Mortgage Free by 2018

Imma_Number · 3 June 2013 at 11:53PM

:hello:
So I've decided my mortgage needs to go.

I have been overpaying on it to a greater or lesser extent since I first got this house 10 years ago but I've been gradually slacking for one reason or another until this year. This year I realised that I'd been in this house for 10 years, paid of just over 50% of the original loan and that I had 5 years until the endowment from my first house pays out.

For the last couple of months I've been lurking here on MFW and also on the Debt Free boards picking up hints and tips. I did an SOA for myself and was shocked at what I was absentmindedly spending. I now have a budget and a plan. I'll not be doing TillyTidies, I think I'm more a gallygirl's "spend what is left after saving" kind of person. Each month I pay my budgeted OP to the mortgage and anything I haven't spent by the end of the month goes in a buffer account.

So the plan:
Current mortgage: £68K + change
Phase 1: Get mortgage <= (savings + endowment surrender value) by end of year.
Phase 2: Reduce mortgage/increase savings so that mortgage <= savings when endowment matures in 2018

Thanks for dropping by.

#

if_at_first... · 4 June 2013 at 3:34PM

Best of luck - and keep posting updates at least once a month even if it doesn't go according to plan. I find it motivating to know that I have to post my progress and failures. Keeps my on my toes!

Imma_Number · 5 June 2013 at 3:06PM

Thank you If at first...

I'm not sure how often I'll be posting. I'll try for once a month for plan updates and maybe every now and then for some musings.

Imma_Number · 5 June 2013 at 3:10PM

I've been intrigued by how other lenders do mortgages. My mortgage is with Nationwide and I can log in as often as I like and see the current balance (interest is added daily, not as a lump sum once a month), and can overpay whenever I like (OP takes effect next day). I don't have to phone them up to get a balance or to warn them the next payment is an overpayment, or to negotiate how they are going to apply it, ie reduced term or reduced payments. Nationwide have a handy "Overpayments" option on the menu where you can select how you want the OP to be handled.

Pay off my mortgage earlier by reducing my mortgage term
Reduce my future monthly payments
Keep my existing payment and term as-is. (At the next natural mortgage payment change, i.e. interest rate change, my payment will be automatically recalculated).

I've elected the latter as part of a self-managed fixed repayment scheme so that even if interest rates change my out-goings won't (up to a point) . Fortunately the rates have been stable for a while so I don't have to change my OP often.

I don't understand why one would pick reducing the term. Should hard times hit I can select "Reduce my future monthly repayments," wait a few days for the change to take effect, pay in £1 and hey-presto mortgage is recalculated to take into account the OPs without having to go cap-in-hand for an extension. If things carry on swimmingly, the balance approaches £0, and the mortgage gets paid early even without reducing the term. Perhaps someone could point out the pitfall in my scheme

Reading back this looks a bit like an advert for NW. It's not. Other than owing them a lot of money I have no connection with them. I'm just happy with their Internet Banking.

freddykrueger · 5 June 2013 at 6:09PM

As above I would like people's view on these options as well - I am a nationwide customer also and perhaps naively chose the first option but maybe I should change it?

fothers365 · 6 June 2013 at 10:16AM

We are Nationwide and have reverted back to their SVR. A couple of years ago we switched to interest only when I was on maternity leave and we knew I would be again soon after.

We have started OPing and phoned them to go back to paying capital and interest but they charge for the switch and basically said we are best just OPing and continuing as is.

I said to them we wanted to reduce term rather than regular payments but they said they don't reduce term on IO mortgages so we could either reduce the regular interest payment or reduce the balance which we chose. The term will technically shorten though.

I have to agree that we are loving their online facility though- I check the balance every morning and update a spreadsheet:o.

The other good thing for us is being on SVR (or maybe IO) we can OP however much we like and can get it back if we need it with no charges. It takes about 10 days. Our emergency fund is therefore in the mortgage rather than festering in a low interest account.

route2b_debtfree · 6 June 2013 at 12:53PM

Welcome and good luck!

I have a Nationwide mortgage as well and had the same dilemma when deciding which option for my overpayments. I selected the first option (to reduce the term) as it would ultimately result in paying less interest (I think). An interesting bit of info i found out (i'm a bit geeky so found it interesting anyway) was that Nationwide confirmed that all overpayments are recognised differently to standard payments i.e in effect they could provide a buffer if I couldn't for any reason afford repayments. Which is nice:T

Matt

Imma_Number · 6 June 2013 at 1:03PM

Thanks all for your inputs. I guess there's a difference between regular payments until the mortgage is paid off and one-off overpayments.

I shall have to run some scenarios

route2b_debtfree: I knew that was the case for those on the older BMR but I hadn't realised it was for other variants too.

snappybadger · 6 June 2013 at 1:30PM

Interesting...I'm on an IO mortgage with Halifax and think I will give them a call to find out whether I can get back my OPs without charge if necessary. That way I might chuck all of my savings into the pot as I won't need to keep them separate for an emergency! And they'll work harder for me coming off the mortgage.

Imma_Number · 15 November 2013 at 11:32PM

So I've not posted to this diary for a few months. This has been due to a sudden death in the family followed by redundancy.

:(

Fortunately, because of the previous overpayments, my I monthly mortgage interest is much lower which means my emergency savings will stretch that bit further. Other than that, things were on track.

Hoping for a new job soon though. Well, not only hoping, more by applying, and then hoping.

Imma