I am making this mortgage disappear

Anavand

Hello everybody :wave:

Most people start their diary by saying they have been lurking on the diaries on here, so I will get that out of the way. You are all an inspiring and friendly bunch of people and I get huge motivation from reading all of your stories. So I hope you can move over and make a little space for me! Any words of encouragement, tips or advice are all welcome.

We bought our first house 6 months ago after many years of renting. Both me and OH are somewhere a bit too close to the 40 mark so feel we have come quite late to the mortgage party. We went through a period in recent years when we were paying rent and bills mainly from my salary, while OH had a small level of income from his own business, while simultaneously trying to save every penny we could for a deposit. We are now both working and so in a much better position in terms of income. We have tried to hold on to the lifestyle we had before when money was much tighter and have a strong determination to GET RID OF THIS MORTGAGE as soon as we possibly can. The mortgage agreement with the bank might say we will be in our mid-sixties when it is paid off but that is definitely not our plan!

Just to add in terms of our figures, we are currently living in Ireland. OH also has some family here so we have decided to put roots down here for now but we may relocate back to the UK at some stage. So all of our figures are in Euros.

We bought our house 6 months ago for €251000, with a deposit of €50000. In the past 6 months we have reduced this to the figure today, which is €182900. Part of this was due to some savings we had left over after moving, but over the past three months we have begun to make quite large monthly overpayments. This level of overpayment may not be sustainable or able to happen every month, but we are determined to make as large a dent in that figure as we can.

I hate paying interest to the bank. I really don't like having this large figure hanging over us and the prospect of many years of payments. So here goes! Ideally we would love to pay it off in 5 years (why not be ambitious?). Even more ideally, we would love to get there in four years or three (hell why not?). Somebody on here mentioned the other day that there was a television programme on a few years ago that I vaguely remember called "Pay off your mortgage in two years". Let's see what we can do!!!

MortgageFreeMimi

Best of luck with it - nothing wrong with an ambitious five year plan if you're both on board; just think, summer 2022 you could be cracking open the ros! and celebrating no more interest payments under a roof that is all your own and irrefutably!. Totally worth it!

Anavand

Thanks for the kind words of encouragement Mimi! It looks like you have set yourself a nice target too and yes, I can't imagine just how great it would feel to owe nothing on the house at all! And to spend our salary every month on whatever we wanted- it will definitely be worth it.
Good luck to you on your journey.

Anavand

So a bit more about our mortgage- that large beast we are valiantly slaying!

We now, due to OPs, owe about €182900. The mortgage, when we took it out 6 months ago, has a 24 year term, which means we would be rather old at the stage of it being paid off. The 24 year term was the longest the bank would agree to and although we are overpaying and plan to keep overpaying, we like the idea of keeping our essential payments still at a manageable level, because nobody knows what might be around the corner.

We are on a variable rate of 3.5%, which was about the lowest available to us at the time. Rates in Ireland are not as low right now as in the UK, there are fewer banks with more of a monopoly and less competition. Also, they are just generally being allowed to get away with keeping interest rates higher. At the same time, interest rates paid on savings are pitifully low and there are no real exceptions to this. This is another reason for us to overpay while mortgage interest rates are relatively low, as the interest paid is a lot more than any interest we could earn on savings.

Last month, our monthly payment, revised by the bank due to overpayments, was €965. When we started paying the mortgage in November, the repayments were about €1035, so it is a nice reduction in what we have to pay each month. We have chosen not to reduce the term but to reduce the capital and monthly repayments, even though our plan in reality is to have the mortgage gone much sooner.

I should possibly also mention that our mortgage came with a cashback offer of 2%, so that covered our legal fees when we bought, with a little bit left over.

Being completely impatient and a little obsessed with shifting this thing, we are already looking at remortgaging. There is another bank with a variable rate of 3.1% which, although not hugely lower, would knock another maybe €50 off the monthly repayments and they have an offer at the moment where they pay your legal fees, so no costs involved in remortgaging. It seems like a win-win situation so we are going to apply and see what happens. If they do allow us to shift our mortgage, we might negotiate a reduced term at that stage, maybe to a 20 year term, which would put our repayments back to what they were last November but with a less ridiculous figure on the term.

Can you tell that this is on my mind a lot?! Glad to know though, looking on this board, that I am not alone.
I will post again later about some of the frugal/ budgetary things we are doing to try to throw more at the mortgage (and the areas where we are not so frugal at all!).

Anavand

So some of the things we do to try to keep our costs down, to free up more money for OPs-

1. Have shopped around for best energy/ internet/ mobile phone providers
2. Try to do most of our food shop in A*di or L*dl.
3. Try to buy things we always need when on offer, eg. ,bulk buy shampoo/ cosmetics only when on offer.
4. Do most clothes shopping in sales/ when on offer.
5. Generally shop around to try to get best price for things!
6. Sell some things on flea bay or the local version of g*mtree- brings in some nice little payments.
7. Mainly holiday back in UK visiting my family.

Areas where we could make improvements or where it is hard to keep costs down-

1. The food shopping- always seems to be quite a lot but not sure how to make savings. I'm sure its an area where a lot of money "leaks". :eek:
2. We have a daughter in primary school and have some childcare costs in terms of after school clubs and also her hobbies, which include a worrying interest in horse-riding :rotfl: But when it comes to her, there are a lot of things I just won't scrimp on and we are fine with that.
3. We have two dogs, also not cheap but bring a lot of love to the family! One of them is getting older and the vet bills can be shocking.
4. I don't think either of us are paying enough into our pensions and we need to take a long hard look at this. It is tempting to throw everything at the mortgage but I know we need to think more broadly.
5. The house we bought is on the older side and a bit out in the sticks so there are quite a few things we could do to modernise it. While we did a few large jobs straight away when we bought it (mainly, having a new kitchen fitted and new bathroom suite) we are aiming to do small amounts over time and do most of it ourselves as the remaining stuff is largely cosmetic.

That's all I can think of for now!

freshcotton

Hi there. You have done really well on the progress so far and I look forward to reading your updates.

In relation to remortgaging, is there a penalty for doing this? I would expect there might be if you were given cash back?

armchairexpert

Hi Anavand, I found your diary!

Our figures aren't dissimilar, if you ignore that they're in different currencies! I feel your pain about interest rates: Australia is shocking compared to the UK. Ours is fully variable at 4.83% and I've looked around and that's on par with the competitors. So our monthly interest payment is about $905.

And we also need a new kitchen, which is going to involve knocking down part of a wall. So solidarity from all corners!