#halloween17 - My Plan to be Mortgage Free! Advice appreciated.

ruibinbai

Hi guys,

Well this is my first post on the forum. Great site! Hi to you all. Loved reading your stories!

I'm Ruibin, and my goal is to be mortgage free by 31st October 2017 or #halloween17 as I'm calling it!

I have received an inheritance of £50k but I will still need to raise roughly another £20k between now and then to reach my goal.

I'm currently half way through a 5 year fixed repayment mortgage with Natwest at 3.6% which ends 31.10.17. I want to pay it off on that date so I don't incur any early repayment fees and it gives me plenty of time to save.

Here are my plans:


Mortgage taken out initially: £79,500 on 31.10.2012
Mortgage remaining as at 20.4.15 - £75,573.11
Inheritance: £50,000
Current savings of my own: £4000

Plan 1:
Invest £50k in savings - best I can find is 2.3% for 2 years = £2300 in interest

I worked out that my settlement figure at #halloween17 would be £70572.98 - this was quite easy to work out using an online calculator

So,

£70572.98

-£50k inheritance
-£2300 interest from putting £50k in savings
-£4000 of my own savings
= £14,273.98

So this is what the additional saving I need to put away every month:

30 months between now and #halloween17 =

£14,273.98 / 30 = £475.80 a month! Quite a lot! I can do it but it will be very tight.


Another option I thought about was putting my 10% allowance into my mortgage this year and next year - but I don't know if this will make a difference to the amount I will have to save each month? I called Natwest and they flat out refused to tell me what my projected settlement figure would be if I put the full 10% in each year. The online calculators wont allow for this.

Is there any way I can work it out for myself? I need to be as accurate as possible so i can work out what I will need to save each month! I have had a go looking at trends in my mortgage so far but I don't think its the most accurate way of doing it.

Would overpaying as I mentioned be better than putting the whole £50k into a savings account?

Any help will be appreciated.

This is the first step to my dream of being mortgage free by #halloween17

Luckyinlife

Personally i would look at paying of 30-40k in one lump sum how much would this cost in fees ?
also how much time would it save on mortgage and how much interest will it save you ?
by paying of the 40k it would massively increase how much actually comes off the mortgage per month from your normal payments

ruibinbai

Bluefire wrote: »

In my opinion as long as you can overpay the 10% without a fee, then that's what I'd be doing. The interest you're paying on your mortgage is more than you're saying you're going to earn on your savings, so it would make sense. The sooner you pay it off (depending on how your interest is calculated, is it daily?) the sooner you'll start paying less interest.

Savings wise, there's nothing to say you can't split up the remainder of your inheritance to achieve the best rates. Just off the top of my head, 20k in a Santander 123 account would earn you 3% (2.4% after tax if you're a basic rate tax payer) or what about leeching some of the money off each month into a regular saver? As you're only wanting to save until 2017 it would be a way of earning up to 6% on those monthly payments.

I'm sure there's folk on here who will have some much better advice for you than me as I've only been doing this for a month, but I hope that helps!

Thanks for the advice!

The current accounts do look good in terms of % rates but its alot of faffing. I like my accounts with Halifax.

And you are correct there is no fee on the 10% overpayment each year.

I'm just finding it really hard to work out my settlement figure if I did overpay this year and next.

Any one know how to work this out?

Thanks

ruibinbai

Luckyinlife wrote: »

Personally i would look at paying of 30-40k in one lump sum how much would this cost in fees ?
also how much time would it save on mortgage and how much interest will it save you ?
by paying of the 40k it would massively increase how much actually comes off the mortgage per month from your normal payments

That was another thing I considered - paying the whole lot into my currect mortgage - say £50,400 which would bring down the payments - but would that mean I would just have to save the same each month to pay off the remaining £20k (or so) - I'm struggling to work this out too!!

I would be charged about £1.5 k fee for doing this if i did it in October 2015

Luckyinlife

I see what your saying
could you tell me the term you ow the remaining over ? and what % your currently at i can show you more clearly what i mean then :]

ruibinbai

I have 26 years remaining.

3.6%

Thanks

ruibinbai

Bluefire wrote: »

What are your current monthly payments if you don't mind me asking?

Currently £379

Luckyinlife

OK so i look at it like this you currently pay

£379 of which roughly £236.17 is interest and £143.38 is actually coming of the capital of the mortgage

Now if you was to pay of the 52k off straight away
out of the £379 interest would only be £73.67 an youd be paying £292.46 actually of the capital of the mortgage each month from your stranded payments

and you only have 6 years left to pay it off at the standard rate

these are rough figures of corse but you get the idea

if you feel better with the saving at hand keep just save it and pay 10% a year :]

ruibinbai

Bluefire wrote: »

OK, so I've just inputted your numbers into my mortgage spreadsheet so I can give you some rough calculations for your different options. Please do check the sums yourself though, I'm not infallible by any means! These sums are based on your interest being calculated daily and your intended MF date of October 2017.

Option 1: Overpay £52500 this month, paying the approximate fee of £1500, and continued monthly payments of £379.

This would leave you with £13,544 still to pay on #Halloween17

If you were unable to pay this until October 2015 it would leave you with £14,567.

Option 2: Overpay 10% on October 2015 & 2016, investing the rest at 2.3%

Would leave you with £56,095 to pay. Minus your remaining £40,027 in savings, minus the interest that would have earnt (roughly £2015 if invested on October 2015 for two years & the interest added annually)

So £14053 left to pay in total.

As you can see, there's not much between the two. These sums are based on you paying the £1500 fee out of the £54,000 in the first option (rather than it being added to the mortgage) and your monthly repayment figure of £379 remaining the same, which it may not after overpaying.

Thanks for trying to help me!

The only thing is - my mortgage payments would go down if i overpaid. They wouldnt stay at 379

ruibinbai

Luckyinlife wrote: »

OK so i look at it like this you currently pay

£379 of which roughly £236.17 is interest and £143.38 is actually coming of the capital of the mortgage

Now if you was to pay of the 52k off straight away
out of the £379 interest would only be £73.67 an youd be paying £292.46 actually of the capital of the mortgage each month from your stranded payments

and you only have 6 years left to pay it off at the standard rate

these are rough figures of corse but you get the idea

if you feel better with the saving at hand keep just save it and pay 10% a year :]

Thanks for helping - although my mortgage payments would go down! They wouldnt stay at £379 - they would change in line with my new balance you see.

Thanks

Luckyinlife

The payments only go down if you want to keep the mortgage over the same amount of time

Normally you overpay to bring the term down on the mortgage not the monthly payments