The long march to a Mortgage Free Future/Larger Forever Home

ian1246

I m still torn on whether we should be looking to Overpay or save for a new house.

My solution: A "sensible" compromise based pretty much on the above - come September (after the August wedding), we start to refill our Joint TSB Account up to £1000 (Interest on up to maximum £1500) by £500 a month, earning the 5% Interest. Then once that is done, in October 2018, we each open up a Nationwide Flexi Account and transfer any "personal" savings we have into them, taking advantage of the 12month 5% Interest. In addition, we then use the 2 Nationwide Flexi Accounts to open up 2 linked Regular Monthly Savers - Max of £250.00 a month, earning 5% Interest - the £500 we were then putting into the joint account each month, then goes into those (2 x £250.00), maturing in November 2019.

Advantages: Our money would be earning 5% Interest vs. our mortgage's 2.84% & easily accessible should we decide we need it (emergency, house upgrades or new house purchase legal costs). Come November 2019... if we decide to stay where we are, we can use it to overpay the mortgage in a lump sum, or alternatively stick it into a easy-access ISA for future use to cover costs of moving/emergency fund (albeit any ISA Interest will be lower than our mortgage interest).

Disadvantages: The Nationwide Saver's Interest is flexible - if it drops, we may have to withdraw the £££'s and go elsewhere. Its also not paying off the mortgage (something I m desperate to do) and the concept of spending that money (I.e. New Windows) rather than it going on Mortgage payments is.... painful.

This should allow me to put off making a decision till Next Year! :j

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On the plus side: I ve identified a potential area of savings. Currently myself and partner do the food shopping using our "personal" accounts - we then calculate half of the bill and get the other to send the £££'s. Same applies to things like Takeaway's, Cinema, House Purchases etc... - currently our "joint" accounts exist solely for paying utility bills (Natwest Rewards Account) and Mortgage/Wedding Savings (TSB). Everything else comes out of our personal accounts.

Result? It can get a bit complicated working out who owes what. Its also easy to loose track of whats actually been spent on "luxuries" like takeaways, meals out and other things (Cinema).

We each have a budget of £125 for food a month - and for the actual food shop, we never come close to exceeding that (its normally between £30-£40 a week, bar the tri-monthly bulk Meat Order from Muscle Food which comes to £60ish, which we then break down and freeze....) The surplus from the food budget just gets left in our personal accounts for savings/spending on other things.

Instead of this: We re both going to just transfer an extra £125 into the TSB Joint Account at the start of the month - we ll then each ensure we have our joint account card and use this for the food shop. This should save us a lot of inconvenience working out who owes what and more importantly: The left over food budget will gradually accumulate - which will then provide the spending budget for things like Takeaways, the evening out etc... - essentially ensuring we remove the temptation to whittle away our personal savings each month on "luxuries", by instead having a set "figure" present - the left over food budget - which we can then use.... hopefully leading to better long term savings since we ll have a much better "reign" on these expenses.

Plus: I suspect the excess food budget will likely gradually accumulate over months, providing a potential source of £££'s for future house upgrades or mortgage overpayments.


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Other potential extra saving: My partner is currently in the midst of switching her TSB Account to Barclays, to take advantage of the £14 per Month Blue-Card Rewards offer (£11.00 per month after Account Fee's are deducted). Considering her savings are dramatically diminished after paying out for part of our honeymoon, this should net a £10+per month boost to her finances (when factoring in the loss of the 5% TSB Interest).

Once this is done, I ll also be looking to do the same next month with my Clubs Lloyds Account - boosting my own finances by £11 a month.... that's £22.00 - which I m very tempted to discuss with her about putting towards Mortgage Overpayments.... (got to start somewhere!)


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Downside: My car's still not right. The "Check Engine" light has once again come back on... after spending £264 on replacing the EGR Valve - after the new replacement, my car then frequently stuttered, with the check engine light still coming on - and then a further £40.00 last week rectifying the stuttering and trying to fix/identify the fault leading to the check engine light. Car runs really well now... but the light has still come back after 2 days. Clearly still an issue... guzzling my hard earned £££'s :mad:

Other downside: On Saturday we went a little overbudget buying my 2 best men suits for the wedding - we'd budgeted £200.00, but in the end it cost £307.80 to kit them each out with a full suit (including waistcoats). One of my best men has also asked if he can bring his new partner to the wedding (it costs £79.50 per person to attend for the day & a further £5.00 in the evening for BBQ!) - the combined result of which our projected wedding budget is now £158.21 over budget!

Hopefully, at least some part of this can be regained via the £100 Decoration budget - we think we ll only need around half of this (just need some streamers for the ceiling, then a bunch of small colourful plants for the tables - potentially fake plants from somewhere like Poundland/B & M... oh, and love hearts for the "favours"). Plus both my best men have asked for my bank details so they can send me some of the cost for the suits (I have just said to contribute what they are comfortable with, given we have asked for them to have specific suits which match my own), so its possible the budget may yet get back on track :-)

ian1246

Well, finally managed to work out how to access my Mortgage's Online Banking - I had set it up when we applied for the mortgage... and after buying the house in November 2015, completely forgot I had online banking!

Today I have officially made my first Overpayment! :beer: :j..... £2.44, nicely rounding down my bank statement to the nearest £10. Plus its sort of a test to see how long it takes to go through and show up on my Mortgage Statement. Whilst I won't be in a position to make serious overpayments for 12+months (got to save for new windows/bathroom), I figure a good way to make small overpayments will be to round down my account balance every week to the nearest £10.... transferring the "excess" to the mortgage. I ll have a chat with my partner and see if she'll do the same - it should mean we slowly make some limited headway on the mortgage, whilst maintaining our current saving plan :-)

I m also pleasantly suprised at the remaining Mortgage Amount - £114,870.23.... on my overpayment calculator I had it at £114,911.27 for June 2018

The Loan to Value Ratio is also showing a lot lower than I expected - 59% - albeit I m not entirely sure how they ve calculated that -we brought the house at £165,000 in November 2015, with £114,911.27 mortgage currently remaining - 69.64% by my maths - I think the 59% must be them factoring in increased house value? If so, it means they value the house at £194,764 currently - (114,911.27 / 59)*100=194,764. Not sure how accurate that actually is!

julicorn

Our mortgage account is the same (showing a lower LTV than I'm expecting), I reckon they do take house price increases into account. Mine does seem a little optimistic though - who knows!
All the best!

Blibble

You appear to be in a very similar situation to me and OH, right down to saving for the wedding & the income you're currently getting between you (give or take £20). Our point of view was that we can't guarantee future job security or anything in the future, so a large amount currently goes to savings (~£1100), whereas comparatively little goes to OP fund (~£250p/m).

This way we have greater flexibility; should we be fortunate and our circumstances remain the same, we have the option of putting down a lump-sum on the mortgage, or doing the garden up on our property, or extending etc, or in your case using it as a deposit for a dream-house. You have to factor in your own circumstances, of course, but in my opinion the best option isn't *necessarily* the one that makes your money work the hardest (although it often is!). Good luck!

ian1246

Thanks for the replies guys.

Unfortunately, in my quest to map out our future financial position, I have discovered a potentially catastrophic flaw in our march to a mortgage free future - my Partner's pensions.

I m hopefully sorted on the pension front (currently 29years old) - I'm in the emergency services and will get a salary which is half of my average career salary, provided I do the full 35years, which I should be able to just about manage if I retire at the maximum age of 60 - at current pay scales that will mean a £18,179.64 yearly pension, not factoring in future pay rises/promotions.

My partner (currently 26years old) though? Alas... not so much She's a nursery worker with a private pension - current salary just over £20,000..... and at some point (2021+) we re going to want kids, inevitably meaning going part time and taking a hit to her career (Makes sense for her to go part-time rather than myself, given I ll be earning nearly twice hers!)

Her employer only contributes 2% of the qualifying salary for the auto-enrolement pension (NEST), going up to 3% next year, while her own contribution will rise from 3% to 5%.

Basically what this means in practise is her employer will be contributing a grand total of £50 a month next year (April 2018) & £33.33 a month currently.... a pitiful amount, albeit better than nothing.

However... it basically means, assuming her income averaged out at £20,000 across the course of her career, with her retiring at 58years old (I.e. same time as me when I turn 60)... that she would have a grand total of £86,600 in her retirement pot, using NEST's retirement calculator's - which assuming none of that was taken for a lump sum, would buy her a £3,240 a year annuity - not much at all!

Thus... our overpayment plan is going to have to be scaled back, in favour of greater pension contributions for her

Using a bit of estimating, if we can save up and invest £24,000 into her pension pot by August 2021 (August 2018> August 2019 - rebuilding personal savings & house upgrades, August 2019> August 2021, £1000 a month Pension Contributions i.e. using what we would have been overpaying the mortgage with, plus some of our personal savings) & then maintain a minimum of £150 going into her pension every month (between her & her employers contributions), then hopefully that would give her a pension pot of £162,000, which could get her a pension annuity of £6,090 a year - or if I tick the "guarantee

Obviously... this is all estimates. Investments fluctuate, as will her pension contributions etc....

Either way though, it would give her at least some sort of "liveable" pension, especially when coupled with my own, making it somewhat viable for her to retire at 58years old - then when the state pension kicks in at 68years old, that would be a further £8500+ a year - bringing her pension up to a respectable £14,000+ a year.

Alternatively, we could just sustain a minimum of £250 a month payments in total, including employer contributions (minimum of £200 a month employee contributions) across the course of her career, which would give her a £170,000 pension pot - £6,080 a year annuity.

That would potentially allow us to start working on overpaying the mortgage a little sooner.

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Lots to think about. Anyone have any suggestions on alternatives to the huge investments needed for her (NEST) Pension?