A great start @ 3.09%

MFW1981

Ok,

So we are new to this forum but very keen to become mortgage free..

We currently owe £165,000 and will be fully paid up in 2045. (32years, 8months) and our LTV is around 75%.

Im 31 and my partner is 29. We both work full time and have one son.

We have just signed up to a fixed rate (repayment mortgage) with Santander for 2years @ 3.09%

The monthly payment is £670 but we plan to make a minimum overpayment of £230 each month. (maximum 10% per year)

If we stick to the above for 2years we will reduce the balance to £153,360.

As for the overall calculation, it says we can be mortgage free in 20years time... but as we probably wont get such a good deal (3.09%) for the whole of the mortgage im wondering if we should try to make higher overpayments in the 1st 2years as we've got a really good rate?

Any advice would be really appreciated. We would really like to be mortgage free before 2032....

Cheers

Jock_Tight

The more you can pay off in the early years the less you will owe in the long term due to compound interest.

Assuming you have an emergency fund set up (3-6 months worth) and have set yourself a budget I would overpay as much as possible, within your 10% limit.

MFW1981

Thanks for the advice Jock.

We have around £20k in savings but have a few things we need to budget for so realistically would need to hold on to some of it.

We also have some money owed to us from friends and family so its like a nest egg (although we are waiting for them to repay it lol)....

Im really keen to become MF, but the other half isnt as keen as me....

Shes a live for the moment kinda girl and shes only looking at the short term picture....

She'd like to move in the future so doesnt see the point in clearing down the mortgage..... however I've explained to her that if we sell tomorrow we could get 230k for the house so that currently gives us around 65k equity....

If we do move in the future then we can borrow less....

Overall I dont want to be paying for the rest of my life... im 31 now and the thought of still having a mortgage at 60+ is scary.....

Each month we have around £400-500 left over and I think it would be great if we could use it for overpayments...

The months we have lots of things to pay for then we can just reduce the overpayment or not make one at all... simples....

Thats me convinced, now ive got to get the other half on board......

Jock_Tight

MFW1981 wrote: »

Im really keen to become MF, but the other half isnt as keen as me....

Shes a live for the moment kinda girl and shes only looking at the short term picture....

She'd like to move in the future so doesnt see the point in clearing down the mortgage..... however I've explained to her that if we sell tomorrow we could get 230k for the house so that currently gives us around 65k equity....

If we do move in the future then we can borrow less....

My wife was the same, with the aid of a couple of spreadsheets showing the benefits of overpaying and the fact she would have more money in the long term she eventually came on board.

If you overpay the mortgage you may able to get better rates in the future as this will improve your LTV.

Overall I dont want to be paying for the rest of my life... im 31 now and the thought of still having a mortgage at 60+ is scary.....

My dad retired at 52 (now 74), they paid the mortgage off early by overpaying as much as possible (when interest rates were horrific!!). They have been all over the world since on holidays. Was enough to convince me to try and do the same. I'll be mortgage free this Friday, at 39

MFW1981

WOW... mortgage free at 39.... thats fantastic...

Had a quick look at your thread and can see you offset your mortgage...

We have some of our money allocated to home improvements but the rest is sitting in ISA's.... should we look at offsets at the end of this deal?

As for overpayments, we have a 10% limit per year on our mortgage so we can pay a maximum of £32k off over the next two years...that works out to a monthly overpayment of £1300 a month which is a lot of cash...

We are aiming for £230 per month but I think we could probably do £500 (subject to the other half coming on board)

My other half hates spreadsheets..... even though its clear to see we can save so much if we pay off as much as we can now....

Jock_Tight

MFW1981 wrote: »

We have some of our money allocated to home improvements but the rest is sitting in ISA's.... should we look at offsets at the end of this deal?

Would depend on what interest rate you can get on your next mortgage deal and if this is higher than your ISA rates.

Offset accounts work if you have a reasonable amount of savings, in our case we got some additional help from parents. The benefit is you still have access to this money so its not locked away in the mortgage.

Sepa74

If your wife isn't a spreadsheet fan, maybe have fund with some of the loan calculators on this site - you just plug in the figures and it calculates everything for you.

I also like this one which tells you how long it will take you to pay something off.

http://loan.bizcalcs.com/Calculator.asp?Calc=Simple-Loan-Payoff-Time

A lot of people on here are in a similar position where there partner isn't as on board as they are... it seems taking it slowly and steadily is the best way to bring a partner around.

Good luck!

MFW1981

Thanks for all your replies...

We got our confirmation letter today, our mortgage is now fixed for 2years @ 3.09%

They have sent us details of how our payments will change over the next 3months...

This month they wan £631.63 (same as we use to pay)

Next month they want £601.43

and then £670.10 for the next 2years...

As me and the misses agreed to pay a total of £900 each month we have made our very 1st over payment today of £268.37

Next month we will still pay £900 so thats another OP of £298.57

Then we will make regular OP's of £229.90.....

I've also spoken to the misses and she had kinda agreed that at the end of every month we can look at what we have left and maybe pay a bit more...

I'd like to overpay £500 a month but will have to see if I can get the misses to agree lol

ztan

Hi MFW1981
What a good start! Definitely get overpaying as soon as you can and as much as you can, that rate is amazing! My OH and I have just started making regular OP, and are going to check and see what's left at the end of each month and keep topping it up where we can.
Keep your enthusiasm going, your OH will soon be an avid MFW too

Jock_Tight

Thats a great start with the OP well done!

How many months do you shave off the mortgage term if you keep the same ?

MFW1981

ztan wrote: »

that rate is amazing!

Yeah, we thought so too, considering out LTV is only around 75%. Santander messed us around sooo much that the deal they where offering us (3.59%) expired and when I called back to arrange a deal they started telling me its now 4.59%....

I wasnt happy so made a complaint and asked for the 3.59%.... but to our surprise the paperwork has come through at 3.09%... :T

Jock_Tight wrote:

How many months do you shave off the mortgage term if you keep the same ?

current mortgage is 32years 8months and with that level of overpayment it will be cleared in 20years...

However If I can get the misses on board we can start doing a bit more so should shave a bit more off