The ups, downs, and occasional sideways bits of trying to be mortgage free

Tahlullah

Sorry, no sympathy here.
What do you expect when you make a roast chicken???

Cherryfudge

LOL about the roast chicken! Last night I decided to finish up the cooked chicken from the freezer: there was a roast chicken carcass with a tiny bit on (I know I'm supposed to make stock from it but we never use it so I got what I can from it and threw it away) and a bag of chopped up bits to use up. I always say I can feed an army off what DH considers a 'finished' chicken, but these were very bitty bits. Still, we had them in a pasta sauce and it was really tasty. Later I was sorting the freezer and found another bag of cooked chicken bits - are you sure your husband hasn't been hiding half a chicken in my freezer? (You're in Australia and I'm in England... that would be 'Very sure', then?)

Good for him being able to get so much off the carcass, but a bit jaw-dropping for you. The amount of times when my idea of making an extra portion or two has been scuppered by DD and DH... and both of them just burn up the calories!

armchairexpert

I boggle at the people who can make a chicken stretch to three meals!

Anyway, chicken and veg pie made from the leftovers, carcass in the freezer for stock. While I was there (this is yesterday evening, Wednesday) I made a cheesy potato and cauliflower soup for today's lunch, and I was halfway through making a tomato soup for the kids' Thursday night dinner, feeling very organised, when I discovered that we had no passata for the dinner I was making for Wednesday night. So I had to turn the tomato soup back into pasta sauce, and now I think they're getting egg and chips, frankly. There's only so many miracles I can work!

Since it's a new month I'm going to double post with a summary, but just to also say that I have talked some of my friends into joining me for a Buy Nothing Month in June, so that means no clothes, no eating out, nothing frivolous. I spent last night online shopping for the things I thought I couldn't possibly do without for another month, and then came to my senses and did not press Buy on any of it except the sequel to the book I just finished. We'll see how it goes!

armchairexpert

In May, I:

1. Paid off $500 from the mortgage. There is a huge caveat here, though, that because our entire income sits in the mortgage account all the time, some of the drop just reflects the fact that we haven't had any big bills this month, if that makes sense. It's basically a huge overdraft, so I have categories in YNAB telling me what's allocated where, If we have a big expense or go on holiday some of that payment gets accessed, so it's not a 'pure' payment in that sense. I don't know how to separate it out any further. I'm counting this as a modest win, and it does line up with The Plan.
   
2. Spent a fortune on clothes! Our budget was originally $100/month, I put it up to $200 because it just wasn't going to cut it, and we spent $700. That did include winter uniforms for both girls, plus fancy trousers and a raincoat for me, plus Mr Expert needed jeans, t-shirts, a jumper, we all needed new underwear, the girls got a pair of spring shoes each to grow into...so hopefully that's IT for now! :eek:
   
3. Overspent a wee bit on eating out but it was my birthday.
   
4. Overshot my ambitious grocery budget of $900 but came in at $980, which is lower than it used to be - I would guess that when we started this journey, it was closer to $1200/month. Tentative
   
5. We also had a couple of big bills that couldn't be avoided, but in both cases the money had been budgeted for - now that I've been running YNAB for a few months the pots are starting to fill up. :A
   
6. And here's the really bad bit: my mortgage rate went up! If I were allowed to use swear words on MSE I would, because the cash rate hasn't gone up, this is just the predatory lenders using the lack of competition to gouge consumers. It's going to cost me an extra $100/month to service the loans now.

I am actually going to sit down with Mr Expert and discuss switching. We went with this bank because they offer a product no other bank does, but we've changed directions since setting it up, and also we have more equity, and so a P&I loan might work better for us. It's a faff, though, so it might not get done for a while.

Bring on the end of the tax year is all I can say - that's when we get the lump sums that will really make a difference, instead of this frustrating chip-chip-chipping away for hardly any return.

Tahlullah

You've still been doing great this month, despite your odd blip.

It sounds like you are currently running an 'Offset interest only mortgage' which is what I have. So all the money in the account overpays the mortgage, so less interest to pay, and you can increase or reduce payments as you go along. If so, I fully understand what you mean by £500 this month as this is what you haven't spent, but you may do next month.

I have to keep reminding myself that you coming up to winter so have a need for new winter clothes, so this spend is necessary, especially your fancy pants.

Eating out - pah! It was your birthday this month so totally acceptable to blow the budget a bit.

Groceries - good to have got it down, but as YNAB says, perhaps your groceries budget it really $1000, down from $1200, not $900 down from $1200?

Congratulations on being able to cope with the unexpected big bills whilst still filling your pots. A great success.

Definitely time to remortgage. But, what is a P & I loan?

You have had a fantastic month. Time to celebrate - from out of the freezer!!!

armchairexpert

P&I: Principal and Interest. And you're completely correct about the type of mortgage, yes!

I had a quick google around and it looks like I could get a better rate on the residential house but then I'd be socked with a higher rate on the investment unit, and it might work out better but I'd have to sit down and do the sums. Also I can't afford to switch the investment unit over to a P&I - I can only pay down one mortgage at a time! At the moment the two loans are interlinked, because I borrowed 105% of the unit cost using the house as collateral, and although it's gone up in value I don't think it's gone up enough for a stand-alone loan yet. I owe $265K on the unit and it's worth about $280K - I think it'd have to be closer to $310 for a stand alone mortgage. The other thing is that at some banks, they offer a lower rate if your overall loan amount is over $499K - well, mine's at $485K so that's galling!

So I need to do a lot of sums when I have some time, I think, and maybe talk to some mortgage advisers about how to bundle the loans for maximum effect.

Thanks for the encouragement! I was so excited to see how much my interest payment had gone down by this month, and then it went up, which feels like such a deflating blow.

Tahlullah

I do think I undertand. In comparison, I have one mortgate, the overall sum, but across 2 loans - Mortgage 1 and Mortgage 2.

Every month, I get a statement asking me for the interest owed, which is across both loans. I budget and pay this off immediately. Every 2 years I fix my interest rate, which I did in February of this year. It is currently at 1.99%

I then have a standing order set up to pay off Mortgage 1 at £1k per month. I also make regular over-payments of £50 per month to mortgage 2. So both are coming down; just one faster than the other.

Additionally, all of my bank accounts are linked to the offset, so any money in them reduces the interest I have to pay. I have about 6 accounts with he bank. Each mortgage has its own account. I have separate accounts for my savings, buffer, personal money etc. They all run independently, but I can move money easily so I clearly see payments making a difference. But if I didn't, the interest would reduce at the same rate anyway, because they all count to the offset.

To me, it sounds like it may help to fix the rate of interest, if that is possible and separate out the mortgages, so you can actively budget to make specific over-payments.

You know what is best for you and will make the right decision. However, I would never swap to a P & I because as you say, they are more expensive and they don't offer the flexibility of the offset.

Good luck going forward.

Tx

Cherryfudge

Oh no, now you've got me wanting an offset mortgage! (I had no idea what one was till you mentioned it and I looked it up).

As I have some savings and will eventually inherit money when we finally get Mum's estate sorted out (which could be many months) it sounds perfect for me. I think I need to do more reading before I start asking for one though - partly as I don't really know much about it so it might not be right, and partly because they seem to cost a fortune to set up.

See what you've started.

armchairexpert

Oh they're already separated out, and I'm throwing all the extra money at the residential mortgage which is the one in my sig. The investment mortgage interest is tax deductible, so I'm not touching that one until this one's gone. That's also why so many banks offer bundled packages which attract a higher rate of interest on the investment property: tax minimisation. I just mentioned the total because where your total mortgages are over $500K the interest rates seem to come down.

Fixing at 5.15% feels a bit galling, with so many warnings that our housing bubble is about to pop. But I do see the benefits from a budgetary point of view.

Cherryfudge (your name always makes me hungry!) I think you can get offset mortgages both for interest only and repayment loans. They're really good if you're disciplined enough not to treat them like a huge credit card! A good trick is to take out a, say, 30 year loan, pay it off in 10 or 20 and then keep it open because then you have access to low interest credit for things like renovations until the term is finalised. Again, if you're disciplined, but I feel like everyone on MFW is a good candidate for this sort of thing.

armchairexpert

Two unrelated things by way of a quick update:

1. I told Mr Expert that the mortgage had gone down by $500 and he looked confused and said but I thought it was an interest only mortgage, and I established that he has no idea how the mortgage works and never had. He's not a stupid man: in fact, he's technically Dr Expert, and works in a scientific field! Goodness. No wonder he's so content to have me be in charge of the finances.

2. I have realised that my mortgage-paying-off attempts have been limited to tracking the budget and trying, halfheartedly, to cut down on things. That's certainly worked to some extent, in that we were over spending most months and using sporadic lump sums to keep things on an even keel, and now we're living within our means. But it's not enough. So, wish me lucky, I'm going to go through the house and try and find things to eBay. I'm not expecting to come up with much, but we'll see.