The price is right! Time to hammer the mortgage

michelle2904_2

The P family consists of chief in command Mrs P thats me who budgets spends pays the bills juggles work and being a mum to henendaz wannabe little p ds age 11 (whom i think has inherited his mums no wasting money attitued (now that is;)) then Mr P chief earner and my personal man about the house but aint a clue about money management.
Anyhow me and Mr P have been together for 13 years and bought our house 7 years ago (we rented for the first few years saving a deposit of £27000) the house we bought was £145,000 with a mortgage of £118,000 at the time the mortgage we had was of a very high interest rate and we went interest free while i looked for a new mortgage. this was at the height of interest rates and new they had to come down so convinced hubby to go on a tracker although he wasnt too happy as he likes fixed, i found a woolwich lifetime tracker at .27% above the base rate fee free so we remortgaged interest only!! OMG best thing i ever did or was it..........

At the beginning the payments was still quite high about £600 but as the base rate went down the payments came down too:rotfl:
But instead of paying big overpayments on the mortgage we maxxed out the cc cards and loans on holidays to florida 3 times and a nearly new car, new kitchen and bathroom.

Plan as of today (my diary)
make mortgage overpayments of £800 a month current balance £105,000 made £13,000 overpayments so far:T
make overpayments on cc number 1 currently £3500
make overpayments on cc number 2 currently £4500
make overpayments on cc number £ currently £2500

hope i aint bored anyone:)

Michelle

Twiddy

Hi Michelle

That's an upbeat start to a diary and in now way was I bored by it! Subscribing now......

That's a great plan of attack aswell and will be tracking your progress with interest (excuse the pun!).

Welcome to the boards and good luck in your quest!!

All the best
T

financialbliss

Hi michelle2904,

What's your rates on your 3 credit cards and the rate and normal monthly payment on your mortgage?

Just curious as to if they are 0% rates on the CCs, or at a higher rate. Suspect if not 0%, they they will be way higher than your mortgage rate and you would do much better to clear the cards before starting on the mortgage.

FB.

michelle2904_2

Hi, the rates on the the cc are 0% balance transfer till aug 2012 on the £4500 0% on the £3500 till may 212 and the last one is a barclayard low rate at 6%. Our mortgate payments on interest only is shy of £70 per month, we have one biggie loan of £9500 at £229 per month but my plan of attack was to try and over pay the mortgage while interst rates are low...... what do you think? clear cc first? xx

sweetdaisy

Good luck michelle2904 on your quest to become mortgage-free

WestonDave

Interesting problem you have. In principle you should attack the highest interest borrowings first, which normally means leaving the mortgage till last. Normally credit cards are the highest rate so clear them first. However in your scenario it might make more sense to leave the credit cards whilst they are on 0%, clear the 6% one completely as quickly as possible whilst keeping up the repayments and minimum payments on the mortgage. I'd then build up funds (maybe in ISA's etc for maximum interest) ready to clear the two 0% cards as soon as they hit the charging point. Once you have funds in hand to clear those and earning interest on deposit then you need to decide what to do with any other funds you have.

One approach given your very low mortgage rate is rather than actually clearing it, is building up as big a contra fund as you can in savings accounts and ISA's. If you are only paying 0.77% interest, it actually makes sense to just pay off the interest and put any spare funds you have on deposit in a savings account where you might get 2% thereby making an easy 1%+ towards the mortgage capital amount. Once interest rates start to rise you can then decide whether it makes sense to continue like this, or use the lump sum to reduce the balance perhaps in conjunction with a remortgage to a fixed rate or offset account.

I'm assuming the loan can't be repaid early or would be no benefit in doing so, and that you have a savings balance for emergencies - if not the latter then you definitely ought to think about this before paying away everything unless you can draw down overpayments back from the mortgage.

michelle2904_2

Today i have opened a isa account to start savings as we have zilch and this scares me. hubby pay day tuesday so will pay £500 mortgage overpayments and hopefully £500 to cc split between the highest interest cards.
as of today 11/11/11 my debts are
mortgage £105,000
halifax loan £4759
nationwide (car) loan £8977
tesco loan £1460
tesco cc £3547
barclaycard cc (me) £2804
barclaycard cc (hubby) £900
virgin cc £4453
dfs £1565

feeling VERY motivated and will show hubby these figures and hopefully he will have a lbm too

michelle xx

financialbliss

michelle2904 wrote: »

...so will pay £500 mortgage overpayments and hopefully £500 to cc split between the highest interest cards.
as of today 11/11/11 my debts are
mortgage £105,000
halifax loan £4759
nationwide (car) loan £8977
tesco loan £1460
tesco cc £3547
barclaycard cc (me) £2804
barclaycard cc (hubby) £900
virgin cc £4453
dfs £1565

Hi Michelle,
WestonDave beat me to a response yesterday!

I've totted up the above (apart from the mortgage) and it's an eye watering £28,465.

If it were me, I'd ignore the mortgage completely until some of those other debts are cleared. I know you can get a "hit" from making a mortgage overpayment, but your mortgage rate is tiny in the grand scheme of things.

I'd recommend listing the above debts with their interest rates against them, so people can advise how best to tackle them. Perhaps sort the list from highest rate to to lowest too.

FB.

michelle2904_2

financialbliss wrote: »

Hi Michelle,
WestonDave beat me to a response yesterday!

I've totted up the above (apart from the mortgage) and it's an eye watering £28,465.

If it were me, I'd ignore the mortgage completely until some of those other debts are cleared. I know you can get a "hit" from making a mortgage overpayment, but your mortgage rate is tiny in the grant scheme of things.

I'd recommend listing the above debts with their interest rates against them, so people can advise how best to tackle them. Perhaps sort the list from highest rate to to lowest too.

FB.

hi and many thanks for your replies and advice my debts are as follows

mortgage £105,000 0.77% interest only
halifax loan £4759 6.7% cant make overpayments on this loan
nationwide (car) loan £8977 6.8% this was taken out recently so im sure i can overpay (will check this though)
tesco loan £1460 6.8% can and have made overpayments on this loan
tesco cc £3547 0% till may 2012
barclaycard cc (me) £2804 6% lifetime
barclaycard cc (hubby) £900 17% just finished 0%
virgin cc £4453 0% till august 2012
dfs £1565 interest free

I thought it made sense to overpay my mortgage while interest rates was low, the size of it scares me......... i feel really down looking at this and cant believe i allowed us to take on such a big mortgage and put our holidays home improvements on to cc cards

beachie

Michelle,

Good luck on your journey.

You don't have a large mortgage compared to some and it sounds like you have a good amount of money to put towards debt each month.

If I were you I would concentrate on getting the credit cards down paying the highest one first. Forget about the large mortgage overpayments (I round mine up to £200 a month so I feel a little more progress but mainly pay my credit card debt).

Interest rates may stay low for a long time yet and there is no telling when the interest rates will rise. The latest predictions are 2014 but it could well be later (or sooner).

If you paid off your mortgage you could find yourself in a position where alot of your credit cards (0% is not guarenteed) with a high interest and therefore wasting money on interest.

Sorry to put a damper on your plan but you will get there.

WestonDave

Why would you want to get rid of the loans which cost least and keep the ones that cost most? That would be what you are doing if you overpay the mortgage first.

Having now got all the figures I would suggest the following.

1. Ensure you have an emergency fund suitable to meet any likely upcoming needs - e.g. appliances going wrong, car getting trashed or one of you being out of work for a couple of months. The ideal is 6 months take home pay but with debts to pay this might need to wait. Get yourself a good few hundred in an ISA just in case so you don't end up having to take on more, and expensive debt.

2. Clear the 17% cc.

3. Have a plan in place to clear the two interest free credit cards at the point they stop being interest free - they will probably be the wrong side of 15% when they come off interest free. Ideally start building that fund now, but if you are sure you could do it nearer the time then you might start on "4" first and come back to this - but be absolutely sure as its better to pay 6% than 16-20%.

4. Once you've dealt with "3", clear the tesco loan - clears that off your credit record and makes things simpler.

5. Clear the Nationwide loan if you can overpay.

6. Then clear the 6% credit card.

7. Once all the above is done, I would personally be putting money away in ISA's etc at say 3% so I am earning more money than I would be saving at 0.77% if I used it to actually pay down the mortgage. Having a £100k mortgage is no problem if you have £100k in the bank earning more in interest than the mortgage is costing. You probably won't get that far soon but that would be the aim assuming interest rates stay as they are. Every time interest rates move, either on the mortgage or the savings you'll need to check whether its better to keep savings or clear the mortgage.