The Scariest Thing I Have Ever Done....

McTaggus

Thanks Tropically! I'll check whether they would do one for free, and if not, probably not bother at this stage as I don't think it will be enough to give us a rate saving after playing around with calculators.

Currently keeping fingers crossed that rates don't go up in Nov, as we can only fix in a new rate from Dec onward..........!

McTaggus

Happy Friday Everyone!!!

Three weeks until we make the call to get our next fixed rates, and three weeks exactly until we finally escape the horror of being over half a million pounds in debt.......! We're both so excited!!

We are, however, also debating how best to utilise our funds for the next couple of years. Currently we overpay the mortgage by £1300, but when our interest rate drops from 4.29% to 2%, continuing to make payments at the same level would mean our OP's increase to £1,900 per month. At first that seemed a no brainer, but then I started re-reading MMM and also some old posts by The Escape Artist, and considering this alongside the "10 Year Plan" (which, frankly, I think is more likely to end up being the 12 year plan.... but what's a couple of years between friends).

Now, I'm asking myself a very important question, that previously I hadn't considered. If I spend all of our free cash on paying down the mortgage, particularly when interest rates are still so low, then am I missing a fairly important trick - investments, and compounding for the purpose of capital growth for the future?

Somewhat embarrassingly, investments was never something I had thought about and the entire world just seemed so..... inaccessible.... so I tended to write it off as something that OTHER people or really RICH people did. But, my recent reading piqued my interest, and I have started doing further reading (I'm currently reading Investing Demystified by Lars Kroijer), and I'm starting to realise I have been missing a pretty crucial piece of my financial freedom puzzle.

Pushing ALL of my cash into paying off the mortgage will, yes, cut out a key expense for when I'm ready to start thinking about chucking the job in. And yes, when we downgrade and move to a small house in North Devon or the Welsh Borders, it will give us a sizeable chunk afterward to go towards supporting us with a form of income. However, investing a part of our OP pot when our rate drops, would help us do both simultaneously - capital growth for the future, and also paying the mortgage off sooner than the currently agreed 29 year term remaining.

Having done some reading and research (monevator is a great knowledge tool), I'm thinking I might have a go initially with a Vanguard Stocks & Shares ISA and the Lifestrategy fund. I'm perfectly happy to be a passive investor and I have no desire to be an active investor. It seems like a good solution, that could really help to diversify the potential income we can generate for the future. Now, we just have to decide how much we're going to be putting in. I'm thinking it would be a good starting point to keep accelerated traction with our OP's, so perhaps give £1,500 to the OP budget. That would then leave £400 free to go into the S&S ISA account, and give us about £5000 in there in our starting year. Then, our hardworking money, can start to go and work hard for us too

I still need to do some more reading (and finish the book) before I make any decisions, but think that's likely to be the direction of travel.... but it's another new part of the journey I'm excited to start on!

That's all from the McTaggus Clan for now, but sure I'll be back on 1st December to just mark the event with a celebratory post!

Wishing you all the best!

Merchandiser2367

Great diary, how are you investments going now?

McTaggus

Hi Merchandiser,

Thanks for your post! I have to say, the book has been a real eye-opener, and it's given me a lot of food for thought - I'd thoroughly recommend it as it certainly gives you some basics to think about. Unfortunately, my investment plans outside of my existing pension contributions haven't gotten off the ground yet, though I'm still considering starting the Vanguard option once I have finished paying our outstanding (interest free) stamp duty debt back to my Mum in Q4 this year. That way, we maintain our increased OP contributions as a result of our rate drop, but also start investing without having to compromise on either goal. Plus, my pension (Fidelity) is happily chugging along with 8% returns, so it's giving me some satisfaction even if I haven't started a separate investment journey with my "free" cash yet.

For me, right now, the interest rate rise actually prompted our decision to focus more on OP'ing in the short term rather than diversifying now to investments. It means that, by the end of our next two year fix, we should be down into the 60-65% LTV bracket and should (in theory) help to maximise our access to better rates when we next have to fix. If I start diverting funds away from that increased OP now, we won't make the lower bracket, and I think I'd sorely regret that position given they're talking about 2 rate rises this year, and more to come in 2019.

That said, one of our two boilers packed up today and has started leaking through the kitchen ceiling, and we have just had to cancel one month's OP to pay for some urgent work to be done on the house... best laid plans, and all that :mad:

Regardless, we change down to the £480K's on the 1st of May, so it still keeps me smiling and motivated!

Wishing you all the best - and buy the book!

McTaggus

Kittenkirst

Fantastic to see your update!

The book definitely sounds like a good read- will have to see if I can get it from my library and get inspired:)