Mortgage Free in Three Yrs

Dithering_Dad

Hi Stuart and MMC!

I agree with you both, it's all upto the individual to decide their own financial strategies and goals and then move forward pursuing them. My strategy has always been to reduce our outgoings (I used uswitch and moneysupermarket style websites to reduce our utilities, insurance and other bills), to reduce our liabilities (I paid off all our debts while I was a DFW and then moved into the MFW board and started reducing our mortgage), to increase our savings to cover my family for 6 months without income (now increased to cover me for 12 months) and to increase our retirement provision so that my wife and I could retire in relative comfort.

So far all of these are going well, even my pension. It had reduced by about 12% when the stock market started to dip from peak, so I decided to place all of my pension into a Cash Fund. We've had two major stockmarket drops since and I've now temporarily placed my pension back into stocks in the hope that they will bounce after the latest drops.

This strategy has worked very well for me and my family, but I don't try to force it on other people, nor do I desparage other people's goals. As I said on that 'Don't pay off your mortgage' thread that I came across GTD on, I wouldn't go onto the pensions, savings and investments, housebuying and letting forums and presume to tell them how to invest their money, so why do we in the MFW have to put up with people telling us what to do with ours?

However, as I noted earlier, we don't get too many of those anymore. I wonder why?

gallygirl

Dithering_Dad wrote: »

Hi Stuart and MMC!

I agree with you both, it's all upto the individual to decide their own financial strategies and goals and then move forward pursuing them.

I completely agree with you - and I wonder just how rare we are? TBH the only people I feel comfortable speaking to about this at work are people way my senior & out of my league financially - but at least they understand what I'm talking about. I can't think of anyone on my level or age who are remotely interested in any 'goals or strategies' apart from how to finance their next car/holiday etc. Even those who come on here are only looking for cheaper options, e.g. car insurance on a sports car is a 'bargain' at £1200 instead of the £1250 they were quoted elsewhere :eek: . They don't ressess whether they actually should be buying the car in the first place. I hope that all those who don't talk about it are beavering away in the background. Some I suspect are, but there are all too many playing ostriches .

GettingThingsDone

Sigh - DD - I do wish you would stop misrepresenting what I'm saying, as I have to resist letting it wind me up

Here's a simple scenario:

1) Right, I've read that overpaying my mortgage is a great idea and I've piled all of my extra cash into overpayments.
2) I've now lost my job and I can't keep up my mortgage payments
3) The value of my house has fallen, and even though I've made overpayments, I'm now in negative equity.
4) My lender is unsympathetic and is now repossessing my house
5) Boo hoo - I wish there had been a health warning on making overpayments. All that money has been wasted...

Okay, I know the people in here aren't that stupid, but that's the *kind* of health warning I was talking about.

Yes, we're talking savings strategies, mortgage products and overpayment options.

Look, both of my parents have used these techniques to become mortgage free. I used these to become mortgage free (when I was 30 - I just worked hard and earned the money). You don't have to convince me of the benefits of getting to mortgage free!!

Anyway, I'm going back to lurking for a bit until I'm DF!

gtd

Dithering_Dad

Hmnn, we can all come up with unlikely and outlandish scenarios to fit our argument.

You could as easily say that you decided to invest in the stockmarket back in July, put all of your cash into there and saw it half in value by this morning. If made redundant you'd have to cash in those investments at the worst possible time.

You could say that you decided that you'd like to pay off your mortgage by putting your money into 'Mortgage Free' at the 9:30 at Doncaster. It's a 10-1 longshot but you feel good about the nag's name. If the horse comes last, then you would lose all your savings!! OMG!

You could have decided to chase the highest savings interest rate and placed all of your cash in an Icelandic bank and then discovered it had gone bust just as you lost your job. You don't qualify for benefits because technically you have a lot of money, but you can't get at it until you fill in all the forms and wait for them to go through the system.

I always found your anti MSE posts rather insulting, despite your attempt here to pretend otherwise with the 'Okay, I know the people in here aren't that stupid' remark, you really must assume that we are or you wouldn't think we needed such a Health Warning.

For my part, in the 18 months and more that I have read & contributed within the MFW forum, I can honestly say that I have found the MFW's to be some of the most financially savvy set of people I have ever 'met'. Far from being the financially naive children you believe them to be, they are probably better placed to ride out this economic slump that most others.

Why not start your own thread on the MFW board and ask whether the MFWers feel more or less secure in the current economic climate after having reduced their mortgage debt. I doubt that many people would be wishing they had a larger mortgage right now....

TallGirl

I don't really want to fuel the debate but I did want to add a little bit of my own.

OK you overpay you then loose your job so you can't pay your mortage. Here is how I see it
1. A lot of mortgage providers allow you to take the money you have overpaid out so no difference to having the money in a savings account.
2. If you have overpaid you can usually reduce your mortgage payments or even have a mortgage holiday so that will lessen the problem of not having a job.
3. So if you had not overpaid your mortgage you would have capital to keep you going that is fine. However you will not be entitled to means tested benefits so claiming mortgage relief could take even longer.
4. Once the money you did not overpay on your mortgage is gone you will still have a problem paying it and would proably have to sell in any case. However if you were mortgage free you could perhaps afford to stay.

I totally 100% belive that overpaying my mortgage is the best thing for us. Ours is fully offset giving us the best of both should we need access to the money. I am so glad we are going to be MFi3 as it will give me so much more freedom to do what I want to do. My small investement in the stockmarket in the UK and Denmark is now worth 50% less and as for my inherritance in Denmark in a bond that has now dropped 20% I am sticking to mortgage overpayments and offsetting for the time being.

Dithering_Dad

I was going to leave it there with my previous response, but having read your ridiculous example again, I feel that I have to address it, point by point, if nothing else but to debunk the anti-MFW message within. I'll assume I am the person in the example, to give it a 'real-world' twist...

GettingThingsDone wrote: »

Here's a simple scenario:

1) Right, I've read that overpaying my mortgage is a great idea and I've piled all of my extra cash into overpayments.

I spent a few months on the DFW board eliminating my debts (By a combination of reducing outgoing and increasing income). By now I know the dangers of living my life in debt and having no savings, so I decide to build up a buffer to prevent me from going into debt again due to unforseen circumstances. I build up emergency savings (3 x monthly outgoings) and I also start paying into a stakeholder pension plan to secure my long-term future. The remaining 'extra' cash is now available for investing. I decide to pay down my mortgage rather than investing in the stockmarket or further building up my savings.

2) I've now lost my job and I can't keep up my mortgage payments

I have income protection insurance in place that will pay an income while I am unemployed. There is a qualification period, but that's fine because my emergency savings, coupled with any redundancy payout will keep me ticking over until the insurance kicks in.

3) The value of my house has fallen, and even though I've made overpayments, I'm now in negative equity.

The value of my house has fallen (just like non-MFWers houses have), but because of my overpayments, I am obviously less likely to be in negative equity than if I had not overpaid. If I do get into negative equity, it'll be less negative than if I had not made overpayments.

4) My lender is unsympathetic and is now repossessing my house

My lender is going to be more sympathetic with someone who has consistently been making mortgage overpayments and is now 7 years in advance of his mortgage repayment schedule. Before they can reposesss, they have to go through the courts. Again, the court will look at your overpayment history and will be reluctant to repossess from someone who is several months/years in front of his mortgage payments.

5) Boo hoo - I wish there had been a health warning on making overpayments. All that money has been wasted...

All that money has not been 'wasted' because those overpayments have given you 'room to manouver' while you were temporarily out of work. They have done exactly what you wanted - provided security for your family.

Okay, I know the people in here aren't that stupid, but that's the *kind* of health warning I was talking about.

Your warning seems to be simply that if you lose your job, you might struggle to pay your mortgage and could get reposessed. Surely this is the same for everyone, regardless of whether they're MFW or non-MFW?

Yes, we're talking savings strategies, mortgage products and overpayment options.

No, you're not saying anything about savings strategies, mortgage products and overpayment options. You are simply saying that overpaying your mortgage should have a 'Health Warning' and provided a child-like scenario to try and prove your point. You failed IMHO.

Look, both of my parents have used these techniques to become mortgage free. I used these to become mortgage free (when I was 30 - I just worked hard and earned the money). You don't have to convince me of the benefits of getting to mortgage free!!

If you are mortgage free, then why are you talking about joining the MFW once you've graduated from the DFW (as many of us here did)? If we don;t have to convince you of the benefits of being debt free then why are you posting about 'Health Warnings' on a Mortgage Free support thread?

Anyway, I'm going back to lurking for a bit until I'm DF!

Good luck with becoming debt free.

gtd

1274

GettingThingsDone wrote: »

Here's a simple scenario:

1) Right, I've read that overpaying my mortgage is a great idea and I've piled all of my extra cash into overpayments.
2) I've now lost my job and I can't keep up my mortgage payments
3) The value of my house has fallen, and even though I've made overpayments, I'm now in negative equity.
4) My lender is unsympathetic and is now repossessing my house
5) Boo hoo - I wish there had been a health warning on making overpayments. All that money has been wasted...

Okay, I know the people in here aren't that stupid, but that's the *kind* of health warning I was talking about.

gtd

I think there needs to be a health warning on overpaying your mortgage, a positive one. Warning, not overpaying your mortgage could seriously damage your financial health.

I have lived your scenario up to the end of stage 3, overpaying my mortgage from £125K when I joined MFI to £37K now. I lost my job a couple of months ago and am now contracting. The value of my house has fallen.
BUT
Having overpaid, I reduced my mortgage amount down to £50K when I lost my job. This reduced my required minimum monthly payments by £500, which meant I could afford them even without a secure income. I also pulled some money out of my overpayment fund for day to day living expenses until I got contract work. My lender had no problem with any of this, because my overpayment fund was mine to do what I liked with. The money came back into my account a day after I made the withdrawal request. No money wasted, because I can replenish the fund with any amount of the withdrawal I don't spend or any contracting earnings.

To get my mortgage down as far as I did, I cashed in a rubbish ISA, and sold some shares. Although I have no savings, I still have £12K in my overpayment fund, to withdraw if things get tight. That's 24 months mortgage covered. If I had not overpaid I would not have been able to reduce my monthly payments to a level I could afford on a contractor's wage.

GettingThingsDone

DD, you said:

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.

Therefore it is better to have a mortgage product that has this facility than one that doesn't - yes???? Therefore it is a good thing to tell people about maybe?? Maybe??? That is all I am saying. And, ahem, even you didn't know about it until recently...

Far from being the financially naive children you believe them to be

No I don't and I don't have any anti-MSE/MFW posts either, so stop trying to misrepresent me. I was saying that overpaying is a type of 'investment' - maybe health warning is too 'extreme' sounding, because it certainly rattles you for some reason. Sorry if you found it insulting - it was never meant to be.

You could have decided to chase the highest savings interest rate and placed all of your cash in an Icelandic bank and then discovered it had gone bust just as you lost your job. You don't qualify for benefits because technically you have a lot of money, but you can't get at it until you fill in all the forms and wait for them to go through the system.

Well, that was a good idea until it wasn't, if you see what I mean. I know some very financially astute people who have been bitten by the Icelandic affair. I'm the last person to recommend any investment strategies, mainly because I believe by the time the 'man-in-the-street' (i.e. me) knows about it, the real opportunity is over anyway.

Anyways, I'm not that bothered about it - I'm more bothered about you painting me as someone and something I'm not. Yes I will be starting my own thread as I've had such a good experience with DFWs that I'd like to replicate with MFWs. So, DD - can we start again please? I will admit it - you do irritate me, but I'm holding out the olive branch of peace... and I'll keep 'warnings' and such legal things to my professional life, just don't make out that I'm anti-MSE/MFW because I'm not.

Sorry to everyone else for filling the thread with non-MFiT chat.

Back on track - I don't know if this is quite the place to ask the question, but is there a negative view of MFWers out there? I never tell anyone I'm a DFW, but I was planning on telling people my MFiT plans - is it better to keep schtum?

GettingThingsDone

Hi DD, TallGirl and 1274 - thanks for the input; seriously I'm not against what you're doing and I'm genuinely interested in the MFiT thing because it's what I did when I was in my late 20's.

So what does a young man who's mortgage-free do? This one borrows some of the money back to achieve some further goals in life and it has been an interesting 10 years. In a similar way to 1274, I set my borrowing to what I could relatively easily afford. Being MF wasn't the be-all and end-all for me back then.

Over the last few years I'd gradually ran up credit card debts in my normal day-to-day life and after having a light bulb moment I'm totally in the DFW mode again and I've cleared those down now (only one small loan to go).

I declare a professional interest in mortgage regulation which I hope explains my caution in this area. OK, maybe I was being over-cautious because I was thinking of people who may be taken with the MFW idea, they don't post, they haven't put into place the emergency savings, stake-holder pensions, income protection insurance etc, and make overpayments into a mortgage product that doesn't let them get their money back when they need it. OK OK I worry too much!

Now that I'm starting a family (yes, I know it's a bit late in life!) the MFW-thang is higher in my thoughts. Anyways, I should be saving this for my own thread...

Dithering_Dad

GTD, could I ask you to please create your own thread if you want to discuss the pros & cons of mortgage reduction further? This is a support thread for people who have already performed this necessary step (over 18 months ago now) and decided that, for them, being an MFW was their goal.

Having made that choice we simply want to get on with paying down our mortgages and helping to support each other and anyone else who have decided to pursue this goal.

If you really feel that there are inherent dangers in paying down your mortgage then creating your own thread will get the warning out to a much wider audience than within this support thread.

Thanks.
DD.