New MFW checking in... 28 June 2013 at 10:22PM in Mortgage-free wannabe 12 replies 1K views

FastAndFurious

So after getting some inspiration reading some of the other threads in here, and realising I want to aim for the MF club, I thought I would post my own diary. Hopefully it'll help keep me on track...

So original mortgage £106000 taken out in 2007 but stupidly have made no overpayments until now which I kind of regret as we certainly had the means . Current amount owed is a shade under £93000 and we have no other debt. Equity in the house is about 50 to 60k

I am thinking of it now as we just had a new son born two weeks ago and i want to get us on the best financial footing i can as well as maybe moving to the next rung of the ladder within the next 4years. We have some savings (£45k ish) but given the paltry returns currently, its barely worth the accounts the money is in. Currently on a 2 year fix @2.49% only started earlier this year but can make overpayments of up to 10%.

We already save anyway but I've never looked after it particularly closely (or well) so it's time I became a little more financially aware. I know we have some fat we can trim without even starting on our unnecessary luxuries. So this week I did the following:

• Switched ISAs to get better rates
• Switched current account to Santander 123 (have a Santander mortgage)
• Started budgeting to free up a little more cash

Next up I plan to look into cashback sites and ebaying some of the stuff we don't use/need.

Target for 2013 is to pay off £9300. I am toying with two options:

1) Using some of our savings now and then saving whatever we can afford monthly to replenish savings
2) OPing whatever we can afford to monthly till December and then topping up the remainder of the 10% OP if needed with savings at the end of the year.

Not sure which to go for. Guess 1 will save me more interest but 2 is clearly best for maintaining savings.

Cheers F&F

resilie

Hello and welcome:wave:

I personally think you have a good amount of savings so if the interest you pay on the mortgage is higher than the interest you get in your ISA I would go for option 1 and rebuild savings throughout the rest of the year...

Katzen

I agree with the post above. Although your rate is pretty low for the mortgage its probably still better than savings. If 31st Dec is your year end then you can do the next 10% on 1st Jan in the same way.
Play with the OP calculator on here or elsewhere and put the ideas to the test-its scary how much any OP will save you in the long run!

kirstypark

congratulations on new baby, and well done for planning to save at a time when most parents are spending heaps. Just a thought, and i am not great with these things, but what about an offset mortgage - you have about half saved up anyway so would be saving about half your daily interest?

FastAndFurious

Thanks for the input all. I'm pretty sure I will go with option 1 in mid July.

It's embarrising to admit this, but I knew nothing about offset mortgages until I started looking into paying down the mortgage a couple of weeks ago, though i was aware of trackers. I have just always just automatically defaulted to fixed rate mortgages so I knew the payment would not change. But will definitely consider one once I am out of the fix (march 2015).

FastAndFurious

So, I put off making the overpayment earlier in the year for a couple of reasons but I'm looking to do the full £9300 allocation from savings (currently around 51K) before the 31st. But I have a question. From what I understand you can either take the overpayment off the mortgage term, or take it off the monthly payments. If I did the latter with the lump sum overpayment, I would keep the monthly payments topped up to their current amount anyway (which would also naturally reduce the term no?).

I quite like the idea that the second option gives me a bit more flexibility should something bad happen in the future - i.e I could revert to the default lower payment without penalty and just stop the overpayments. But I don't want to do that if its going to cost me more in the long run.

Why are these decisions never easy? ;-)

chirpchirp

I take mine off the monthly payments but ask them not to change the direct debit amount that I pay but as you are limited to 10% you would probably be better changing the term. Changing the term will decrease the amount of time you will pay the mortgage over.

If you merely lower the payments then you will still be paying the mortgage over the same amount of time but will have more spare money to add to your savings.

Not sure I've explained that well, if I haven't I'll have another go.

moneycurious

Morning, conrats on the baby and welcome . Your right that if you pay a lump sum this will drop your over all payments but if you maintain the current this will naturally op. Good luck x

want_to_save

i have to say i do the other, i ask them to take the overpayment off of the total owing which will reduce my term in the long run and leave my monthly payment as it is

FastAndFurious

Thanks all, I thought it over, changed my mind about a dozen times... and then paid my OP for 2013 today, taking it off the term. £9200 down and I'll give them a call tomorrow to confirm details but by my calculations, that should take me down to a little over 80k and trim about 2.5 years from the term (18 years and 9 months before OP).

In 2014, I plan to be a little more organised, OPing regularly through the year, that way I can continue to build my savings too. So 2014 target is a shade over 8K given 10% per year is my max until I get off this darn fixed rate and onto a more flexible mortgage.

But in 2014, we have some work to do. We are budgeting to some extent, but we are still wasting way too much money on frivolous stuff we don't need. Need to get that under control, any tips on getting buy in from the other half?

Cheers and Merry Christmas to all

suse*

I just managed to get an offset a couple of months ago and I love it. One thing you might want to check is what your LTV is as if you can get it below 75% or 65% even, you can get much lower interest rates. That way you could end up with a fixed offset for 5 years say where it is only 1% or something crazy for any amount you haven't got covered by the savings.

I wasn't as lucky as you and got hit by massive negative equity so I only managed to get 84% ltv so it is nearer 3% but compaired to the 6% I was on before to me that is amazing.