Project Mortgage Neutral Begins

savingholmes

Sounds a great opportunity

ajmoney

I received my annual pension statement from work yesterday, it gives me its current worth and what it would give me as a monthly income and tax free lump sum now,  I still have 6 and a half years left to pay into it so it will be higher when I receive it.  I intend to use my lump sum to pay off whatever mortgage is left when I leave so it is good to see this figure in comparison to my spreadsheet.  I expect to have around £36864 left to clear based on my current OP plans.  My current savings total is around £34820 and my current lump sum is over £40k (I am not divulging the total for now).  This shows I will be able to clear the total without needing to use all of my savings and lump sum, and my savings and pension will continue to build from today's valuations.  I would like to get rid of my mortgage in its entirety by then so I don't need to use any of this but it is nice to know the buffer is there.

Suffolk_lass

Not sure if you have done the equation to look at how much interest you will pay on your mortgage over the remaining time you will have it based on your current plans - and then compared this with the interest or growth you have in your savings. It was when I did this that my plans changed and I paid of our mortgage more quickly and saved a bit less for a few years

ajmoney

Suffolk_lass said:

Not sure if you have done the equation to look at how much interest you will pay on your mortgage over the remaining time you will have it based on your current plans - and then compared this with the interest or growth you have in your savings. It was when I did this that my plans changed and I paid of our mortgage more quickly and saved a bit less for a few years

I am not sure how I would start doing that.  The bulk of my savings are in a S&S ISA and are performing fairly well, the smaller amount I am currently building up so I have a 6 month EF, my job is secure but never say never.  I am currently OPing £430 a month and saving £550, that will be reassessed once I hit 6 months.  I will also reassess just before I remortgage next year like I did last year.  I doubt I will be able to earn the same as now when my contract ends although my pension means I only need a salary around £29k for it to be similar as I can draw that as soon as I finish with my current employer.

savingholmes

Lovely to know you are securing future and everything is on track. 

Suffolk_lass

I would start with your mortgage (ignore your OP for the first calculation) your provider should be telling you either in your annual statement or online, how much interest you are paying per month (they usually average it out, including if you routinely overpay) -

I would start with that and multiply by the number of months left on your mortgage term)s) - then if you push overpayments they should send you a letter or update to tell you the new expected payment per month and interest per month, without further OP.
Taking that letter, you can multiply the difference in the interest rate by the number of remaining months to show approximately how much you have saved in interest with that OP - it's rather inspiring and you could become obsessed with it!!

I always looked at the life of the mortgage total for interest rather than the monthly figure, but I know others don't.

I'm not sure if you get the letter if you add your £400 to your monthly payment as an automatic thing, but you should be able to find out what the interest is per month to give you a starting point.

Once I knew this, I could track whether my interest and investments were keeping up with that interest to at least off-set it. And if not, I paid more off the mortgage. 

ajmoney

I am going swimming with a friend this morning for the first time in over a month.  I doubt I will be in for very long, just enough to feel the buzz and feel the water support me as my energy levels haven't yet returned and I want to go back out in the garden this afternoon.

I have decided not to do my shop today (normally a Sunday task) as I have no idea what to buy for any meals.  The intention is to go tomorrow unless I can find some inspiration for meals to go today.

ajmoney

@Suffolk_lass I am going to have to slowly digest that as it seems to take my brain longer to process this kind of information.  What I do know is the monthly interest added to my mortgage is currently around £89.53 and I am OPing £430.  The £400 is bringing down the size of the marger mortgage and the £30 is covering the interest on the smaller mortgage.

Suffolk_lass

Don't fret over it AJ - it's just a test to see if you could speed things up by swapping your strategy about a bit. For me, I was incentivised by seeing the interest dropping more quickly (it does anyway as the capital you have repaid increases) but it was a bit like a boot up the backside each time I paid another lump off, seeing the interest tumbling. It is weird but we are saving now from our pensions (not particularly long term, more like sink funds) with the exra money we are no longer putting in to mortgage or debt repayment. Amazed at how much less we need than I thought.

savingholmes

It's encouraging to read people's retirement stories who found they can live on less than they imagined. I think lockdown has given many of us an indication of how much less we could live on if we weren't commuting to work etc...