Onwards to freedom!

icontinuetodream

Hi SSS....:wave: I am on the MFiT-T3 challenge too and also found out this morning that my balance is lower than anticipated! Good feeling isn't it No real advice regarding paying a chunk off your mortgage....I think that you have to balance it with your need for security....how about paying half of it and that way keep both bits of you happy??:D Good luck on your journey :T

edinburgher

You're doing really well - slow and steady regular OPs are great and I'm trying really hard to stick with them. It's a great financial (life) lesson in general that dull as dishwater reliability and sticking to the plan works better than zany schemes, no matter how many I invent

An emergency fund of some sort is a pre-requisite for anyone with a mortgage as far as I can see (unless your mortgage company lets you withdraw OPs further down the line). Like you, we 'earn' far more from OPs (4.99%) than we do from savings (3%). That said, without an emergency fund we can't pay our mortgage *at all* if we both lost our jobs. Mrs E and I decided to match OPs with payments into our Emergency Fund 1:1. It'll take a bit longer this way, but we only need to save the EF once and it provides a stable base for our future

Mc_Marty

Hi SSS,

Just seen this thread and have subscribed to it so that i can watch your progress. Well done! It's quite something when the moment comes that you realise you could be MF years earlier than expected and pay back £0000's less in interest to the banks. A good feeling.

Our situations are similar. I became a MFW in Dec 2010 with a repayment mortgage of 116k (5yr fixed at 5.84% ends 2014). As of Jan 2013 it should be approx 60k. Have completely dedicated last 2 years to making as bigger dent as possible. I currently do the full 10% overpayment amount each year and have also sneakily reduced the term in order to get round paying more off the capital without incurring early repayment charges. I have roughly calculated that i now save £000's a month in interest payments. Assuming my situation stays as it is (i.e. keep job), i hope to MF by June 2015 (but life rarely goes to plan so who knows). It does mean sacraficing things now but in the long term it means having more later.

Goodluck with your mortgage, looking forward to reading your posts.

BTW, about your earlier post of savings vs mortgage payments, it is very tempting to chuck it all at the mortgage especially when saving rates are so low. I keep about 3mths salary in savings and then the rest on the mortgage.

Southernman

Noticed your thread in the Mortgage free in 3!

I've got an £82k balance and my aim is also £60k by the end of the challenge.

It would be good to be able to motivate each other and track how we're both doing (although you do have a 1k head start!!)

I know what you mean by the ISA situation, i have £5k in a 3% one and i like the security of knowing it's there but it would be better off on the mortgage. Just worried that i'd have nothing to fall back on if i lost my job!

Will be happy that the more i overpay the less interest i pay on a monthly basis. Right now we're talking £300 of the £580 i pay automatically a month. Actual mortgage before overpayment is £473!

SillySod

SuperSecretSquirrel wrote: »

It's so obvious, I can't believe it took this long to sink in! I had been thinking of the higher monthly repayment as an overpayment (which I guess it kinda is, but strictly speaking isn't...) that eats into the 10% allowance for the year (which it doesn't). Glad I've got that straight in my head now!

Are you sure your higher monthly repayment does not eat into your 10% allowance? Mine certainly did. Obviously I don't know what is in your contract but I would have thought that anything you pay over the originally-scheduled monthly payment is seen (also strictly speaking) as a monthly overpayment.

We reduced our term (our bank has a standard £30 fee) to get round this problem as otherwise the amount you can overpay is reduced year-on-year.

Good luck, and see you in the 3-year challenge

SuperSecretSquirrel

Wow, lots of posts Hello icontinuetodream, edinburgher, Mc_Marty, Southernman, and SillySod, thanks for stopping by!

I've been doing my sums, and I think I've pretty much decided what I'm going to do regards overpaying before the end of this year. I'm planning on withdrawing £5000 from my ISA, and throwing that (really hard ) at the mortgage. It'll still leave me with a plenty big enough security fund should we end up needing it, and will make a very big difference to the total interest we end up paying on the mortgage. It's going to be hard withdrawing that money, it takes a long time for me to save that much, but at the end of the day I'm not spending that 5k, I spent it when we bought the house, this is more like moving the money from one account to another, one that pays better interest, but that you can't easily make withdrawals from - if I think of it that way then it's definitely the right thing to do

This lump will be a one-off, then next year the plan is to maintain the monthly £276.67 automatic overpayments. If I'm fortunate enough to make a little extra money, or just have a bit left over from time to time, I might make the occasional ad-hoc overpayment. I live in hope that OH will do the same eventually too! It's important to me that we still enjoy our holidays and and other nice things during this time though, I'm not turning into Scrooge for the sake of mortgage overpayments!

It would be nice to increase the monthly overpayments come 2014 (pay a nice round £1000 a month, £476.67 of which would be op's), but I'm already looking too far into the future now as there are too many unknowns to plan ahead with any real accuracy. If we manage what I hope we will though, we'll then need to reduce the term come 2016 to allow continued overpayments (SillySod I think you may have got the wrong end of the stick from my quoted post, I probably didn't do a good job of explaining - as in your case we'll eventually reduce the term, which will increase the standard monthly repayments, which means if we pay 10% of the balance over and above the bigger standard repayments the mortgage is cleared quicker and without fees).

I'm looking forward to following all of your stories over the coming months and years - good luck everyone

SuperSecretSquirrel

Well, you can't say we're not committed to the cause! 5k withdrawn from my ISA and paid off mortgage yesterday Not only that, but OH has reviewed savings and contributed a further 1k today, so that's a whopping great £6,000 off the mortgage this weekend Obviously this isn't something we'll be able to do often, but it's one hell of a good start!

I'll call the mortgage company later in the week to confirm the transfers went through ok and to get an updated account balance, but my spreadsheet reckons we're currently sat at £75,115, which means next months payment will take us below 75k which is a great milestone in itself... and a year later our interest will be below £10 a day which is another milestone to look forward to

Who'd have thought that paying down debt could be "fun"?

icontinuetodream

SuperSecretSquirrel wrote: »

Well, you can't say we're not committed to the cause! 5k withdrawn from my ISA and paid off mortgage yesterday Not only that, but OH has reviewed savings and contributed a further 1k today, so that's a whopping great £6,000 off the mortgage this weekend Obviously this isn't something we'll be able to do often, but it's one hell of a good start!

:j:j:j:j WOOHOO!!!! :j:j:j:j

SuperSecretSquirrel

Lovely payday surprise - OH had some money left over in current account from last month, some was sent to savings, and £150 was sent to mortgage company as an OP So pleased that OH has made another voluntary OP, I think the massive scale of potential savings has sunk in and we're both on the same page now, in it together!

Also, we just received £15 cashback for switching electricity supplier a couple months ago, so that's gone straight on the mortgage too. Every little helps

Ok so on to the not so great news... Our 6k overpayment last month has reduced our monthly payments, not our term. I should have specified that we wanted to reduce the term. There's a £60 admin fee to reduce the term on request, but I think this might be waived if overpaying a lump sum over £500 at the same time. I'll call the mortgage company tomorrow to find out for sure.

Right now our standard monthly payment is £476.39, and since I've increased the monthly dd to £800 we are now automatically overpaying £323.61 per month. This year that leaves us with about £3500 available as additional ad hoc overpayments before we're charged an ERC. I think that will be fine, don't think we're likely to go over that line.

Next year, I was hoping to increase the monthly dd to a nice round £1000, in which case we'd be automatically overpaying £523.61 per month. That would mean that without any additional ad hoc OPs we would likely be stung by an ERC. Every year from then on, as the balance decreases, we'd be going over the OP allowance more and more. We'll definitely need to reduce the term to increase the standard monthly payment soon.

I'll just need to make sure that we can easily revert back to the 25 year term should circumstances change before I commit to anything. I'm pretty sure the answer will be yes, but we are very wary of being lumbered with a large monthly mortgage payment that we can't reduce should either of us end up being made redundant!

SuperSecretSquirrel

When I called the mortgage company yesterday I was struck by the curse of the "computer says no" call centre drone.

He'd "never heard" of customers reducing the mortgage term or request, only extending the term... There was "no process" for him to follow to reduce the term, so he could give me no more information...

Bit annoying. I was calling to find out if there would be a fee involved, and if so how much. Wasn't expecting to be told that I'm not allowed to reduce the term :doh:

The cynic in me thinks that perhaps staff are only trained in aspects that will make money for the company, not save money for the customer. If that were the case, it'd be a bit of a scandal really, but with all the scandals hitting the financial industry I doubt many people would care much about this.

Anyway, I've written a letter detailing my query and will pop it in the post later. Hopefully the letter will find its way to the right person, and I'll get some sense from them. I can but hope!