Mortgage Free in Three Yrs

Dithering_Dad

I've just received my annual mortgage statement from Standard Life and it makes for pleasant reading, especially the bit which shows how much interest I pay on the mortage each month gradually decreasing as I made my overpayments.

I also noticed for the first time that I had a 'Prepayment Reserve' of £37,456. I looked this up on the SL website and it basically means that all my overpayments can be retrieved at a cost of £20 admin charge.

When I first started this challenge I never wanted or expected to have to pull money back out of my mortgage, so never really looked into this area. Now that we're in a recession and people are losing their jobs all around me, I'm finding it such a relief to know that I can access this money in a dire emergency.

I have about 12 month's worth of emergency money saved up, so should be OK, but as I'm such a worry wort you've no idea how comforting it is to know that I can now survive 3 years without work.

I am so glad that I decided to overpay on my mortgage! It's not easy having such a large income and keeping to a strict budget but thank god I did! Thanks also to everyone who contributes to this thread whose encouragement has helped all of us keep going over the last 18 months.

GettingThingsDone

Hi DD - that's great news about your Prepayment Reserve, good to know it's there just in case.

Now that we're in a recession and people are losing their jobs all around me, I'm finding it such a relief to know that I can access this money in a dire emergency.

I'm sure you probably don't remember me, but I think you misunderstood my point I was making a few months ago, which is neatly encapsulated in your statement above.

Anyhoo, I'm looking to start my MFW journey (or at least overpayment journey) in the new year, so all advice re: account types and strategies appreciated. I will of course read up on a good few threads on here first

gtd

Dithering_Dad

GettingThingsDone wrote: »

I'm sure you probably don't remember me, but I think you misunderstood my point I was making a few months ago, which is neatly encapsulated in your statement above.

Anyhoo, I'm looking to start my MFW journey (or at least overpayment journey) in the new year, so all advice re: account types and strategies appreciated. I will of course read up on a good few threads on here first

gtd

Hi GTD, I think I can recall you from a 'Don't overpay your mortgage' style thread, where you were saying that overpaying mortgages should have a health warning because there were better ways to invest your money and that MFW's could lose out financially?

I dare say that now we're several months down the line and looking at the current state of the stock market and the issues with having large amounts of savings (especially in certain Icelandic banks) that you'll now probably understand why us MFW's were keen on making direct overpayments on our mortgages, which as everyone knows is the surest way to reduce mortgage debt.

We certainly don't see any more of those 'Don't pay your mortgage off' threads anymore, so it's good to be vindicated but a shame that so many people are going to suffer inthis recession . Glad to see that you're now onboard and about to start down the Mortgage Free route too.

MFW - Not loonies after all.

financialbliss

Dithering_Dad wrote: »

I also noticed for the first time that I had a 'Prepayment Reserve' of £37,456. I looked this up on the SL website and it basically means that all my overpayments can be retrieved at a cost of £20 admin charge.

Hi Ditherind Dad,

Our mortgage is with Nationwide. Just a 5 year fix currently, nothing special. We're still allowed to overpay by up to £500 per month. We've currently got about 18,300 which Nationwide describe as an "Overpayment reserve".

We can borrow this back - I've not done this personally, but I understand from reading on these forums that it typically only takes a matter of days for this to be retrieved. I believe there is no charge for this - at least there wasn't when I last checked.

I also believe in paying down the mortgage over saving elsewhere. I suspect the BoE rate is going to drop like a stone in the next few months - anyone for a 0.5% rate drop again in November?

Financial Bliss.

ailuro2

FB- that'why we went for fixed rate interest on the new savings accounts - we're hoping to make the money work even harder than it was before. Of course if it all goes the other way then it'll get dragged out of the account and slapped back on to the mortgage.:D

GettingThingsDone

Hi DD - not quite right - I still do think there should be a health warning, but not because there are better ways to invest your money.

I can explain my caution - I'm heavily involved in producing KFI's, so I'd feel terrible if I gave someone bad advice. However, I know mortgage calculations pretty much inside out, so I'm fully aware of the benefits of overpaying and why some mortgage products are better than others.

I've got lots of reading up to do though and some savings to build up before I go for the MFW thang - so I'll go back to lurking

Good luck all with your MFiT!

gtd

Dithering_Dad

GettingThingsDone wrote: »

Hi DD - not quite right - I still do think there should be a health warning, but not because there are better ways to invest your money.

You should start up a new thread to warn would be MFWers about the 'dangers' of becoming mortgage free. It'd provide welcome light relief in these dark days of credit crunch, house price crashes and recession.

Perhaps your pal InMyDreams could contribute to it, informing us how mortgage repayment does not increase your net worth and that only investing in the stock market can do that. It'd be interesting to see how her net worth has fared since the stockmarket crashes. Methinks she will be wishing she had 'invested' that lost stockmarket money in her mortgage after all, at least there would be something to show for it.

Meanwhile I'll merrily continue overpaying my mortgage where I can and be happy with the fact that having reduced my mortgage debt by 25% since the start of the MFi3 challenge I have made myself and my family that much more secure.

I guess the MFW 'Health Warning' you could attach to that is "Warning, Mortgage Overpayment can seriously help make your family more secure during economic downturns!!". :rotfl:

Dumbledore55

I have to say the recession has made me realise that I am not a risk taker and that I gt great comfort from just watching my debts go steadily down.

I'm so grateful that due to support from this site I have no credit card debts or loans and that I have slowly been reducing my mortgage. I still can't help looking for bargains so hopefully my moneysaving ways are now a learned behaviour.

It's been frustrating that my building society only lets me pay off 10% of my mortgage per calendar year but I've been saving ready fto make a lump sum payment in January 2009 and already have £4K.

My current mortgage deal ends in August 2009 and I can't wait to do a new deal for a significantly reduced amount.

I'll think about savings and investments when I'm mortgage free, I'm pretty lucky as I know I'll have a decent pension and my years of struggle have taught me that piece of mind is far more important than any amount of money.

Roll on January 2009!

StuartGMC

Dithering_Dad wrote: »

Meanwhile I'll merrily continue overpaying my mortgage where I can and be happy with the fact that having reduced my mortgage debt by 25% since the start of the MFi3 challenge I have made myself and my family that much more secure.

I guess the MFW 'Health Warning' you could attach to that is "Warning, Mortgage Overpayment can seriously help make your family more secure during economic downturns!!". :rotfl:

DD I agree on the peace of mind from OP etc to reduce the mortgage debt, having been through redundancy where company closed down in 1992 it was a real kick not to get ANY redundancy pay as it went bust, just a little from the government requirements and not the 3 months notice I was expecting (equating to 4 months net salary). We then bought in 1994 and have worked to balance lifestyle, arrival of our child and mortgage, always overpaying, hope to clear 9 years early as per my thread.

However, I think there is some middle ground on the investments area; basically we all need a balanced portfolio it's just that we will all have a different view on the spread and risk that's appropriate.

Our S&S ISAs are down 53% at the moment, but, they are not part of our short-term plan to clear the mortgage and medium term plans to 2016, so the risk is only on the sums invested which augment our "core" plans. We're getting 50% more units now than June for our regular contributions, but am considering a reduction and switching more into the mortgage OP to take monthly payment to 108% above that required.

There's risk in many areas, but, I think having good times with the family, plus security of the roof over your head combined with long term pension and life cover provisions are the priority especially where you have children. I've opted not to try to move job to a higher salary as it would have needed a £300k mortgage to make up the difference at the time to move to a like-for-like property, and in effect the disposable income would have been much less despite salary increase around 40% or so.

At the end of the day, we all hopefully get choices and then should be happy to live and learn from them, and not be too critical of those opting for different risk profiles; those without the options to make such choices are the ones who really have my sympathy.

minimoocow

Dithering_Dad wrote: »

You should start up a new thread to warn would be MFWers about the 'dangers' of becoming mortgage free. It'd provide welcome light relief in these dark days of credit crunch, house price crashes and recession.

Perhaps your pal InMyDreams could contribute to it, informing us how mortgage repayment does not increase your net worth and that only investing in the stock market can do that. It'd be interesting to see how her net worth has fared since the stockmarket crashes. Methinks she will be wishing she had 'invested' that lost stockmarket money in her mortgage after all, at least there would be something to show for it.

Meanwhile I'll merrily continue overpaying my mortgage where I can and be happy with the fact that having reduced my mortgage debt by 25% since the start of the MFi3 challenge I have made myself and my family that much more secure.

I guess the MFW 'Health Warning' you could attach to that is "Warning, Mortgage Overpayment can seriously help make your family more secure during economic downturns!!". :rotfl:

I'm a firm believer in doing something!!!

By that I mean although you might make more money doing it one way than another the important thing is to actually do one of them! Too many people haven't saved anything (either into their mortgage, into shares or just savings accounts) and that appears to have got the country into the mess its in.

I have a One Account. I know I could have saved more money if I had got a fixed rate (at the time probably 4.5% fixed rather than 6.7% one account) and then paid the overpayments into an ISA. However, would that have been with Icesave? . . . hmm I was considering it. Maybe had the stock market not have crashed I could have made even more on there.

The fact is I went with what I felt was best at the time. I now have only £7,500 to go on the mortage but with no savings. I'm entirely happy with that as I do have emergency funds to use plus once the mortgage is gone in the new year I can look at investing the overpayments elsewhere.

Yes I could have done things differently and probably better but I'm happy with the choices I've made - others might need to do it differently and if things hadn't changed so much in the last year maybe we MFW would have lost out?

Ultimately I think everyone just does what they think is best for them and their family. I'm concentrating on making us financial secure so we have a bit of breathing space to have children. I'm not interested in maximising every last penny . . . sorry if that isn'y very MSE but there it is!

MMC