DFW turned MFW

Fuzzy14

I’ve just joined the DFW ranks but truth be told, there’s still a large debt there. Just because it’s secured against your house over a long period of time makes us feel that it’s not really a debt, but it is. I think becoming a MFW is a natural progression for a DFW, instead of getting used to a large disposable income just keep ploughing it into the mortgage.

I managed to clear a £38,000 debt in just 11 months :eek: by quitting my job and going agency, working offshore etc. The work is more temperamental, don’t get paid for holidays or sickness but the hourly rate more than makes up for it. So I’m now looking to take my disposable income and feed it into my mortgage. Household income is typically £86k pa, less tax and bills not including mortgage coming to £11k so in theory I've got £51k disposable. As above, I paid of £38k debt at an average of £1000 per week but that was sailing a little too close to the wind, I’d like to have a little more disposable money for emergencies, periods that I’m out of contract and to enjoy myself a little.

I currently have a £126k outstanding at LTV 0.72. I have 16.5 years left (December 2029). My fixed rate period has just finished so I’m on Halifax standard variable rate of 3.99%. I’ve set up a spreadsheet in Excel (I like my spreadsheets) and calculate that I’m due to pay £46,700 in interest payments alone in the next 16 years, that’s not acceptable.

So I have two choices:
1) Stick the mortgage back on a 2 year fixed rate 2.79%, save up money in parallel and then pay in a lump sum at the end of the fixed rate
2) Stay on SVR, overpay the mortgage on a monthly basis at a rate of £2500 per month on top of my existing direct debit.

Running both through the spreadsheet, both methods will be paid off in December 2016 and both much of a muchness for overall cost. In total it will cost £134,500 to pay off my mortgage, a saving of £34,000. That, co-incidentally, would mean I’m mortgage free just before I turn 40 years old. Which will be nice.

I spoke to the Halifax about putting it on the fixed rate, but they wouldn't offer the lower interest rate as they’d taken an average of recent house price sales in my area and reckon my loan to value is only 0.86. This is nonsense as they've taken an average of the entire estate which includes smaller homes. Even their online calculator says house prices have risen in my area by 15% in the last 8 years. They offered to send out a surveyor to revalue the house but I told them not to bother. So method #2 it is.

First overpayment due 1 October 2013.

Cheers! :beer:

SG27

It depends how halifax calculate your interest a to whether its better to overpay monthly or in lump sums. My mortgage has interest calculated and added daily so ops reduce interest instantly. If your interest is calculated and added annually then your better to save in a savings account and op lump sums.

What job do you offshore?

Fuzzy14

I'm a mech eng, took a job up in Aberdoom to pay off the debt, now returned home working behind a desk for less money but still contracting so better than before. Looking at my statement the interest is added monthly onto the account so interest calcs will either be daily or monthly. I'll ask when I phone them (to get account no, sort code for the payments.)