Battling the Interest Only Mortgage!

Eating_Daisies

Hi All,

I am very long time lurker on this board - I actually had a different user name but I'm not able to log on with it anymore as this site is case sensitive and my computer automatically inputs the wrong case ... and ultimately I'm not clever enough to work it out!!

Anyway I find this board so inspiring so I thought it was about time I started my own diary. A little about us: I'm 28 working as an agency carer whilst studying to be a therapist and married to the most amazing man! He's 32 and works 50+ hours servicing, repairing and installing sports equipment in schools and gyms etc all over the country. He is also doing his Special Police training at the moment, every Sunday until December, so is very very busy! And we have a little dog who is the only dog I know that eats daisies! (Hence my user name!)
My husband & I both get paid weekly and never know what we will earn as it depends on the hours we've done - not the best way to base a mortgage!
We've had a very difficult few years mainly because I was head-hunted for a job in 2009 that I was promptly laid off from 2 months later! :eek: It was a scary time & since then I've been in & out of work although I've been with my current care agency since April and all being well I'll stay with them until I qualify and find a job as a therapist - hopefully! I'm very proud of what we have achieved in the last two years even though it's been difficult! We got married this year; had a smaller wedding than planned so that we could build a porch and have the drive done as it was practically just mud! We went to America for our friends wedding last year (although said kind friends paid for the flights); moved a wall to create a kitchen dinner rather than lounge dinner; bought three new (for us) cars and sold one of them; and we've paid for all three years of my uni fees without getting into any debt.
We have had help from my wonderful MIL and she is giving us some more money as she received an inheritance. (But it is so hard to say "thanks for all your help, can we have the rest of what you said you would give us please? A cheque will be fine, ta!"!!!)

We currently have an Interest Only mortgage mainly because in 2007 (shortly before I met hubby) this was all he could comfortably afford by himself. In 2008 we sold his flat at a profit and bought a very run down house that had been empty for at least 6 months as the vendors had bought and moved into another house. This meant we bought the house, which was at the time worth around £200k, for £176k and we had a £155.3k mortgage. It's almost worth the £200k again now.
Since 2008 we have made a couple of over payments the latest being this week when I sent a cheque for £2.5k. We can only over pay by £500 or more by cheque, we're with Mortgage Express who are very keen for us to pay back the mortgage!! We owe them £148,500 now which has reduced the monthly payment by £10 - every little helps! Our new monthly payment should be around £310 but I will round this up to £350. The extra £40 will have to be saved until we have the £500 that we can over pay. We have a few things that I want to save for before we really start on the mortgage but then it will be our main focus. We have 20.5 years left on the mortgage and we would need to be paying around £700 on top of the interest payment to even be able to pay the mortgage back by then!! :eek: However, my aim is pay the mortgage off by Nov 2018 hubby's 40th birthday I really can't see this happening but if we don't try we never know!! This isn't our forever home either, I do love it and I'm very lucky to have a 3 bed detached in a lovely quiet area but I hope for a 4 bed detached with room for me to work as a therapist from home. But I think I should focus on this one first!!

My husband pays the bills with his salary and I aim to earn around £600 a month (which I hope is a conservative estimate!) which we save with and which we will start over paying the mortgage with. I know it sounds like I have unachievable dreams but I have high hopes for my career! I would love to be a lecturer eventually so hopefully my earning potentially will be much much higher than now. My husband has recently gone for a promotion at work which I truly hope he gets firstly because it will be salaried so we will know what he will be bringing in and secondly because he works his guts out & gets very little recognition for it.
We are also trying to find someone to rent out our second room for the next year or two, any money from this will go to our mortgage. I have started doing surveys again and I need to get back to doing ebay as it was earning me some pennies and clear the house - I have LOADS to get rid of! I use Mr T's vouchers for RAC cover and I recently got £89 worth of Eon vouchers with them too. I've gotten into card making recently and hope to make some to sell. Loads to do just getting the motivation to do it!!
I meal plan and take the housekeeping out in cash to buy food with. I only buy clothes from Tesco & Primark and only with birthday & christmas money. We live pretty frugally and it helps that our friends want to pay off their mortgages too and they either have small kids or are pregnant - which lends itself to cheaper social evenings I think! We also get spoilt by MIL to a takeaway or dinner out once or twice a month. TBH we want for nothing as I have enough clothes to last a lifetime and hubby has enough DVD's to watch a different one everyday for a year at least!! (It's his equivalent to shoes I think & he never pays more than £5 for them!) I'm lucky that he is on board with my plans although he would just be pleased if we can pay it off in 20 years tbh! He was not amused when I made he get a glass jar of BBQ sauce rather than the squeezy one though because it was cheaper! And he draws the line at value beans but he lets me get on with the rest of it which suits me!

Sorry for the mammoth post! Just excited to finally be here!:j I will post a SOA soon. All advice & comments welcome!

Lois_E

Hi Eating Daisies and welcome to MFW.

You sound as though you have a great attitude and are doing lots of the right things already - and your MIL sounds like a great help too.

I'll look forward to following your diary. Would you find it helpful to do a SOA for people to help you with? No need to if you'd rather not. And have you played with any of the spreadsheets and mortgage calculators yet? Lots of us find them very addictive.

Enjoy the journey, and good luck.

Eating_Daisies

Thanks for the welcome Lois_E!!

Will do a SOA as it would be good to see it through other people's eyes.

I'm already full addicted to my spreadsheets & have been for a while! In fact I have 3: 1 for the bills; 1 for our saving plans; and 1 for the mortgage!! :rotfl: A read that a lot of people on here do what I do also, stare at the spreadsheets and little tweaks here & there just to see how things change! (We're a board full of geeks really aren't we!) :rotfl:

Eating_Daisies

Our SOA:

Mortgage £350
Contact lenses £22
Gas & Electric £55 (I expect this to go up soon with the price rises)
Water £17
TV license £12.37
Council Tax £146
Lottery £15
Cineworld £29.98 (unlimited cards)
Sky £38 (we have HD+ in the lounge & our bedroom & we recently got multi room for the kitchen which will also go into the 2nd bedroom & hopefully be attractive for a renter)
Mobiles £30 (hubbies contract is £15 & mine has just changed to £10.50 so a little extra if we go over)
House Insurances £25 (paid annually)
Car expenses £120 (tax, insurance & MOTs for 2 cars paid annually)
Professional fees £15 (as I have to have 100 client hours to pass my course I have to pay for insurance and student membership to the BACP)
Fuel £200 (quite high but drive for my job & hubby does a 40 mile round trip for his police training every Sunday)
Food £200
Dog insurance £11.47
Dog savings £20 (this isn't as crazy as it sounds! I put this aside each month as I buy his food in bulk and so there's money for his jabs and worming etc - and the odd toy!)
Phone line rental £10 (paid annually)
Presents £20
Holidays £80

Think that's everything! As above DH covers all of this with his wage & mine goes on savings.

This is what we are planning on saving for at the moment:
Top up on accounts: Joint £1,500 (this is where the bills come out of); DH's £500 (to make it up to what it used to be before he met me!); mine £1000. This will basically give us a bit of a buffer and take the accounts up to what they used to be.
Uni Bridging Course £3,000 (I'm doing a diploma at the moment and may carry this on to MSc level but I would need to do a one year part time bridging course first & it's an estimated cost).
MSc Yr 1 £3,000 and MSc Yr 2 £3,000 (these are estimated costs)
America £1,500 we are hoping to go out there again next year for a 'proper' honeymoon (although we will be going with MIL!) DH's sister lives out there so we will be visiting much loved family too.
And finally (and mostly importantly for me!) baby savings! I'm hoping to save £5,000 to allow me some maternity leave, the likelihood is I won't be able to find a therapy job with maternity pay so we will need to have some money to keep us going. (I can't wait to start a family and I'm hoping we can start trying late next year. Which may mean I won't do the MSc but right now the more options we an create for ourselves the better. This is part of the reason DH is training to be a Special Police Officer, after 2 years it 'should' be easier for him to join the force.)

So after all that has been saved for I can properly crack on with the mortgage! Only £18.5k to go ... :eek:

wantabetterlife

Hi eating daisies. Our BTL mortgage is interest only and i think one way of getting it paid of quicker is not to reduce your mortgage payment when you o/p...your mortgage company should be able to do this if you phone them. This way atleast something will be coming of the capital everymonth even if its only small.
Hope you dont mind me asking what type of therapist you are training to be, just curious thats all.
Best of luck with your plans

Eating_Daisies

Hi Wantabetterlife, thanks for the post. My mortgage company have a thing called choices where you can pay a little extra each month by altering your direct debt but I think the money just sits there, you can get it back if you need to & can use it to take a payment holiday, & I don't think it comes straight off the capital but they are sending me some details out so I will check that. I would like to send them the rounded up payment but not if doesn't come off the capital ...

I'm training to be an Integral Therapist, which is person centred counselling. I learn lots of different models like CBT & Psychotherapy & then use what is most appropriate for my client at that time. Two years down & only one more to go!! I've also done 26 of my 100 hours & I can honestly say I love it!

Thanks for everyone that has read this thread ... that first post is huge!!!!!!!

summerday

Sounds like you know what you want and are prepared to work hard to get it, good on you.

Re the maternity pay- look into the possibility of 'Maternity Allowance' for self employed people and people who work in some capacity and earn £30+ a week, there are certain conditions you have to meet but I have been recently looking into it for my sister (who will qualify due to redundancy while pregnant) and after you've been self employed for a while you may find you're entitled to it (think it is £120 a week).

firesidemaid

trying not to read and run!

just thought i'd add a couple of points and then will follow your thread:)

re. car breakdown cover. after advice/recommendation on here, see the relevant section at the top, i use autoaid for full cover for only £40 per year (and use my tesco vouchers in a better way). take a look and see what you think. the main diff is that you have to pay for the repairs and claim the money back. i have never had to call them out, but my dad has - says it was great service and got the money back in a timely fashion.

also> £15 a month on lottery:eek: have you tried seeing (perhaps over 10 years) how much you could save/pay off your mortgage instead? try one of the great calculators for this. you could even put the minimum £100 into premium bonds (you can still get your money back) and then continue to save the rest against your mortgage:).

bye for now x

Eating_Daisies

Thanks Summerday, I will look more into the maternity pay when I get there (hopefully not too long away!). I once saw something about statuary maternity pay which I think I would get if I was still working for the care agency - I'm not totally sure how it works but I will look into when I get there. (Damn sure I'm going to claim for everything I'm entitled to!) I'm hoping that the lump of money will just be a safety net for us just in case & then get put onto the mortgage. Thanks for the nice comment too Just before I was laid off I had paid back £9k of debt so I know how to work hard. Thank goodness I had cleared that before I lost me job! :eek:

Thanks for post too Firesidemaid (I had to read your name really slowly to see it - stupid me!!) I have read about the autoaid before on here. But I wouldn't really use the Mr T vouchers on much else and we spent £58 in vouchers on joint cover for roadside, home and recovery which direct with the RAC would have cost over £100 so I was quite pleased with it.
The lottery is high isn't it! :o But I once worked out how much I have spent roughly so far & how much i will potentially spend in my life time and the jackpot is still way more so I see it as a calculated risk I guess!! Daft I know, but ya gotta be in it to win it!! And one day it might just be us ... :rotfl:

I've been at a workshop all day, which has been brilliant. It was the second day of a two day course about using imagery in therapy, so hopefully an investment in my future career. Not very MSE as it cost over £100 but it's all paid for & like I said an investment. I also bought a magazine this morning & DH is about to go to the Chinese BUT it is our 6th month anniversary today!! :T:T:T And tomorrow I'm driving (in their car so no cost to me!) friends to the airport at 6am which will take about 3 hours there & back and then I start work at 10am and finish at 10pm so I think I deserve a treat! That's my excuse & I'm sticking to it!!

Hope everyone is having a marvelous weekend!

Eating_Daisies

Today I have not achieved what I intended to :o

But I have worked out that by paying £2,500 off the mortgage we have saved £1281.35 in interest (I think!) although because we are lucky enough to be on 2% above the base rate it will no doubt be much more saved by the time we pay back the mortgage!

I think I am paying around £10.17 on interest daily!! :eek::eek: I have previously tried the make £10 a day challenge that is on here somewhere but I didn't do very well. Might try again though ...

I have the information through about Mortgage Express Choices and it does come off the capital as soon as you pay it so I think we will change our DD so that we pay £350 a month to them, our new monthly payment is £309.38, so it's only about £40 we will be overpaying but every penny helps!

Yesterday someone came to look at the spare room but called to say she won't be staying here, she's a newly qualified nurse but we aren't very close to the hospital & I wasn't expecting her to stay with us, but it's still a shame. BUT I did go into work & say that I would do the double shift every other Sunday evening (I already do 06:30 - 18:00ish every Sunday) which is only about 3 hours more work but it means I can share the driving & I like who I'll be working with & the pay is better on Sundays.

I must put the photos of our room on the spare room website & start some ebaying!

jamesd

Eating_Daisies wrote: »

But I have worked out that by paying £2,500 off the mortgage we have saved £1281.35 in interest (I think!) although because we are lucky enough to be on 2% above the base rate it will no doubt be much more saved by the time we pay back the mortgage!

That was expensive. You haven't saved £1281.35 in interest. You might save that over the whole rest of the mortgage term. For the short term decisions what makes or saves you the most money is whatever pays out the highest interest rate, after any applicable tax. What you did has lost you money, compared to what you could have done.

Did you know that you can get 8% on up to £300 a month from First Direct in their regular saver account? That makes you far more than paying the money off the mortgage saves you. If it makes sense then you can pay a lump sum off the mortgage at the end of the 8% deal. With two of you that's potentially £600 a month making 8%. Or stagger opening the accounts and recycle the money from the first account into the second once the first deal ends.

If you're already using that, have you looked at the tax free NS&I inflation-linked certificates that pay RPI plus 0.5%? Those are pretty much certain to pay out more than your 2.5% mortgage rate and you can each put in up to £15,000 per issue in your own names and the same again in trust for the other, a total of £60,000 per issue. As with the regular savers, if it makes sense you can use the money to pay a lump sum off the mortgage on maturity and then save the mortgage interest rate for the rest of the mortgage term. The money can be taken out at any time after the first year, with a lower interest rate. That's what you do if the mortgage interest rate becomes high enough for it to be better to use the money on the mortgage.

There's no need to save just 2.5% when you can do far better elsewhere. If you do, it's just throwing money away that could be used to help to get rid of the mortgage more quickly and cheaply.

Congratulations on putting more money away but please try to do it more efficiently than you have been.