Mortgage Free by 55

gallygirl

VDOT47 wrote: »

Does anyone else ever feel depressed that this is such a long journey? I know that we are doing very well by all reasonable standards in terms of overpaying/saving each month, and that in theory our equity in our house is increasing by £25,000 at least each year, yet I still feel very miserable on occasions that it still isn't enough to allow me to move my little family into a house where we will be totally happy, rather than just mostly happy but having to live with compromise in terms of location/noise etc :-(

It IS a long journey, no matter what you do. But you are taking steps to make it shorter so take comfort from that .

I found it very useful to have lots of mini-targets along the way, along with a groovy spreadsheet of course . I know you are planning on moving but treat the mortgage as if you are staying put. Mortgage interest has just dropped below £15 so it will be a while before it goes below £14. How long before it goes below £14.50? How long before you've paid off 10%, 15%, 20% etc? Do you have a regular day you make overpayments? Choose a date and a nominal amount of say £200 if that is what you can definitely afford every month. Stick that on the spreadsheet along with your normal monthly payment. What's the estimated pay-off date? If it's say the 30th of a month as that's when your mortgage payment comes out, how much do you need to bring it forward say two weeks, so that your overpayment will be the last payment? Can you find that extra down the back of the sofa etc? Then how much to bring it forward another two weeks etc? And obviously it will come forward anyway if you pay more than £200 extra. Make it a game - Beat the Spreadsheet .

VDOT47

Not much doing here. Going to be a quiet few months on the overpayment front.

VDOT47

Still nothing to report - May was the first month since November that no additional overpayments were made (aside from the DD which is £30 over the required monthly repayment).


Does anyone have any gut feeling on the following quandary? As avid readers (as if there are any!) of this blog will remember, I borrowed just over £10,000 on a 0% money transfer card to make a large lump sum overpayment to the mortgage. I also took out a 0% purchases card, to fund various home improvements, holiday costs etc and this is now basically maxed out at £10,000 too.


Both cards are on 0% for about another 2 years, so are costing me nothing in the short term, and the combined minimum monthly payments of £200 are manageable. Ordinarily I would just leave these and then look to balance transfer as much as I can in 2 years to keep the money tied up at 0%, rather than using savings to pay the cards off.


However, I think we are likely to be looking at making an application for a larger mortgage in about 18/24 months time as we aim to move house then. So, my quandary is: which will get us a better mortgage offer (both in terms of amount we can borrow and also in terms of interest rate) - using savings to reduce the mortgage balance and thus give us a better LTV and deposit (but having c. £17000 of debt on my credit records and affordability scores) OR saving up to pay off the card debts, but inevitably having less equity in the property when we sell??


My gut says I would prefer to take the first option, and I know the answer is to get a mortgage broker to run some calculations based on each scenario, but I'd be interested to know if anyone has any thoughts or similar experiences?

SuperSecretSquirrel

I don't know, but my gut instinct is the opposite of yours. I imagine 20k of unsecured debt to be pretty toxic to a mortgage lender. I'm stoozing myself, but would be paying the balances off ahead of time if looking to move house with a mortgage anytime soon. Also, keep in mind any transfer fees if planning to balance transfer. I'm not seeing many no fee deals these days, most seem to charge around 3%, which would likely negate any gain from savings. Check out the MSE credit club to get a feel for things

greent

I'd also go with the opposite to you, VDOT (so in agreement with SSS) - as an ex-banker I would have preferred less CC debt with less equity than more equity and higher CC debt. However, things have changed now. But as far as affordability goes, I think more attention is actually paid to that nowadays than when we last moved (12.5 years ago) - which seems another good reason to reduce short term debt imo.

VDOT47

Thanks both, it certainly all gives plenty of food for thought!

VDOT47

Brief update - balance is down to below £245,000 after this month's DD. Just over 65% LTV.


In better news, I got a payrise so will have a bit more ability to make overpayments again from this month.

VDOT47

So the 'plan' now is to have the mortgage balance down to £200 - 210k by spring 2020 and then assess if that leaves us in a good enough position to move at that stage to our 'forever' home. If not, then we plough on for another 6 months and re-assess (and so on, and so on).


So I need to keep overpaying regularly, but also to build up at least £10,000 in savings to wipe off at least one of the credit cards when the time comes to make a mortgage application.


Payday on Wednesday, so I'll do some sums to see how much spare I can throw at an overpayment.

VDOT47

Managed to make an overpayment of £203.59 this week.


Probably won't achieve much better in July, but August has a regular saver maturing and should see a work bonus which will allow for a much better overpayment month.

VDOT47

Signature updated - our letter from mortgage company today confirming the June overpayment shows that the loan has 22 years remaining, so end date adjusted forward to July 2040! Saved ourselves 19 months so far!


Short term aims are:
1) to get remaining term down below 20 years ASAP
2) to reduce daily interest from approx. £14.20 to below £13.50 by the end of the year
3) get below 65% LTV - should automatically happen with July and August DDs (60% LTV would mean reducing balance to £224k - a mid term aim to achieve by next Easter)