Overpaying mortgage to draw from ...then pay off!

Hi everyone, I am a newbie so do be gentle with me. I am trying to get to the stage of being mortgage free, but my husband and I are determined to improve our home before we sell on. So we have been massively overpaying our mortgage, because we want to extend the house, double it's size, and raise its equity. To be honest, the way things are, we won't be able to sell it without making it a proper family home.The idea is to pay down the mortgage debt so that we do not borrow again from the bank- as if we would! We are in a cheaper pocket of London so we hope that if the final build is half decent, it will help fund our escape plan from the Smoke! We have paid for planning permission, plans, and building control and have had it all passed. Total amount we can borrow is 192k, it is an offset mortgage, and we have paid it down to 126. I want to get the debt down to 80k before the build, so basically we need to save or overpay as much as we can to help fund the build. I am tempted to delay it by a year so that it all reduces in debt as more will have been overpaid. here are some figures
Offset mortgage one is 50k, now paid off
Offset mortgage two is 146k, we have killed off 20 k, so 126 left now.
ideally, we could kill off another 30k of the second offset mortgage, which has a slightly lower rate, so that the bulk of the paid off bit remains untouched. I would be grateful for and money saving tips to help pay it down, am happy to live very cheaply for a year.
Saving tactics so far
Paying into a monthly saver with 8% payout after a year, but small amounts so should get about 80 interest back, not bad tho.
Everything is paid into offset that we can afford to. Average is 3k PCM.
I walk to work and we make own lunches
Keep switching providers
Frugal with fuel
eBay shop owner! Sell a lot online
Private jobs on top of full time one

Where I think we could save more is having a proper budget and being cleverer with food buying and cooking as we have very little free time. Competitions and voucher deals are a but of a mystery to me as well. any suggestions gratefully received:j:rotfl:
" I refuse to allow the banker to be the only one who laughs!":beer:

Replies

  • dimbo61dimbo61 Forumite
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    Are you pay down the mortgage or saving into the offset?
    If you want to have works done then build up savings in the offset account.
    When you say Total amount we can borrow is £192K had you had the confirmed by your lender?
    The mortgage world has changed big style in the last 12/18 months and lenders must look at affordability.
    If you build up funds in the offset and pay for work in stages then your lender can see the works done so far and may then provide the extra money needed to finish off the work.
    If the computer say NO then you have to save up the funds to pay for the work to be completed
  • dimbo61dimbo61 Forumite
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    We had a large extension done this summer, it was only a single storey side and rear extension but we now have a downstairs bathroom, huge kitchen/lounge and study room. Cost £50K value added £50K after a valuation by a surveyor so we are happy.
    The plans and what you are building are very important as you do not want the most expensive property on the road.
  • dimbo61 wrote: »
    Are you pay down the mortgage or saving into the offset?

    The idea I had was to pay down the offset mortgage because that really axes down the interest, then draw back from it when the time comes to do the build. It is a first direct mortgage and they let you do this. Do you think that is right? I can see no point in plonking it into a low interest saver when we want to reduce our mortgage debt.

    If you want to have works done then build up savings in the offset account.


    When you say Total amount we can borrow is £192K had you had the confirmed by your lender?


    Hi, yes, we have got them as two fixed rate offsets, one at 50 and the bigger at 146. So they should re loan us our money!

    The mortgage world has changed big style in the last 12/18 months and lenders must look at affordability.
    If you build up funds in the offset and pay for work in stages then your lender can see the works done so far and may then provide the extra money needed to finish off the work.
    If the computer say NO then you have to save up the funds to pay for the work to be complete
    " I refuse to allow the banker to be the only one who laughs!":beer:
  • Hi again, yes I am worried about the costs of the extension, as I live in London and I firmly believe that someof the builders, not all, but some are scamming people and charging a lot. I was hoping to get the build done for 70 k, but the work is going out to tender next year, we shall see.As you say, it is about profits and I don't want the most expensive house on the road at all, unless I can sell it on! worst case scenario is we have to wait for longer to do the work. Would you say that 85 k for a double storey side extension, creating a big kitchen and front room and, upstairs, en suite bedroom and smaller room, is fair? I think it is quite high, but am happy to be corrected. We are both so keen to increase rh size of the house but refuse to pay the bank everything we have to fund it.
    " I refuse to allow the banker to be the only one who laughs!":beer:
  • Sorry, I should have added that Maths ain't my strong point and that the original mortgage debt was 196 k, doh!
    " I refuse to allow the banker to be the only one who laughs!":beer:
  • dimbo61dimbo61 Forumite
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    You said in your post that you have an OFFSET mortgage so every penny in the offset account is offsetting the mortgage and saving you the interest rate you are paying YES?
    If you have funds in the offset account you can add to it OR take it out at any time ( without having to ask anyone!!!)
    If you overpay the mortgage you have to ASK First Direct can I please have our overpayments back.
    Some lenders are now being careful about OFFSET accounts.
    I have no idea about the house/land/access to your home or the size of your extension ( Square meters or Feet)
    The standard of Kitchen and other fittings!!!!
    You can pay £100,000 for a posh kitchen or £5,000 for a cheap one
    So IKEA or Clive Christian Kitchens ???
    Good builders and detailed plans so they know what you want and how much to quote you help everyone understand what you want.
    Good Luck
  • Hi again, yes, that is exactly the sort of mortgage we have got.Blimey I hope FD don't get funny about us redrawing the money back, they have assured us that this is fine. But thanks, and I will check this with them asap. I have also just realised that they will charge that interest rate of 5.99 % on the redrawn dosh, but I figured that that was balanced out by the saved mortgage interest on the overpayments of nearly 2 years. That is right, i think?

    I think we will do as much as possible ourselves, as we did last time. The quotes for the work that I have had veer between fifty and eighty five grand, which is madness to me. The build is well designed and has great planning drawings, but we want the actual building itself to be mid range. It is so scary, because, as you say, get it wrong and those costs escalate. Happy Christmas to you and thanks for all your good advice!
    " I refuse to allow the banker to be the only one who laughs!":beer:
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