Advice Please - Confused as to way forward!

Castaway2002

Hello well I've finally plucked up the courage to join, after reading lots of your posts and really do admire how well some of you have done to pay off your mortgage, with lots of hard work no doubt :T

A little bit about us, I'm 40 and husband 42, we have two lovely boys aged 6 and our currently living in our second house (bought in 2006 for £320k with a £250k mortgage, yes I know that's a lot)! Unfortunately we went from being a two income house to one income, once I fell pregnant with twins and as childcare costs were so staggering it made sense for me to be a stay at home mum afterall it was a walk in the park with twin boys :rotfl: ha ha!

We were fortunate to have got an 'interest' only mortgage which I know are impossible to come by these days, so that enabled us to stay in the house, but the downside is that fast forward the clock 9 years and we've only shaved £50k off the mortgage - so outstanding balance is £200k!!

So here's where you guys come in advice needed please! I know that I want to start doing something as we can't carry on not paying forever and I have managed to secure a part-time job. It has also occurred to me that as well as paying off the mortgage it would be nice to have some sort of pension (as we don't really have anything in place or savings so the options are:

a) rent out our existing house (so hopefully the mortgage starts getting paid) and in the meantime buy another small property (max £300-£350k and pay the mortgage on that)

b) just sell this house and buy a bigger property (which would mean extending our mortgage from £200 to £350k which is probably max we could get)

c) downsize (although hard to do in the South East of England as prices as so ridiculous) and just try to save as much as possible over next 5-10 years so we can eventually move to a bigger house.

As you can see I am completely confused as to the best option and change my mind daily which means at this rate I'll be 95 and still pondering what to do :rotfl: Option a would probably mean we have a lot more in later life (equity and for a pension) but would stretch us as would option b) and my concern with option c) is we are hopeless at saving but just spend it.........hence why I'm on here

So any advice or words of wisdom from those of you who have maybe followed one of the options above? Thanks

midnight_child

Hi Castaway,


Didn't want to read and run.


Without wishing to sound rude I am not sure any of those options is the answer.


Option A - Where does the deposit come from for new house? Will you be able to cover any void periods without a tenant in the rental house?


Option B - Do you actually need a bigger house for a growing family?
I don't see how upscaling will help in the short term if you a worried about a large mortgage to clear. This would only mean larger payments and possibly you would not get an interest only deal. Assuming house prices go up (not certain) you will acquire equity you can cash in later, but you would need to be able to afford payments in the meantime.


Option C - Will a smaller house meet your family needs? You say downsize, then get a bigger house in a few years, but this means you will be house moving costs (solicitors/stamp duty, etc) twice, that will likely outweigh any short term gain on reduced mortgage costs.


Unless you get very fortunate with an inheritance or lottery win, the best way to achieve your goal of clearing mortgage will be to either increase income (part time job is fantastic), or reduce expenditure. Most people on this board try to do both in combination.



My advice would be:
1- Why not have an audit of your income/expenditure and work out how much each month you can realistically put towards a pension (which you really should have - employer contributions is basically free money!!) and the mortgage. I know you say that you are a spender, but if payments are timed to leave your account by standing order just after payday, then you may not even notice the difference.

2 - run some numbers through the mortgage calculator to see how much extra you will need to pay to clear the debt by a desired time, or what difference it makes to just put an extra £10, £100 or whatever per month towards the mortgage. I realise that £200K is an awful lot of money, but you will be very surprised how a seemingly insignificant amount adds up to big savings over time!!

3 - Frequent this site. It is a long journey, but you will find moral support on here to keep you going through the tough times. You will also find loads of great tips on how to reduce your outgoings (while not living like a pauper), and ingenious ways to make extra cash (legally of course!!).

But be warned, once you start saving money it becomes quite addictive. :rotfl:


Best of luck
MC

Castaway2002

Thanks for your reply. I really appreciate you taking the time to read my post and what you have said does make sense. I think I just suddenly had a bit of a panic that because of so many years 'interest free' with regards to the mortgage not a lot has got paid and whilst in the long term we would like a bigger place maybe now, when already very stretched, is not the time to be doing it! I've got a mortgage calculator and started working out some figures but ideally need to earn more (so may mean going full time if I can keep childcare costs down)!

PS We do have some pension but just not very much, small amounts from previous employers dotted here and there. Hence wanting to try and invest more in property so we have something to live off in old age

Castaway2002

I've added a signature with a bit more info on me!

midnight_child

Do you know exactly where all your current income goes?

Castaway2002

Yes have got a reasonably good idea re income & our expenditure, as it's just been the one income (my DH's) for the last 5 years although I have recently started a part-time job so pay that into the joint account too. Problem is we use to be a 'two' income household with very similar income and then when I became a stay at home mum to twins we lost that so in effect we had no choice but to just pay 'interest only' on our mortgage since 2009 (when my boys were born) as there was no way we could pay 'repayment' on our mortgage, plus bills/food etc, on just the one income. Although things have improved a little with my part-time job, it is not much (£800 pcm) so I really need to earn more. Am hoping this site will give me inspiration and help me stay focused on my journey to become MF

Thanks once again for your advice and pointing out what I probably should have realised with my rather ambitious aims that weren't really going to do much but stretch our already tight finances even more :rotfl: I think I must have been dreaming when I posted my initial message with the options above

Castaway2002

Right here goes, if I'm going to start this MF journey I need to know if or what areas of our monthly outgoings we could reduce. I've not been the best at 'shopping' around for deals and dare I admit that I don't usually 'compare the market' so have been guilty in the past of just renewing deals without checking it's the most cost effective I wish I could have been a saver or thought about MF 20 years ago but hindsight is a great thing and I suppose better late then never

Income / Payment to joint AC - (Husband's salary £2600 and mine £800 - Total £3400)

Bills / Outgoings (Monthly):-

Mortgage (2.5% rate) - 1600.00
House Insurance (Home) - 18.37
Personal Loan (to pay credit cards) - 215.62
Life Assurance Policies (for both of us) - 86.82
Council Tax - 216.00
Gas & Electric - 192.00
British Gas Services - 23.63
Thames Water - 81.39
Telephone/Broadband - 61.00
Sky Digital - 82.50
TV License - 12.12
Window Cleaners - 15.00
Petrol/Car - 100.00 to 150.00
Approx Food/Household Goods - 400.00 (although have overspent here in the past upwards of £600 to £800) no wonder we're always overdrawn !!

It adds up to a lot, especially our bills which seem to be in the region of £800-1000 pcm :eek: Am hoping we can reduce these by 215.00 when we finally pay off our loan (next June 2016) but not sure what else we can cut apart from obvious like food bill or Sky?!

Anyhow if you helpful souls can shed some light on what I could cut and how as every little bit could then be channeled to the mortgage if I'm to seriously start our quest to be MF cool:

newgirly

Hi just spotted this thread but have posted on your other one! I would stay put and work on trying to op as much as possible, we have twin boys (14) and a girl (17) and are still in the house we bought many years ago as a stop gap. We are the same ages as you and your oh and are also on io as I didn't work for years being a sahm.

There is no quick fix I think, unless you are in a terrible area and very unhappy I would just throw yourself into paying the mortgage time will pass and circumstances improve , best of luck !

Enterprise_1701C

Just happened to glance at this so not normally here.

Your gas and electric bills are higher than a friend of mine in a 5 bedroom house with 4 kids. Have you looked at changing supplier. Have you got into the habit of using a tumble dryer when you could hang the washing outside?

As for the Sky - have a look at this thread https://forums.moneysavingexpert.com/discussion/2652651.

And your water bill seems massive, can you cut down on that? Shorter showers, less water in baths etc?

Mav6215

The telephone/broadband seems way too high. Does that include calls?

With most suppliers offering cheap BB deals if you take line rental with them and add on evening and weekend calls you could cut that by half or even more if you don't have or require FTTC.

Good luck.