FinancialBliss: My mortgage free journey…

financialbliss

Hi Jonnybravo, dumb blonde - Thanks for saying hi.

@dumb blonde. Google is your friend! Actually, I wasn’t sure how to spell it either. Our #1 had eczema during his first 18 months or so and can still get the occasional flare up.

More worryingly, we think he may have a nut allergy and we’re going for an appointment / tests next week.

Excellent news on the debt front. Hope you can continue this on the mortgage.

FB.

financialbliss

If you’ve been paying close attention, you’ll have noticed that I had two mortgage providers for property #1 due to remortgaging.

Due to property #2 being a bit of an epic post, I decided to separate out the mortgage on property #2, i.e. mortgage #3 into a separate post.


So, in March 2004 we took on a 95k mortgage from Nationwide. Nationwide because they were offering a pretty good rate, I liked their flexible mortgage with daily interest and the tail end of property #1 was with Nationwide and I’d not had any problems with them.

In case you’re not familiar with Nationwide, you’ve allowed to overpay 500.00 per calendar month without penalty, and overpayments can be borrowed back, although I’ve never personally done this.

Mortgage was initialy a 2 year fix @ 4.79% giving an initial payment of 543.80 per month. We started overpaying by various amounts as we could afford it, each time a 500.00 overpayment was made our monthly amount reduced by around 3 pounds or so.

After the 2 year fix, we decided to fix again, I was very tempted to fix for another 2 years, but eventually, due to looking at fees, fixed for 5 years, also @ 4.79%. I’m currently in this 5 year fix until March 2011.

We kept overpaying until I realised we weren’t actually shortening the term (and having had to just check), quite recently in July 2006, we asked Nationwide to reduce term instead and fix the monthly payment at the then 485.40. In December 2006, I asked for the payment to be upped back to something near the original amount and started paying 541.49, until June 2007 when I upped the payment again to the amount we’re currently paying which is 597.31 in anticipation of a pay increase which I’m just about to get next month.


So, from January 2008, I’m attempting to budget 1,250.00 a month towards the mortgage. The big question is how do I apply this?

Starting numbers.
I expect the mortgage to start at 69,690 on 1st Jan 2008.
I am hoping to save an additional 650, (ie 1250 – 600 mortgage) per month.

Scenario 1 – separate savings.
Being able to save 650.00 a month and checking MSE savings calculator, it suggests that I could save 45,728 over 5 years. Applying this savings to mortgage in December 2012 – calculated mortgage of 53,740 gives an outstanding mortgage of 4,600 in December 2012.

Note: I’ve applied interest rate of 6.3% - c/o mrs bliss tax free, current icesave rate, although we have monthly savers too.

Scenario 2 – overpay on mortgage.
If I apply the whole 1,250 per month to the mortgage, my calculations suggest I’m left with an outstanding mortgage of 4,750 in December 2012.

Note: I’ve applied fixed rate of 4.79% until March 2011, then the Nationwide variable rate of currently 7.24% until December 2012. At the end of March 2011, if I overpay each month, I’m looking at a mortgage around 27k, perhaps less, so I’ve just plonked myself on their standard variable rate until December 2012, hopefully a maximum of 21 payments from March 2011.

Both scenarios are just that – my best guess scenarios.

For #1, savings rate could be way off, especially as there’s been a suggestion of 3 base rate cuts in 2008.

For #2, once I get off the fix in March 2011, the mortgage rate could be higher due to the current credit crunch, or perhaps lower due to base rate cuts.


My choice at present is to overpay on mortgage…

Why? Despite leaving me that little bit further away from the goal, once I’ve put the money into the mortgage, it’s much harder to spend it compared to simply being in savings, although any overpayment reserve can be borrowed back. Also, seeing the debt come down month on month is a great driving force.

If you were in my shoes, what would you opt for?

Look forwards to some responses.

Financial Bliss.

Kaz2904

Although not in your shoes, mine are nearly the same size!
Mortgage started 27/05/2005 @ 5.29%. Borrowed £90000.
Allowed to overpay by 6*monthly payment so £3+k.
Started overpayment in January 2006 and changed snowball in January 2007.
Pay £1330 a month towards debts (see below).
Currently chucking everything at mortgage but about to rethink strategy and start building up ISA and high interest savings accounts. We both work FT.

Dumb_Blonde_3

Hi Financial Bliss,

Crikey - I really hope that your son doesn't have a nut allergy - keep us posted on that one - fingers crossed.

I'd go for Scenario number 2 - overpay the mortgage. Its pretty easy to 'draw down' the money with Nationwide - we've actually done that ourselves.

JonnyBravo

financialbliss wrote: »

My choice at present is to overpay on mortgage…

.......

If you were in my shoes, what would you opt for?

Well it's uncanny but I too would opt for overpaying on the mortgage but then perhaps thats not too suprising as there are a few parallels between our situations.

We too have more than one mortgage (2 of 3 also with the Nationwide) and we too pay off £500 extra/month.
As you say its for the "satisfaction factor" and the motivation it provides. I do realise it may be marginally less astute than setting up many monthly saving high interest accounts and an ICICI etc etc etc but the small difference isn't worth the administration time or loss in motivation I may suffer. (In all honesty its probably more the admin :rolleyes: ) (Oh... apart from cash ISA's which clearly are too easy and too good to ignore)



I'd join you on your 12/12/12 quest but it's too far off for me..... we've got a bigger amount outstanding and realistically we're looking at 2014/2015, but we're both determined to get it paid off asap.

In the meantime :T for you, your efforts and your thread!

rca779

FB, am I missing a trick here

Reading your post it would appear that you have upped your mortgage payment to ~ £600/month, but intend to actually pay in £1250/month, thus overpaying by £650/month and saving £££££'s in interest.

However earlier in your note you mention that Nationwide only allow monthly overpayments of £500/month. So how do you intend paying the extra £150 without paying any ERC's

I am interested as I also have a Nationwide mortgage and once I get the England manager's job (see earlier post on page 3) I intend to pay-off my mortgage ASAP:j :rotfl:

JonnyBravo

rca779 wrote: »

FB, am I missing a trick here

Reading your post it would appear that you have upped your mortgage payment to ~ £600/month, but intend to actually pay in £1250/month, thus overpaying by £650/month and saving £££££'s in interest.

However earlier in your note you mention that Nationwide only allow monthly overpayments of £500/month. So how do you intend paying the extra £150 without paying any ERC's

As some one with a Nationwide mortgage I can tell you how I think it is possible..... for some.
If you've had your mortgage extended (ie borrowed more at any point whether to move, extend or buy a flash car!) your mortgage at Nationwide may be listed as the original mortgage and then also an "advance".... it is possible to pay off £500 off each of these "accounts" per month..... whether that's FB's situation or not I have no idea!!!

Please check this is true cos whilst I have it in the back of my brain I can do this I've never paid more than £500/month. I've never had enough cash, and I'd hate for you to quote me in your correspondence to the financial ombudsman during any complaint!!;)

saversarn

Hi FB,
I have just read through this thread and think it's great.
I wish I'd had the internet / MSE website etc years ago, when I think of all the money I have wasted :eek: (just the wasted I'm very happy with the money I've enjoyed;) )
Anyway here I am 45 still owing £100K very good income but three kids two at university..... to pay off your mortgage before your children are teenagers must be the best thing ever!!
Best of luck in your quest:T

financialbliss

Answers to my questions and further questions...

We're just popping out swimming with the little 'uns. I'll reply later to overpayment query.

Thanks,
FB.

financialbliss

Nationwide have fairly flexible fixed rate mortgages. As a minimum requirement, as with all their mortgages, you must pay the minimum amount they require to service the debt.

On top of that, you’re allowed a 500.00 per month overpayment without penalty.

However, you can ask them to alter your term at any point, up or down, such that as long as you’re still paying the minimum amount they require to service the debt, they will apply the change free of charge.

Note that some providers (think I recently read Barclays or Halifax) charge an admin fee for doing this.

Simple example: say I’m paying 250 per month (if only) and also a 500 overpayment. I suddenly decide I can afford 1000 per month instead of 750, but unless I request the term shortening, thus upping the monthly repayment to say 500 per month, I’d not be able to pay 1000 per month to the mortgage – 500 standard payment and 500 overpayment.


The easiest way to actually achieve this is to log into Nationwide internet banking, send a secure message saying you'd like to alter your monthly payment to <whatever> per month and ask how this will affect the term. You should either get a secure message back detailing the new term that the revised payment will give, or information in a letter.

They should send a form titled "Changing the term or repayment method of your mortgage" - ref M620 at bottom right of form. With the clue being in the title, this form needs a repayment term. Fill in the new term based on the info received and post back.

They they apply new term to mortgage and the net effect is that you’re now paying a new standard monthly amount to your mortgage account. Remember, you can still overpay by 500.00, so don’t get over keen with your monthly amounts!!!

Hope this helps.

FB.