diary of an overpaying nut

prudential

An overpaying nut. This is what I'd like to become anyway. The overpaying part I mean... I'm already a bit of a nut case

Long story short, I've just remortgaged to renovate my kitchen, my bathroom, and to extend the lease on my (overpriced) greater London leasehold flat. I'm hoping to lock in a 5-yr fix rate @ 1.79% with Barclays, which should give me some peace of mind over the next 5 years. The new £217000 (!) mortgage is on a 25-yr term which scares me (current one is on 19 years left... ) so that's why I'm here. I NEED to overpay every single month to reduce that 25-yr term. I'm a single parent in my early 40s and I'd like to pay off that mortgage balance well before 60, ideally before 55, or dare I dream before 50...

I'm glad that I managed to buy my flat almost six years ago, as I couldn't afford it now. My child is due to join secondary school in 2019 and our catchment school is great, so I have no plans for moving. Plus, we love the area, even though sometimes I feel like it's a bit too posh - this reflects in high street prices and property prices - they're high even for greater London standards! I'd love to own a small house but the flat is just fine. Less work to clean and lower maintenance/repairs costs!

Apart from that, I'm in full time employment, I have been with the same employer for a long time and I am loosely planning to leave them once my child settles in secondary school. I am sort of preparing for that, at the moment I'm doing all the work training that I can access, and I will be applying for professional certification soon. Employer paid, hopefully - but if not, I'm willing to pay for it.

Perhaps it's premature to open a thread in this forum, because my mortgage application was submitted on Friday and is not yet approved, but the AIP looked fine on paper so here's hoping.

The fine(r) details of the monthly budget - to be confirmed once mortgage offer issued:

• mortgage payment £900
• planned over-payment £300
• bills & direct debits (utilities, services, subs, childcare, Oyster card, gym, clubs .. ) £900
• savings (emergency fund, uni savings, holiday fund) £300
• pension £420 (only £100 from me, but £320 from employer)
• spending (food, clothes, fun, entertainment ... ) £750

This is the big plan. On top of this, I get an annual bonus which I have yet to decide how to split. In the past I used it for holidays, credit card payments, and very rarely overpaid on the mortgage. About a year ago though I stopped using credit cards and so I plan to use a big chunk of it to overpay.

C'est tout. Wish me luck please! and thank you for reading.

VDOT47

Hi prudential,


All sounds like a very good plan.


The bills and spending categories seem quite high to me (well, perhaps not the spending one as it does say that it includes food) so maybe little savings could be made there, however I appreciate London costs are higher so that has to be taken into account.


One thing you might consider - as your mortgage rate is quite low, is to maybe use the £300 pcm that was earmarked for overpayments to build up a savings account at a higher rate (eg. Nationwide FlexDirect offer 5% on balances up to £2500 and you also get access to a 5% regular saver account that allows £250 pcm to go into it) and then when that account matures pay the lump sum as one large overpayment thus maximising the interest in the short term?

armchaireconomist

"Long story short, I've just remortgaged to renovate my kitchen, my bathroom, and to extend the lease on my (overpriced) greater London leasehold flat. I'm hoping to lock in a 5-yr fix rate @ 1.79% with Barclays, which should give me some peace of mind over the next 5 years. The new £217000 (!) mortgage is on a 25-yr term which scares me (current one is on 19 years left... ) "


Why not just keep the existing mortgage and save the money you would've been overpaying + whatever the difference is on your new contractual mortgage payments vs. old? Then use this in future for your plans.

prudential

@VDOT47: thank you, I need to look at the rates... the thing is I want to ensure I have a cushion of overpayments in case things go south (unemployment or other unexpected life events).

@armchaireconomist: the mortgage rates with my existing lender won't be as good even with 60% LTV, so I want to remortgage to access a lower rate. I also need to extend the lease as it's slowly approaching the magic 80 AND renovate bathroom which is really crumbling, and I only have part of the funds I need. I want to do all this now while I'm gainfully employed and mortgage rates are low, and LTV is much less than 60%.

So I decided to do everything in one go, and added the kitchen to it. The rate of 1.79% was the lowest I could get for 5 years (not secured yet, but I hope to get approved). If I don't get the full £217K I might to readjust my plans but I'm really hoping to get it.

My current mortgage payments are a bit over £1000 and I'm also paying back some older CC debt (£400 per month). I had a bit of an a-ha moment one year ago, and I completely stopped using credit cards and loans. I managed to pay off the loans and reduce credit card debt considerably, but I still have some that will be added to the new mortgage.

When the new mortgage starts, my mortgage payments will be £900 and I plan to overpay by at least £300 monthly, plus some lump sums from my bonus.

armchaireconomist

"My current mortgage payments are a bit over £1000 and I'm also paying back some older CC debt (£400 per month). I had a bit of an a-ha moment one year ago, and I completely stopped using credit cards and loans."


The only difference between credit cards, loans and your mortgage is one (although seemingly better value due to lower rate and lower monthly payments) takes considerably longer to pay off and accrues substanstially more interest.


Please consider the long-term impact of what you're doing for short-term satisfaction of a shiny new kitchen/bathroom.