New MFW/ Calculations, homework checking and q's

OnlyGuyWhoLikesTwix

I am finally in a position to start overpaying my mortgage. I've just done a mortgage retention with my lender, Clydesdale. All is well with that. I couldn't remortgage with a new lender as I was over my credit card balance a couple of times so was getting passed over. So I've taken a new 5-year retention, 5 years at 2.39%. OK not the best rate in the world but given my credit, it's had to happen.

As it turns out, I inherited a bit of cash and have done only sensible things. I have cleared my credit cards and cut them up so I am only living on cash I have and I have paid off my car. I am therefore left with £5000 in spare cash which I am intent on putting into my ISA as my emergency fund.

My mortgage amount is £145,000 on a 23 year term, 2.39% pa. I earn enough to easily pay the £683 and according to the calculator, that works to £328 per month as an overpayment

So first question. My product allows me to overpay 10% per annum before incurring fees. How do I actually do it? Do I call my lender every month and give them a card number? Or do I bank transfer?

Secondly, I take it the money I overpay reduces the capital on the loan (it's a repayment cap and interest mortgage). Does that mean I have to overpay slightly less each month? Or during the whole of the five years, will it always be a £328 per month thing?

After all is said and done each month, including overpayments et al, I'm left with £600 per month to save. That is once the overpayment, fuel, food, broadband, car tax, services etc etc is all done, that's £600. While I'm sure I will have to do repairs to the house and at some point will need a boiler, or one month I may go mad and go on a trip, in five years I'll have saved approximately £37,000 should all go exactly as prescribed and nothing bad happens at all, ever (OK I know that's unlikely but five years is a long time to be making solid plans).

I am under the assumption that if the overpayments go on unhitched for the full five year term, the amortisation calculator reckons my balance at the end of five years would be £64,383. I would assume that this, minus my savings would bring my balance to around the £27k mark.

Does anyone actually offer mortgages for that amount? Or will I have to borrow more and likely overpay that too?

Very excited by being mortgage free before 40 It means I can start my personal training business full time!

getmore4less

lets summarise.

OnlyGuyWhoLikesTwix wrote: »

...
5-year retention, 5 years at 2.39%.
...
£5000 in spare cash emergency fund.
..
£145,000 on a 23 year term, 2.39% pa.

£683.43 pm payment
...
I earn enough to easily pay the £683 and according to the calculator, that works to £328 per month as an overpayment
Not clear :
are you saying you can afford another £328 on top of the £683?
or do you think £683 includes an overpayment?

So first question. My product allows me to overpay 10% per annum before incurring fees. How do I actually do it? Do I call my lender every month and give them a card number? Or do I bank transfer?

check with the lender most allow electronic payment to the account some will ammend the DD

Secondly, I take it the money I overpay reduces the capital on the loan (it's a repayment cap and interest mortgage). Does that mean I have to overpay slightly less each month? Or during the whole of the five years, will it always be a £328 per month thing?

Now you have confused me even more about this £328 where have you got that from?

I'm left with £600 per month to save.
...
Nice but I don't think you have done a full plan/budget looking forward

I am under the assumption that if the overpayments go on unhitched for the full five year term, the amortisation calculator reckons my balance at the end of five years would be £64,383.

If this £328 is a real overpayment that would make you full payment £1,011

In 5 years with a £683 payment you will owe £120,000
in 5 years with a £1,011 payment you will owe £99,000

NO idea how you got £64383 from.
This fails the does it look right test, £145k down to £64k over 5 years is £81k or £16,200py or £1,350pm before any interest is added.

I would assume that this, minus my savings would bring my balance to around the £27k mark.

Does anyone actually offer mortgages for that amount? Or will I have to borrow more and likely overpay that too?

Very excited by being mortgage free before 40 It means I can start my personal training business full time!

your numbers look off

I would do some proper budget planing so you have some planed funds for

While I'm sure I will have to do repairs to the house and at some point will need a boiler, or one month I may go mad and go on a trip,

usual starting point is a SOA.
http://www.stoozing.com/calculator/soa.php

OnlyGuyWhoLikesTwix

Hi. Thank you for your response and for fact checking. Let's see where things are right or wrong.

So yes, I can afford £683 payment plus £328 overpayment. I am using the following calculator:
world wide web .moneysavingexpert.com/mortgages/mortgage-overpayment-calculator


And the figures I am using are:
Current debt: £145,000
Remaining term: 23 years
Annual interest: 2.39%
Mortgage type: Repayment
One off overpayment is £0
Recurring overpayment is 10 % annually.

Hitting calculate gives me:
"Normally you repay £684 per month. If you regularly overpay £328, you'd be mortgage free 11 years and 8 months earlier. Your total payment over this period would be £162,574."

Looking at year 5 from the table below this, with overpayment, means at the end of the 5 year fixed rate I will owe £64,363

As for full budget, I've used my last 16 months bank statements to calculate my standard outgoings (water, electricity, insurances, etc) e.g. things that go out on direct debits and also used a mean of what I spend on fuel, food, things that are variable expenditure allowing for overspends during Xmas, summer, etc here and there. I haven't taken into account salary increases, bonuses and am assuming they don't happen as I like to be very conservative when working this out.

edinburgher

You need at least an estimated figure for home maintenance, it can be surprisingly expensive!

While I'm sure I will have to do repairs to the house and at some point will need a boiler

Not sure about the vintage of your home, but with even a relatively modern (70s) house, I find that little and often re. repairs helps to avoid big repairs down the line.

OnlyGuyWhoLikesTwix

edinburgher wrote: »

You need at least an estimated figure for home maintenance, it can be surprisingly expensive!


Not sure about the vintage of your home, but with even a relatively modern (70s) house, I find that little and often re. repairs helps to avoid big repairs down the line.

I do most house repairs myself. To be fair, my house really isn't in bad order and I maintain it quite well. I started working life in the building trade and keep on top of most things. That said, nothing has ever really gone wrong. I need a new front door but I have accounted for that already in the cash I have now and what I will save. I didn't feel it important to mention it, so didn't.

My thought process is the money I put into my ISA is to cover any of those scenarios. If my job goes, if something goes wrong with the house, if the car gets killed, whatever may happen. Sure it takes it off my savings pot, but that's what they're there for. And if I never use them (I know, it's unlikely), then hurrah!

getmore4less

OnlyGuyWhoLikesTwix wrote: »

Hi. Thank you for your response and for fact checking. Let's see where things are right or wrong.

So yes, I can afford £683 payment plus £328 overpayment. I am using the following calculator:
world wide web .moneysavingexpert.com/mortgages/mortgage-overpayment-calculator


And the figures I am using are:
Current debt: £145,000
Remaining term: 23 years
Annual interest: 2.39%
Mortgage type: Repayment
One off overpayment is £0
Recurring overpayment is 10 % annually.

Hitting calculate gives me:
"Normally you repay £684 per month. If you regularly overpay £328, you'd be mortgage free 11 years and 8 months earlier. Your total payment over this period would be £162,574."

Looking at year 5 from the table below this, with overpayment, means at the end of the 5 year fixed rate I will owe £64,363

As for full budget, I've used my last 16 months bank statements to calculate my standard outgoings (water, electricity, insurances, etc) e.g. things that go out on direct debits and also used a mean of what I spend on fuel, food, things that are variable expenditure allowing for overspends during Xmas, summer, etc here and there. I haven't taken into account salary increases, bonuses and am assuming they don't happen as I like to be very conservative when working this out.

That mortgage calculator is broken

if you substitute the 10% annual for the £328 payment it says you need you get a better answer.



I would never use and MSC mortgage calculators most have problems or are miss leading.

They don't fix them when you report the errors.

it fails the simple does it look right tests

10% annually is £14,500 or £1208pm not £328pm in te first year.

Also (£684+£328) * (23-11y8m) = £1012* 136 = £137,632

You can't even pay of the capital with that calculations.

OnlyGuyWhoLikesTwix

getmore4less wrote: »

That mortgage calculator is broken

if you substitute the 10% annual for the £328 payment it says you need you get a better answer.



I would never use and MSC mortgage calculators most have problems or are miss leading.

They don't fix them when you report the errors.

it fails the simple does it look right tests

10% annually is £14,500 or £1208pm not £328pm in te first year.

Also (£684+£328) * (23-11y8m) = £1012* 136 = £137,632

You can't even pay of the capital with that calculations.

You're right, that doesn't work! Hmmmm, something is up there. Good spot!

So my T's & C's say: "repayments of up to 10% of the outstanding balance per year are allowed without incurring penalties"

So as my start balance is £145k, that means I can repay a maximum of £14,500 per year onto the original balance without incurring penalties. I take it that includes what I'm repaying per month as well?

So to illustrate, according to another amortisation calculator, just doing the standard payments means that the balance in month 12 will be £140,212.13. So that means, I would have paid just short of £5k off the original balance leaving me the ability to overpay an extra £10k without penalty? So assuming I had the cash available, I could pay £830 per month to meet that £10k (if I had the cash spare) and still be ok?

Then in the second year (months 13-24), should I happen to overpay that £10k, that will reduce the balanace to £130k meaning the total payments (including overpayments) can be upto £13k?

Is that the right way to think it?

sitesafe

Mine is 10% of the remaining balance at the start of each calendar year so if the balance was £50k then 10% would be £5k which you can overpay that year at any time. The overpayments amount is on top of the regular monthly payments.

So I believe you can pay £14500 overpayment in addition to your normal fixed monthly payments.

OnlyGuyWhoLikesTwix

Thanks for your PM SiteSafe! I can't seem to find the calculator you mentioned...

sitesafe

OnlyGuyWhoLikesTwix wrote: »

Thanks for your PM SiteSafe! I can't seem to find the calculator you mentioned...

http://locostfireblade.co.uk/spreadsheet/Index.html

This is the one I used.

OnlyGuyWhoLikesTwix

Wow that spreadsheet is pretty excellent! Makes a lot more sense.

In fairness that MSE calc being wrong has sort of taken the wind out of the sales a little. I was basing a lot of my calculations on what it was telling me and to be honest I don't think I would have paid off the car finance had I known it was totally wrong. Should have figured, but been swimming in numbers for the last few days working things out hahaha.

Oh well, it's done now. Now's to see if I can get up to that £830 per month. May be a stretch...