge lump sum overpayments.

Peonie

adwat wrote: »

Most mortgages these days allow you access to your overpayments in the form of payment holidays or equity withdrawals - check with your lender for their terms and conditions first.

Hi VJ, as I said before I am also with the HSBC and I did ask the bank's mortgage advisor if we could take a payment holiday or equity withdrawal as our last mortgage provider (Nationwide) allowed us to. Unfortunately the HSBC does not.

VJ_

Peonie wrote: »

Hi VJ, as I said before I am also with the HSBC and I did ask the bank's mortgage advisor if we could take a payment holiday or equity withdrawal as our last mortgage provider (Nationwide) allowed us to. Unfortunately the HSBC does not.

Thanks for this, it's not something I was expecting, so thankfully I'm alright with that.:)

VJ_

Lois_E wrote: »

VJ_, you've done really well to save so much so far, and with that kind of self-discipline, you'll do really well at getting rid of your mortgage quickly too. Just remember to keep checking what the deals are (for ISAs etc as well as your mortgage) and switch when it would be advantageous to do so. Get to know the various calculators that are available on the main MSE site, and it won't be hard for someone with your mindset to work out the best thing to do at each stage.

Don't plan to pay off too much too quickly just at first. If you've always lived at home, it will be difficult for you to predict just how much your living expenses will be once you're in your own place. Try living in it for a while and see how things go. Keep putting money into your ISA as your emergency fund as others have suggested, and while you are doing that you will get a feel for how much you can afford to OP on a regular basis.

Congratulations on getting your own place (assuming it all goes ahead OK), and good luck with your MFW plans.

Thank you. I've been using the MSE budget calculator and put in (hopefully) over estimates already, just to give myself an idea about how much I'll have left over to save. Given what I've been reading, I think I may have more problems with the cooking (I'm hopeless;)) than with the mortgage:p

But I think your "live there a while and see how it goes" advice might just be the best I've had so far.:)

Lois_E

Thanks VJ_ :beer:

If you want to learn to cook, the Oldstyle board on here is the place to ask questions. There are people on there who will tell you how to feed a family of six for three weeks with only a packet of lentils and half a sausage, or something like that.

Peonie

VJ_ wrote: »

I think I'm very much the same, whatever happens I'm going to rebuild my "rainy-day fund", it's really just do I over-pay at the same time, or save, save, save and then over-pay. As I still have some limited savings it looks like I might split savings & over-payments, unless I'm allowed huge lump sum overpayments.

I want to save and overpay, but at the moment we're in save mode. My rainy day savings are not high enough yet as we've only just reached 3 months of after tax wages and my aim is for 6 months.

What state is your property in and do you have any furniture?

I ask as the house we are buying needs ALOT of work doing on it to make it livable - we think the kitchen is from the 1960s, the bathroom is so bad they did not bother showing a picture of it in the brochure, there's a flat roof that needs a pitch and tiles, every room needs decorating, it needs insulation, some rooms don't have radiators and all the windows are gone. Unfortunately to do all that will cost quite a bit, and I suspect we will not be able to overpay (at least significantly) for a few years.

Sorry I've not answered your question. With us there's a difference between what we want to do and what we need to do.

VJ_

Peonie wrote: »

I want to save and overpay, but at the moment we're in save mode. My rainy day savings are not high enough yet as we've only just reached 3 months of after tax wages and my aim is for 6 months.

What state is your property in and do you have any furniture?

I ask as the house we are buying needs ALOT of work doing on it to make it livable - we think the kitchen is from the 1960s, the bathroom is so bad they did not bother showing a picture of it in the brochure, there's a flat roof that needs a pitch and tiles, every room needs decorating, it needs insulation, some rooms don't have radiators and all the windows are gone. Unfortunately to do all that will cost quite a bit, and I suspect we will not be able to overpay (at least significantly) for a few years.

Sorry I've not answered your question. With us there's a difference between what we want to do and what we need to do.

I'm luckier, it's a one bedroom flat - the kitchen is new, the bathroom is newish and the owner seems to have given the whole place a new lick of Magnolia to help it sell*. I have some savings left to start to furnish the place, will take some from home and freecycle\charity shop the rest.

As a single Bloke, there's not a huge amount of essential stuff I need to buy so I'm aiming to spread my spending. Once I get kitchen stuff, a bed & a sofa, I can take my time to get anything else; eventually I need some decent shelving and I'll probably get a new desk, but that's more or less it - my PC monitor already doubles as a TV\DVD player.


*Instead of re-painting it in 'my colours', I'm going to buy some art from local artists to personalise the place; cheaper & looks cooler.

Peonie

I think you are right in what you are doing. Get everything bit by bit as and when you can afford it. We still have a couple of secondhand items from family that we still use 8 years later. Our first sofa was secondhand from a family friend, it cost £150 and was a year and a half old. When we had finished with it it went onto Freecycle.

My family is really good, we always check if anyone else wants furniture before it goes to the charity shop. Next month we're getting a free chest of drawers and a big office chair.

I like your art idea, I'm a bit of an art snob and won't buy a picture if every other person has it as well. That's why I've made my own in the past, plus it's cheaper.