FinancialBliss: My mortgage free journey…

setmefree2

financialbliss wrote: »

Have reduced the mortgage by 9,538 this year. December will see the reduction top 10k.

Well Done You:T:T:T

financialbliss

Got the MSE e-mail today and the debt audit topic caught my eye:

Point ‘1’: Repay debts with savings, which I’ve read before, but I’ve quickly re-read this evening. Points you here:
http://www.moneysavingexpert.com/cards/pay-off-debts

Am I missing the bigger picture with the mortgage I wonder?

Just had another quick look at our mortgage / savings situation again. I’ve slightly simplified the numbers to make life a little easier. Note:

• Mortgage rate is my actual current rate
• Hypothetical savings rate of 7.15% (no tax) on everything
• A nice round 10k savings for simplicity

Scenario 1 – Mortgage and savings.
60k mortgage @ 4.79% - interest charged per year = 2,874
10k savings @ 7.15% - interest gained per year = 715

Net effect: Mortgage costing me 2,159 per year in interest.

Scenario 2 – Mortgage, but no savings.
50k mortgage @ 4.79% - interest charged per year = 2,395

Net effect: Mortgage costing me 2,395 per year in interest.

Scenario 1 v scenario 2.
Difference of 2,395 – 2,159, ie 236 a year or 19.67 a month.

My example doesn’t work out in favour of repaying the mortgage, as in Martin’s example, he has a 6% mortgage rate and 4% after tax savings rate, but 10k both as mortgage and savings amounts, therefore it’s simply a case of differing rates. As the mortgage has a higher rate than the savings, it’s going to cost more!

I've assumed we can get 7+% via Mrs Bliss not paying any tax on savings, but note I've not factored in our efforts to try and load our savings to higher rate savings accounts first.

Figures suggest I should retain 10k savings rather than use the 10k to pay off mortgage (scenario 1).

However, I’m still in the overpay on the mortgage camp as:

Mortgage can be seen to reduce month on month
Reduction in interest charged each month means I clear more debt each month
Saving rates currently not guaranteed to remain high
I can get my overpayments back while I’m still with Nationwide

I’ve probably missed a few plus pointers I could add there, but perhaps a key point is that I’ve made a decision to be mortgage free, I’m primarily going about this by overpaying on the mortgage, I can see our efforts working and therefore it’s motivating me to continue towards my overall mortgage free goal.

Financial Bliss.

uzubairu

financialbliss wrote: »

Mortgage can be seen to reduce month on month
Reduction in interest charged each month means I clear more debt each month
Saving rates currently not guaranteed to remain high
I can get my overpayments back while I’m still with Nationwide

I’ve probably missed a few plus pointers I could add there, but perhaps a key point is that I’ve made a decision to be mortgage free, I’m primarily going about this by overpaying on the mortgage, I can see our efforts working and therefore it’s motivating me to continue towards my overall mortgage free goal.

Financial Bliss.

Me and OH have been thinking too, as we have a Nationwide mortgage on a fixed rate until June 2016.

Until reading your posts, we didn't realise that we had even more flexibilty to reduce the term by even more than our overpayments to date had allowed.

Seeing the mortgage reduce each month when the overpayment goes in is a great motivator for me and the OH, so we have decided to reduce the term further and instead of overpaying £500 and paying £125 into a Regular Saver account, our mortgage payments will go up from £646 to £775 and we will overpay £500.

We just want to be rid of our £113,000 mortgage by June 2016. (10 years after it started).

Checked online today and the balance is £98,255. :j

This time next year we expect it to be below £90,000.

setmefree2

uzubairu wrote: »

We just want to be rid of our £113,000 mortgage by June 2016. (10 years after it started).

Checked online today and the balance is £98,255. :j

This time next year we expect it to be below £90,000.

Well Done on that:T:T:T

Lunar_Eclipse

Well well, the BOE base rate is now down to 3%. Scary reality check in terms of economic outlook, but confirming we shall stick with overpaying the mortgage as quickly as we can.

FB, I suspect if you re-run your figures with a more realistic savings rate*, the figures might now back up your gut feeling that OP is better for you guys.

Stuart, I keep meaning to start a diary but haven't got round to it (still). I know I should, with a spot of attempted back dating to cover the fruitful year we've had since changing things! I've jotted down some brief notes somewhere. I can still remember reading FB's first diary entry. Thank you for your words of encouragement re: our early retirement goal. Too kind really given your comparative early start and the fact that we don't have any spare money after our OP!


* hypothetical 7%+ looking increasingly unlikely, sorry! I suppose this should be reduced to 5.5% in line with the 1.5% rate cut.

Dithering_Dad

Hi financial bliss! I've just been reading your thread with interest. I lurk a lot in the MFW board without posting now because I seem to cause offense with whatever I say and end up in arguments :rolleyes:. However, I thought I'd risk it today and have been posting quite a bit, so thought I'd add to the mini debate on your thread. Hope you don't mind!

I have been asking myself the same questions regarding my own MF challenge. I have almost paid off the Interest Only part of my mortgage and feel this is a real milestone. I was starting to wonder if I should then 'leave it there' and start blitzing my pensions and S&S ISA savings instead, taking advantage of the low share prices.

I then went back and re-read the early part of my MF diary and remembered the reasons why I started down the MF road. In my case it was to reduce our monthly outgoings to the point where I could stop working away all the time and yet we could still afford any extra academic tuition, speech/physical therapy or other medical expenditure for our disabled daughter. Even after having paid down our mortgage by over 25%, we're still not in the position where we could do this. It was a real reminder of why we (me and my family) are making sacrifices to pay down our mortgage.

I do regret a little that I might be missing out on some bargains in the stockmarket, but the whole point of me being away from home and contracting is to reduce our outgoings, not to feather our nest in retirement - I can do this over the next 25 years working in my local job .

If you're also having doubts (or any other MFW who may be reading this), I'd advise you to do the same and sit down with yourself and OH and see if the goals you had at the start of your MF journey are the same as you have now. If they're not, or you have already achieved your goals, then perhaps it's time to have a review of your finances and decide on some new goals?

The great thing about being a MFW is that once you feel that you've reduced your mortgage to a more comfortable level, you can stop and move onto something else, without any penalties but you always feel the advantage of the reduced years or reduced outgoings.

I'm glad I started down my mortgage free journey, but once I feel that I've gone as far as I can or want to, then I'll happily move onto my next challenge. My MFW is not a 'hair shirt' that I have to endure, it's a means to an end.

Good luck anyway with whatever you decide to do!

financialbliss

OMG :eek:

The base rate has been reduced by 1.5% to 3% today.

Ok, you’re probably thinking that I’m 8 hours late, but I was on the BBC business pages at 12.00 and refreshed until the rate article came up, so knew fairly quickly…

Work computers don’t seem to like MSE any more – I can see the posts everyone does, but the buttons such as quote, thanks, reply etc have disappeared, so I couldn’t post a reply at lunch.

Work filters web content based on what type of sites they are, shopping, news, sport, blogs, adult content etc, and block certain ones permanently, eg ebay, youtube, so I can only imagine that they’ve done something to “break” the MSE forums from work.

Anyway, back to the base rate...

I thought 0.5% was a given, possibility of 0.75% and an outside chance of 1%. Never expected anything greater than 1%

Suggests to me that we’re potentially in a bigger mess than people perhaps have previously thought.

What does it mean for me. Our Nationwide mortgage is fixed @ 4.79% while their SVR is currently 6.19%. IF and I say “if”, with both a capital I and a capital F, Nationwide pass on the full 1.5%, their SVR will be 4.69%. A 0.1% cheaper than our fixed rate. My hunch is that they will pass on a 1% cut; I suspect a full 1.5% reduction is unlikely.

As we’re on a fixed rate mortgage and some of our savings are at a variable rate, this means we’ll probably be worse off after the rate cut as I’m expecting some sort of savings cut too – again perhaps not the full 1.5% though.

Will the bliss household be contributing to kick start the economy?
Suspect it’s business as usual for us, keep chipping away at the mortgage and keeping the costs down where ever possible - not to an excess - just being sensible in our spending.

Financial Bliss.

financialbliss

uzubairu wrote: »

Me and OH have been thinking too, as we have a Nationwide mortgage on a fixed rate until June 2016.

Until reading your posts, we didn't realise that we had even more flexibilty to reduce the term by even more than our overpayments to date had allowed.
Checked online today and the balance is £98,255. :j

Hello uzubairu,

Thanks for saying "hi" in my diary. Way back on page 4 of this diary - see post #71 on how to alter the term - I suppose you can also ring them. However as I've started this, I've just also noticed:

uzubairu wrote: »

Seeing the mortgage reduce each month when the overpayment goes in is a great motivator for me and the OH, so we have decided to reduce the term further and instead of overpaying £500 and paying £125 into a Regular Saver account, our mortgage payments will go up from £646 to £775 and we will overpay £500.

So it looks like you're already on the case. Excellent news on getting sub 100k.

We're sub 60k next month and ok, it's not quite the same, but I'm looking forward to it :T

Financial Bliss.

financialbliss

Lunar_Eclipse wrote: »

Well well, the BOE base rate is now down to 3%. Scary reality check in terms of economic outlook, but confirming we shall stick with overpaying the mortgage as quickly as we can.

Yeah - my outlook too.

Lunar_Eclipse wrote: »

I can still remember reading FB's first diary entry.

and worse still, I'm still around :rotfl:

Lunar_Eclipse wrote: »

hypothetical 7%+ looking increasingly unlikely

I think I've done my sums correctly and due to having some savings @ 10% (regular saver), some fixed at 6.86%, some at 6.55% and some at 5.05% none of which need any tax taking off, I've applied the ratios of savings in each of those accounts to the rates and I think we've currently got an effective savings rate of 7.52%

This is likely to go down though, as Kaupthing Edge (ING) haven't passed any of the 0.5% or 1.5% reduction on yet :eek:

Financial Bliss.

StuartGMC

Lunar_Eclipse wrote: »

Stuart, I keep meaning to start a diary but haven't got round to it (still). I know I should, with a spot of attempted back dating to cover the fruitful year we've had since changing things! I've jotted down some brief notes somewhere. I can still remember reading FB's first diary entry. Thank you for your words of encouragement re: our early retirement goal. Too kind really given your comparative early start and the fact that we don't have any spare money after our OP!

No time like the present as they say...
My first post has been edited to give an updated view (thanks FB for this idea!) so jot things down now and you can adjust later.

Regarding OP, well it was also at a time of higher interest rates so couldn't easily see the impact 1994 until 2006 when we looked and decided we didn't need a further 13 years and 4 months, only 10yrs. Since then things have accelerated and MSE has made me do more!

Depends on your definition of "spare" money... I have £150 for "ancillary spend" each month, but the spreadsheet pulls everything together and indicates after all commitments (bills, mortgage, OP, savings required for items in future and investments) any "spare" money or "deficit" in the aspirations. If it is positive then I don't like it to be more than £100 per month, in this case savings/OP need to increase!