Mortgage free by 2023 (!)

debtfreeoneday

Kids both sorted their rooms today and as a result I’ve sold about £40 worth of books. Only added some of it as some books need to go to WBB. Earnings for this month up to £177.20 which I’m so chuffed with but every month won’t be like that for sure!

Having a quiet day. It’s super wet outside. So reading a book, helping kids with crafts and jumping on prolific surveys as they appear. I have enough for payout again once a few more have been approved. 

debtfreeoneday

January 21

OP £640.64 / £2500
SAVE £575.67 / £2000
EARN £185.27 / £1500
365 £72 / £365

Mortgage balance - £63,643.39
Mortgage percentage left to pay - 28%

95 months left 

(To put some context around some of these  I started 2021 with £0 balances so these figures are January plus any money from budgets for February I know we won’t use, ie petrol and council tax free month)

(OP hasn’t been actually made against the mortgage yet as I’m waiting to hit £1000 to do it as a lump sum to get the monthly payment reduced)

+

-Great start to Jan (lockdown does have a positive financial impact)

- busy month for surveys (being at home far more than usual)

- half sorted the pension situation for us and need to finish that this month when I find 2/3 hours to concentrate  

No negatives this month!

FtbDreaming

Well done x

Suffolk_lass

"(OP hasn’t been actually made against the mortgage yet as I’m waiting to hit £1000 to do it as a lump sum to get the monthly payment reduced)"
I dribbed and drabbed mine through so the interest on the capital was reduced as quickly as possible, and asked them not to reduce my monthly payment (which I knew I was affording) so this also made a regular little overpayment every month, getting bigger with each overpayment. I just also made sure each overpayment was being treated as a capital repayment and not an advanced payment of interest (as one lender was sneaky like that unless you repaid more than £1000). Unless cash flow is an issue or you know you are receiving more interest than you are paying, I would recommend this - the magic snowball is less visible but rolls a bit bigger and faster.

I found doing a daily and monthly interest calculation swung it for me.

debtfreeoneday

Think this is why my financial knowledge fails me a bit SL. So I rang the mortgage company again. Any overpayment comes off the balance not the interest so that’s good. 

They recalculate the monthly payment if an OP of £1000 is made. 

I asked what would work better - small or large OPs and they said smaller would mean the mortgage was paid off quicker. But why?

if I OP small, the balance reduces and I assume there is a very small impact on interest as the balance has reduced

If I OP big the balance reduces, the monthly payment reduces but I would top up and pay at the previous amount. 

My thoughts about a bigger OP relate to DH retiring in the next few years and should we not have cleared the mortgage which is a possibility it means our monthly commitment is less rather than still having to pay the amount we currently are...

im sure I’m missing something but what?

I can’t see daily interest. It gets applies once a month so I can’t see how those little OPs impact on a daily basis if that makes sense?

greent

As the interest is calculated daily, the sooner the balance reduces, the less interest is charged each day. EG if the balance is £100 000 and your interest rate is 2.5% a rough daily interest figure is £6.85 (100 000 × 2.5% = £2500 pa. £2500/365 = 6.85 day)    if on day 16 of the month you OP £500 then that month's interest (assuming a 30  day month) is 15 days @ 6.85 + 15 days @ 6.815 ((99 500 × 2.5% )/ 365) = 204.975.   If you OP-ed the £500 on day 2 then your monthly interest would be £204.485 - a few pence less than leaving the OP for a fortnight.  And so on - each little capital reduction (OP) you make will make a bit of difference to the daily interest charged - so the sooner you get the OP in, the less daily interest you will accrue.

If your monthly payment includes an element of OP built into it as you haven't reduced your payments from previous OPs, then this extra bit each month will also help reduce daily interest.

If something happened down the line and you had been OPing and kept your monthly payments the same, then you could always ask your lender to recalculate them to get a lower figure. They will always (unless asked otherwise) recalculate to repay to existing (contract) end date.

With our mtge we had been OPing a lot for years and when my husband was out of work for a year our 'standard' payment was around £600/ mth but recalculating it would have taken it to around £300/ mth. 

Not sure thats particularly clear - I'm not good at explaining it in writing!   
 

shangaijimmy

I'm sure my smallest OP was 4p! It was a TT that went straight to mortgage, so the balance dropped by 4p and less interest was applied. That's how I work my TT's. I also like it when I get my 6 month mortgage statement and its pages and pages long 

debtfreeoneday

shangaijimmy said:

I'm sure my smallest OP was 4p! It was a TT that went straight to mortgage, so the balance dropped by 4p and less interest was applied. That's how I work my TT's. I also like it when I get my 6 month mortgage statement and its pages and pages long 

Makes you feel like the mortgage company are earning their pennies SJ!

debtfreeoneday

Thanks SJ and greent - certainly been mulling this over. You make a good point GT that we could ask them to recalculate at the point of retirement and we would keep OP-ing to the original amount anyway. 

So I think I’m going to OP the amount. I think. I will wait until after Tuesday PB draw results as that’s where the pennies are at the mo. I’ve no idea if you withdraw whether they take your oldest bonds first. Sure they would do. 

Thank you for help and support!

debtfreeoneday

I OP’d it. Start of the month in the account and I had enough to cover it until I cash in the PB so £640.64 sent. I then realised I’d written the balance down wrong in my monthly update - the balance should have been £63,643.39 so with the OP that takes it to £63,002.75. Well I can’t have £2.75 staring at me like that so swoop of the bank account and another £4.78 OP taking the balance to £62,997.97. Off to colour in two bricks of my house now.