would love to be mortgage free!

coldcazzie

Hi all, having read a few diaries I'd love to start my own, if that's ok! I tried to do a SOA but finding it a bit tough as many things are changing in the next 3 months and we pay some things outright instead of monthly (eg bike ins). I have a spreadsheet for monthly incomings and outgoings which I have maintained meticulously for the past 2 years. By that I have about £30-£50 left at the end of each month, although it varies depending on what we've bought.

People: me, man-wife, 3 sprogs: Squish-pot, Lumpy and J'raff (also 2 cats, 3 gerbils and 3 fishtanks).
Mortgage: 99,000 starting Dec '10, 4.11% fixed for 2 years then variable rate (currently 4.24%), over 35 years.

Currently out budget includes £250pcm into a fixed rate monthly saver (paying 6% interest, not taxed as I don't work!), in Dec when it pays out I plan to move this into an instant access savings account as a rainy day fund (3.1% interest), we are also changing current account which will give us a gift of £100 plus will give us a chance to reset our buffer, which I want to keep at around £500 at the lowest point of the month.

I can get an 8% fixed rate saver next year which means it makes more sense to save than to repay on the mortgage, but it's a fixed amount each month (£300) so anything spare after that will go onto the mortgage rather than into the rainy day fund (which will be about £2500), so at this stage I plan to overpay a minimum of £130pcm onto the mortgage. If there is extra free at the end of the month then great, I'll put more on, but £130 pcm is my minimum.

I realise £2500 doesn't sound like much, but we maintain a buffer in our current account too, and I have about £2200 in an ISA as well which I could withdraw if it became necessary. Although I hope it doesnt!

dimbo61

Once the fixed rate saver is finished why not just overpay the mortgage ? You must be allowed to repay 10% a year ( please check with lender)
Keep a good emergency fund with 3 young kids and only dad working
GOOD LUCK

coldcazzie

Do you mean at the end of this year?

At the end of this year we'll have saved about £2.5k in this years monthly saver. This will be our emergency fund. The next year I can get another one at 8% interest. Our mortgage is only 4.11% which means we earn more interest by saving than we would save by overpaying. However, there is a limit of £300pcm max that you can save, which means anything spare after that is better off on the mortgage than in our emergency fund which will only earn 3.1%, so then anything extra will go onto the mortgage.

We are allowed to pay up to 10% as you say, without charge, but I don't think we'll get anywhere near that.

At the end of 2012 then I'll look at savings accounts again, and we'll make a decision on whether it makes more sense to save or overpay. I can't predict what will be available then... if there are no savings accounts that pay more than the mortgage then we'll overpay instead.

coldcazzie

Been a while since I looked at this, although it hasn't been far from my mind, mostly as an increasingly impractical target. I was so hopeful of being able to stick to my plan of a simple regular £130 pcm overpayment next year, but I just can't see how it will be feasible every month... so I've changed my plan to be more flexible.

Anyway, boring stuff first.

Facts & Figures

Mortgage: 99,000 (35 yr term)
LTV: 75% (purchase price £132,000)
Interest rate: 4.11% (2 yr fixed rate)

In: OH wage:...................1187.58
CB:........................ 188.40
CTC:....................... 638.22
WTC:....................... 39.02
Total:...........................2053.22

Out: Sky:....................... 45.00 (inc. TV, phone, www)
Water:..................... 36.80
Gas:....................... 85.00
Elec:...................... 55.00
Council Tax:............... 97.00
Mortgage:.................. 444.90
Mobs:...................... 45.00 (2 contracts)
Life Ins:.................. 28.69
Boiler Cover:.............. 20.00
Cat Ins:................... 7.44
Alarm:..................... 27.50 (monitored system)
Park:...................... 23.91 (Christmas savings)
Mag Subscription:.......... 2.00
Purchases:................. 800.00 (this is occasionally higher)
(Petrol:...........~150.00)
(Food:.............~525.00)
(Other Things:.....~125.00)
Total:...........................1718.24

Remainder Each Month:............ 334.98

~£2000 in a IA savings account at 3.06%

8% Monthly Saver with FD, into that will go £150 dripfed from IA savings, plus £150 from our monthly budget, making £300 total.

Making £184.98 leftover each month. Lets face it, it never ends up being that...:rotfl:
Probably less, allowing for inaccuracies in the Sky/Mobs, possibly slightly higher credit card bill for a birthday, and TC dropping in April. Perhaps £150. Once there's been the things that get paid annually like the TV licence [£145.50], bike tax [£53], home ins [£183.76], bike ins [~£200], MOT [£30], and next year (for the first time ever..! ) a holiday [£160].
On those months there will be less/no leftovers; we may even have an overspend (personally, an occasional overspend I don't mind as we run a buffer on our current account, so we may go into our "personal overdraft" but it never gets close to the bank's 0). However, overall I hope to either pay the leftovers each month onto the mortgage, or let them build up and make larger quarterly payments, not decided which yet... Hoping then to remortgage this time next year, with a LTV of 72% and reduce the term by a few years.

In summary then: my aim is to overpay a minimum of £1500 in the next year.

madeupname1

coldcazzie wrote: »

In summary then: my aim is to overpay a minimum of £1500 in the next year.

Hello coldcazzie - how about joining us over on the MFW 2012 thread (as well as maintaining your own separate diary)? I don't know if you've seen it but its basically a group of people who have set up an overpayment target and then post in the thread about how they are doing. We then keep a spreadsheet tracking everyone's progress. Would love to see you over there - good luck!

coldcazzie

Thank-you very much, I'd love to

I'm very keen to find the balance between overpaying as much as we can, and leaving us enough money to be able to afford the things we've never been able to before (when we were paying off our debts) like swimming lessons.

Jock_Tight

coldcazzie wrote: »

The next year I can get another one at 8% interest. Our mortgage is only 4.11% which means we earn more interest by saving than we would save by overpaying.

Your monthly saver will only make 4% interest over the year because you only make a fraction of the 8% each month. 1st month you make 300@8% * 1/12, 2nd month 600@8% * 2/12 etc. So for £300 a month expect to get back ~£144.

You will save significantly more over the term of the mortgage if you were to overpay the mortgage rather than save in a monthly saver. Remember mortgage interest is compounded over the term so you pay interest on the interest etc.

coldcazzie

Yes, I do realise that. Even £30 a month would save us over £16000 interest over the term of the mortgage, however, I'm coming at this from the background of having nothing. We need a rainy day fund, and there are aspects of the house that need sorting (the bathroom and kitchen need sorting for example) and the only way we can do that is to save. 8% of £1800 (ie, half of the max) is better than 3.06% of £1800 if I just put it into the IA savings account.

Being mortgage free is a great goal, but not at the cost of a bathroom that leaks and a kitchen that is badly designed and installed. believe me, I'd love to put everything on the mortgage, and I'm sure I'll get there, but I'm not there yet.

Jock_Tight

No probs, I was just picking up on the sentence 'we earn more interest by saving than we would save by overpaying'

Its a great incentive to overpay each month when you can see the big savings it can make in the long term. Are you getting the best deals on insurances/gas/electricity etc, over the years we have saved over £40 per month by switching around which was added to our OP.

Also there are little freebies like the Halifax/BoS Reward accounts where you pick up £5 a month just by cycling £1000 through the account (no new money, just move around online). With three of these (sole in each name + joint etc) you can pick up £15 per month / £180 a year. Thats half way to your £30 op per month

All the best on your journey
Jock

coldcazzie

Sorry, perhaps I should've said that in the short term it makes more sense to save. Once I'm happy we've enough in reserve to tide us over should DH be in another traffic accident, for example, and the house is sorted then I've no problem in throwing £300+ pcm at the mortgage, but until then I just gotta scrape by with an "every little helps" type arrangement! :rotfl:

We shopped around for our home ins for this next year - our renewal quote was about £450 :eek: but we've got one for £183, so that's almost a third of what it was. Went through Quidco as well, so should get £32 cashback on that transaction I believe for fuels we're on a fixed rate for a while and can't swap away til it ends... but DH is the one who deals with those as he used to work in the industry. I trust him when he says we're on a good deal.

We changed current accounts to FD, I accept that they don't pay us to have the account (apart from the initial changeover gift of £100), but I'm sick to the back teeth of shoddy customer service. HSBC were always reluctant to help us out, even when we asked repeatedly, and Santander are a bunch of incompetant idiots. Almost every phone call to them is followed by a second a week later having to clear up the mess that was made in the first one.

I'm not sure about having multiple accounts, we have done that in the past, and to be honest it made things more complicated than they needed to be. DH is not good at the money stuff, and tends to live in that very short term world of "I have it, therefore that means I can spend it" and "I want that cuz it's shiny *one week later* ah crap maybe that was a bad idea..." which means giving him reign over an account of his own results in unauthorised overdraft charges. It's taken me ages to get him to keep all his receipts and ring me before any larger purchases to check they're alright. I like having a single jt account and the cashback card for purchases. Keeps it simple. I have wondered whether Santander's 123 card would be worthwhile, since DH got a new job 2 months ago our monthly petrol costs have more than doubled. We might gain £20 a year in cashback after the higher fee... but is that worth the questionable customer services that come with the provider? I'm not sure.

Thanks though, it's helpful to have people's thoughts on the whole thing.

downsizer3

Well done on making a start on your overpayment journey. I can only affor £72pm overpayment as I too need to save ( and pay of a couple of debts) but I just rounded my monthly up and will stick with that until I get all clear.
Even that knocked a significant period off my mortgage not to mention interest.
Good luck - any time you need motivation - try a spreadsheet, they're great for seeing what a small overpayment can do.