Sweetdaisy's aim to be mortgage-free

southerndave

I am about to start my number crunching for the new year, but I am still enjoying whisky so maybe will wait for next weekend! I also think simplicity and goal setting maybe this years watchwords.

sweetdaisy

southerndave wrote: »

I am about to start my number crunching for the new year, but I am still enjoying whisky so maybe will wait for next weekend! I also think simplicity and goal setting maybe this years watchwords.

Good luck with your number crunching Southerndave, though I suspect your financial plans will make interesting reading after a few glasses of whisky .

I have definitely kept it simple for next year. In 2014 I need to start focussing more on my health as it has taken a bit of a dip of late and I have learned that I need to keep things simple in life, so that I don't get stressed out/worry so easily.

I hope to achieve my financial goals for 2014, but if not I hope to get close to it. At the moment DH is working overtime almost every week, so we are making hay while the sun shines (and all that!) as we don't know how long it will last.

sweetdaisy

Food shop done today and had an underspend of £18. Also, didn't spend as much as usual this week on fuel for the cars, so total underspend for the week was £64 and I transferred £50 into Savings. I was tempted to pay some towards the mortgage, but I know that I will be happier once I have increased our Emergency Fund, then I can plough more money towards the mortgage.

sweetdaisy

Received our Offset Summary for the period September to December. Since Offsetting we have saved a total of £2,753 in interest. Compared to the previous quarter, we have saved a further £202.

sweetdaisy

_party_ Happy New Year _party_

The Christmas decorations are down (thanks to DH who sorted it all whilst I have been in work) and the house has been cleaned. All I need to do now is sort out the wardrobes and bag clothes in charity bags.

I intend redeeming some money from survey/cashback sites later on this evening and this year I may put the money in the Christmas/Birthday's savings pot, rather than towards the mortgage.

As a reminder to myself - financial aims for 2014:
1) increase 'Emergency Fund' savings
2) get mortgage balance down to £55,000 by 31st December
3) reduce mortgage term to January 2022

southerndave

Looks like you plans for 2014 are indeed simplified SD! Looking forward to seeing how you get on.

Just being nosey, what size pot in your emergency fund do you expect to have before you consider it 'enough' to cover the emergencies you envisage?

I ask as we round the house with the what ifs, we looked at income protection, different insurance and then at saving into an emergency account as your doing. In the end, because of the nature of our off-set account we decided to just pay down the mortgage and if SHTF then we would access the 'pot' already accrued in the mortgage.

The thinking is that the 'savings' made via overpayments are saving us 4% in mortgage interest and there are not many places offering 4% savings rate. Second, it gets us closer to the end goal and lastly if the S has indeed HTF then the mortgage will probably be the last thing to worry about if so far ahead. Additionally for every month that we are 'ahead of plan' as Virgin term it, we are effectively gaining a months grace in the emergency situation if that makes sense.

Just kind of comparing the different approaches.....

sweetdaisy

southerndave wrote: »

Looks like you plans for 2014 are indeed simplified SD! Looking forward to seeing how you get on.

Just being nosey, what size pot in your emergency fund do you expect to have before you consider it 'enough' to cover the emergencies you envisage?

To be honest, having just read your post I don't even know if I have the right approach myself. As you have probably already sensed, I am quite indecisive when it comes to my MFW plans and am frequently changing the way that I do things .

In terms of my Emergency Fund, I would ideally like to be able to have a balance of £10,000 (6 months of all direct debit/bill expenditures), but realistically I'm not sure that I will reach that, as I know that by the time that the mortgage is paid, both of our cars are going to need to be replaced. I hope to fund this from savings as don't want to draw down on the mortgage and undo all the hard work that I have done so far. Likewise, I don't want to take out a loan as I also don't want to be paying any interest.

southerndave wrote: »

I ask as we round the house with the what ifs, we looked at income protection, different insurance and then at saving into an emergency account as your doing. In the end, because of the nature of our off-set account we decided to just pay down the mortgage and if SHTF then we would access the 'pot' already accrued in the mortgage.

We have Mortgage Protection Insurance, but to be honest it is a waste of money, as when DH was made redundant in October 2012 they didn't pay out, because (unbeknownst to us at the time of taking out the policy) they only pay out to the main breadwinner (which is me) and would only have paid DH after he had been out of work for 6 months. Fortunately, he got a job after 5 months of redundancy. So I should just cancel the Insurance, but I am worried that if I were to lose my job, at least the insurance is still there as a safety net..

I could just keep a small amount of Savings aside and pay all the rest to the mortgage, as we are able to draw back from the mortgage, if things don't go to plan. But I know that if I do this, the term will increase and that will make me feel quite disheartened to see the term rise .

The other thing I could do is put all spare money/savings in the Offset Savings, rather than make overpayments. That way the account will be 'fully offset' quicker and I would have access to a large amount in savings, but this means that I won't see the mortgage balance reduce as much as it does month by month. To be honest, seeing the mortgage balance reduce every month gives me the motivation to get it paid as soon as possible.

I am always interested to hear what approaches other people have to how much you should have as an Emergency Fund, as my approach to savings may be completely wrong.

southerndave

sweetdaisy wrote: »

We have Mortgage Protection Insurance, but to be honest it is a waste of money, as when DH was made redundant in October 2012 they didn't pay out, because (unbeknownst to us at the time of taking out the policy) they only pay out to the main breadwinner (which is me) and would only have paid DH after he had been out of work for 6 months. Fortunately, he got a job after 5 months of redundancy. So I should just cancel the Insurance, but I am worried that if I were to lose my job, at least the insurance is still there as a safety net..

As I said at the time, this makes me conclude, as it did for us, that this kind of insurance is in practice useless. Even if you lost your job, I bet they would find another way to wriggle of of coughing up. When we ran the numbers for ourselves, we worked out that for an initial risk as we built up the savings in the mortgage, long term we would be better off paying ourselves the insurance premium. The likelihood of a need to claim is quite low and as you found out, even when the worst happened, you get diddly squat. Yet how much in premiums has this cost since you started it? Ditto the mortgage protection? Insurance is a scam in my opinion lifting hard won cash out of your pocket based on fears of the unknown. Truth is it hardly ever as bad as they make out.

sweetdaisy wrote: »

I could just keep a small amount of Savings aside and pay all the rest to the mortgage, as we are able to draw back from the mortgage, if things don't go to plan. But I know that if I do this, the term will increase and that will make me feel quite disheartened to see the term rise .

You could and you would. But as we decided its a BIG IF and IF that situation arises, getting in advance of the mortgage would be a secondary concern if at all.

sweetdaisy wrote: »

The other thing I could do is put all spare money/savings in the Offset Savings, rather than make overpayments. That way the account will be 'fully offset' quicker and I would have access to a large amount in savings, but this means that I won't see the mortgage balance reduce as much as it does month by month. To be honest, seeing the mortgage balance reduce every month gives me the motivation to get it paid as soon as possible.

There then is the same conclusion we came to! And there is no right or wrong, only what's right or wrong for you. Run the numbers though on the premiums especially over the long term and then see what that money instead would do off your mortgage account over the same period. Then weight up the risks and take into account the clauses built into the insurance policies, which you already have experience of how little they want to pay out if at all and try and balance the decision on that. However with your natural risk aversion this maybe tricky!:D

Of course, this is purely my take on things and others may disagree and prefer a fully insured, belt and braces approach, but the degree of peace of mind comes with a price tag and its whether the individual thinks that price gives good value.

gallygirl

I see the mortgage balance coming down every month as I offset all savings against it on my spreadsheets. That to me is the real net figure - and when I do get the actual balances through I'm genuinely surprised :rotfl:.

sweetdaisy

Southerndave - according to my figures, since we first took out the mortgage in 2011, we have paid £2,575 in mortgage protection payments :eek:. Since being in the house we have only made one claim (when DH was made redundant), but as previously mentioned, was unsuccessful. If we pay off the mortgage by 2022 (my current target) I will be paying a further £1,818 in mortgage protection insurance. This has given me some food for thought . . .

Gallygirl - I can view my mortgage balance daily (as part of online banking). When I make an overpayment the balance is reduced immediately, whereas the interest is added to my mortgage on a monthly basis. When I input the figures into my spreadsheet, I do see the balance and term reduce, but not as much compared to directly overpaying.

I'm in a bit of a quandary now as I am wondering should I stop the direct overpayments and put it all into Savings, with a view to paying the mortgage off in one lump sum when the account is fully offset, or do I carry on with a 50/50 approach (50% into Savings and 50% mortgage overpayment)? or does it not make a difference?