Diary of a rambling shopaholic

seafarers_wife

Well did start a diary but that got backtracked due to various reasons. Have now been living here 4 months and its safe to say its not the forever house we planned it to be, so ideally looking at moving in the next 5 - 6 years.

Unsure as what to do re the mortgage though as we took out an 89K mortgage on a 5 year fix (6.89%) over 35 years with a 10% deposit. originally the plan was stay here forever and hammer down the mortgage, and if i continue with that plan it will mean at the end of the 5 year fix we will owe approx 65K compared to not overpaying and still owing 83K :eek: percentage wise that equates to owning 34.9% of the house with overpayments or 16.1% without overpayments.

The big decision I suppose is do I start overpaying or do I just make the normal payments and then whack everything spare into various savings accounts?

I have done a spreadsheet where ive worked out if we stay here we can comfortably clear the mortgage in 12 years, less if we cut back on luxuries but ive not done one where i can see how much we would have in the savings account with overpaying and without overpaying, so i suppose thats something im going to have to do today in order to make an informed decision.

Well the diary will be a combination of either the increased savings to ensure we can move elsewhere or a diary of how quick im getting the mortgage down or a combination of both.

LilacPixie

Can you find a savings account to beat you mortgage rate?? If not I would be overpaying rather than saving. TBH I would probably do a 90/10 mortgage saving split just so in 6 ish years time you have some liquid funds for the move.

sukysue

Pay it off the mortgage you will feel so happy seeing the debt reducing honestly being mortgage free is so wonderful I can't even begin to tell you.

greent

Hello seafarers wife

I'd go with LP above - personally I'd hammer down mtge as your int rate is high (relatively) - unlikely to find anything savings wise to beat this rate. Also improved LTV when fix ends will give you access to better rates and deals for a remtge/ move. Definitely wise to have some liquid funds in savings for unexpected bills/ funding the move (our last move cost around £20k (eek!!) when you add stamp duty, sols fees for purchase and sale, estate agents fees, removal firms fees and some sundry items all in!!

seafarers_wife

hmmm well ive done the calculations on liquid funds, both with overpaying and without overpaying the mortgage.

If we overpay £300 a month from Janaury come remortgage time we will owe approx 65K on the mortgage and will have approx 20K in savings.

If we dont overpay, remortgage time will mean we will owe 83K on the mortgage and will have approx 35K in savings.

however this house needs new double glazing and a new combi boiler and posisbly a new bathroom all within the next 5 years so that could easily see the cash savings reduce by 10K.

I think im leaning towards the overpaying side of things at the moment so Im tempted to stick with the originalish plan of hammering it down as quick as possible. I do need to build up a cash savings buffer again so I think short term aim will be to build up a 5K emergency savings in the ISA. there's 2K in there at the moment so 3K needs to be built up.

Now Im thinking instead of overpaying do I build up the 5K emergency fund first and then overpay :eek:

I did warn you I ramble :rotfl:

seafarers_wife

ok decision made on the emergency fund part of my overpayment master plan. Im not going to overpay the mortgage until we have 6 months of expenses put away.

for us 6 months of essential expenses is 2K :eek: a month so I need 12K in the ISA, or as much as I can stash into the ISA quickly before starting overpayments. I know I can get our essential expenses down but for the moment 2K a month is what Im comfortable with, ok it doesnt include any luxuries like we are used to, but for the short term well until January 2013 I wont be overpaying the mortgage.

Im not sure if putting off making overpayments for a year is going to make a huge difference or if its going to annoy me. DH does get random bonuses of a few hundred £ at a time, but usually I budget them for fun money or into something that needs paying asap, but I could start putting them straight into the emergency fund as it all depends if he sails through danger areas or not as to wether he gets a bonus and this trip away he seems to be going through pirate risk areas a fair bit.

so the general plan for now is emergency fund and then overpay. I wont tie all the money up in the ISA though, what Im going to do is when the general savings account gets to 2K, I will xfer 1K into the ISA at a time still leaving us a cash buffer should we need anything for house.

so at the moment the balances are how things stand at the moment.

Emergency fund: £2,141
General Savings: £820
Car Account: £901.86 (budget monthly for insurance, tax and maintenance so can pay everything in lump sum when its due)
Sofa & builder fund: £1,310 (need 2K for sofas by December and 1K is for building work that needs doing in next month or 2)

We do have a couple of random other savings accounts where we put money away each month for various things that need paying through the year, but the balance in those accounts is negligible due to having just had to pay out on them all.

So now at the end of our fixed rate, delaying overpaying till Jan 2013 will mean we will owe appox 69K and own 30% of the house, so its still a huge improvement on not overpaying.