Mortgage free wannabe!!!

InhaleMood

First step to becoming mortgage free....starting a diary on here!
I currently have a shared ownership mortgage on 30% of my property, which is £45750.
I have about £15000 in savings which I received just after taking the mortgage out!
So the plan is to pay off my yearly 10% in Dec 2012 - £4575
Then 10% in Jan 2013 - £4117
So I will have £37k left.
In Feb 2014 my fixed rate comes to an end, so I will be able to pay in about £8k, taking it down to £29k.
Then I will be able to overpay by £300/month.
In 2019 I should have paid it all off and saved £15k in interest!!!
I will then put that money either into the remaining 70% or a new property, and start again!

None of my family or friends have ever done this so I would really appreciate any help/advice along the way!

happycamel_2

Fantastic, good luck on your MFW journey, it is very addictive.

Any reason why you want to wait until December to overpay? Mortgage interest is usually calculated daily.

InhaleMood

happycamel wrote: »

Fantastic, good luck on your MFW journey, it is very addictive.

Any reason why you want to wait until December to overpay? Mortgage interest is usually calculated daily.

That is very true! I just had in my head that I had to do it by December. Well, first thing tomorrow I will get that sorted!

Thanks, for the advice!

InhaleMood

Update
So, i have found out that anything i overpay above the 10% will be charged at 3%.
It seems like it would be worth doing as it would only cost me £250, but would save lots more.

edinburgher

It strikes me that, as you're not paying it off in one go, paying a fee to overpay isn't the best idea at the moment.

It seems better value for money to pay your annual 10% and squirrel the rest away in the best ISA you can find/instant access for anything over the ISA limit.

InhaleMood

I have made my first overpayment! £4677.06!!!!!
Reduces term by 4 years and saves £7k in interest!

[Deleted User]

Given that your fixed rate ends in a matter of a few months, it doesn't seem to me that paying any Early Repayment Charge would be worthwhile.

Pay of whatever you are allowed to do penalty free now, and then save the rest in the highest rate instant access account that you can find until the tie in period ends, then overpay the remaining savings that you have penalty free.

Good luck

D9

Edit: just noticed your fix ends 2014, I read it as 2013 - do the maths and compare the interest saved by overpaying a lump sum to the ERC due before the fix ends - whichever works out cheaper is the way to go.

edinburgher

tanyasharma wrote: »

I have made my first overpayment! £4677.06!!!!!
Reduces term by 4 years and saves £7k in interest!

Well done you - that's a fantastic reduction :money:

moneycurious

Fantastic reduction , and welcome - i would heed others advice regarding the lump sum, in a high interest account fixed you will make money at the moment - and also you never know if you might need those extra pennies as an emergency!

Good luck!

InhaleMood

Thanks all! Great to be able to this in a public place and get encouragement from others.
Regarding the lump sum, i would keep a little bit back for emergencies. I know i could earn some money in an isa, not sure how to work out which would save me more money/cost me less.
If I overpay above 10% next year i would be charged about £300. I could probably earn the same in interest if I was just to save it so would be £600 up. BUT my mortgage is 4.3%. Which would be the best option?

edinburgher

This guide is well worth a read:

Overpay or save

For example, it shows that (assuming you're a basic rate tax payer), you'd need to earn 5.4% in a taxed savings account before you'd be better off saving instead of overpaying.

That said, there's no point leaving yourself vulnerable to a job loss or emergency in the rush to overpay. Most people suggest 3-6 months expenses in an emergency fund is a good idea for peace of mind.

Regardless, there's still very little point in paying an ERC, as you're not going to wipe out the mortgage next year, anyway?