Help and Guidance

confusedftb

EssexHebridean wrote: »

You will need to check the T's & C's of your mortgage deal. Our fixed deals always allowed us to OP up to 10% of the outstanding capital balance as at the previous calendar year end. Our final fix was a 5 year one though so we hit the OP limit part way through and for the remaining couple of years just had to stash money in savings ready for it to end. On the day the fix ended I made two £10k bank transfers and then rang them up and paid the last little bit off using a debit card over the phone. Made the call-handler's day, that did! :rotfl:

Whether you invest or not is not a question for this board - although there is an investments board on here I believe. Definitely do NOT invest either of your EF or DF though - those absolutely must be safe and at no risk of losing them.

Personally allowing that savings rates aren't wonderful currently I'd say that yes, you'd do well to pay as much off the mortgage as you can going forward. It leaves you in a better position if mortgage rates rise, too.

what you said makes sense. definitely not going to invest EF / DF. love the 2 10k transfers, :rotfl:

mortgage T&Cs say something like below which i find it difficult to understand, maybe someone can simplify it for me.

from the completion of the mortgage until 31/01/2021 5% of the balance will be charged giving a maximum charge you could pay during this period of £xxxxx.xx
31/01/2022 - 4%
2023 - 3%
2024 - 2%
2025 - 1%

thanks

enthusiasticsaver

As others have said you need a decent emergency fund and as you are not on permanent contracts I would aim for 6 months fixed expenses so £7200 minimum. I would also clear the credit card by the time the 0% deal expires. If you have sufficient spare money after doing those 2 things overpay the mortgage but you may be restricted to 10% of the balance. As that will be £22k though presumably that won't be an issue unless you are very high earners. I don't think you will get any more than 1.5% on savings so overpaying the mortgage makes more sense in your position. Do you both have pensions?

getmore4less

confusedftb wrote: »

so if there is no instant access account saving more than 2%, it is better to overpay as soon as i have collected the disaster and emergency funds.

then out of those saved funds, what should i do when them? keep them in a saving account? or somehow try to grow them through investments or etc?

The reason for the difference between emergency and disaster is they have two very different requirements.
Both are off budget so very different to a pot of money that is a planned spend.

emergency off budget spend just needs access to money.
If the budget it tight then this will need to be cash somewhere or a line of credit that can be paid off quickly or 0% and a bit slower

If the budget has surplus discretionary savings and/or spending you can just stop saving/spending and might not need any cash put aside.

Disaster loss of income is a very different beast as this requires real money to fill the gap.

It does not all need to be instant access and is not needed all at once so some can be in term based products and relatively liquid investments.

If you can be bothered regular savers and the various interest bearing accounts are good option to hold/rotate chunks of cash regularly adding from income and offloading matured options to other places.

Plenty of those over 2% and will hold emergency and a month or two of disaster depending on needs

Not the best return but a near instant access(days) and secure are premium bonds, we keep some there(prizes reinvested).

The longer term plans, reduce debt, pension and alternative investments will drive where you need the money parked.

Ultimately the disaster fund just becomes the retirement fund to replace earned income having some of it invested in relatively low risk product that offer liquidity(so not pensions) is a viable option.
(maybe not today but once your long term savings are accumulating to over a years worth of spends)

Good use of the ISA allowance along side pensions as part of retirement planning.

getmore4less

i have been on a part-time contract, with the same firm for more than 3years, but my hours have always been full-time. will i still be entitled to redundancy pay?

Once over 2 years continuous service redundancy pay is due on non renewal.

Watch out if they cut the hours to contractual near renewal time that can reduce the redundancy payout.

getmore4less

With regards to the mortgage, we have a 1.99% fixed for 5 years.
mortgage £950
The mortgage loan is £224k, total repayment is of £341k

That total payment is based on going to SVR after 5 years

You could go for a longer term(age permitting) to give more flexibility
25 £950pm
30 £830pm
35 £740pm

confusedftb

thank you @getmore4less indeed for all your valuable inputs.

However, my confusion still remains in understanding the term below,

from the completion of the mortgage until 31/01/2021 5% of the balance will be charged giving a maximum charge you could pay during this period of £xxxxx.xx
31/01/2022 - 4%
2023 - 3%
2024 - 2%
2025 - 1%

confusedftb

enthusiasticsaver wrote: »

As others have said you need a decent emergency fund and as you are not on permanent contracts I would aim for 6 months fixed expenses so £7200 minimum. I would also clear the credit card by the time the 0% deal expires. If you have sufficient spare money after doing those 2 things overpay the mortgage but you may be restricted to 10% of the balance. As that will be £22k though presumably that won't be an issue unless you are very high earners. I don't think you will get any more than 1.5% on savings so overpaying the mortgage makes more sense in your position. Do you both have pensions?

i do not have pension, my partner does have it. we are in our early 30s. i just don't like the idea of pension i don't know why.

getmore4less

confusedftb wrote: »

thank you @getmore4less indeed for all your valuable inputs.

However, my confusion still remains in understanding the term below,

from the completion of the mortgage until 31/01/2021 5% of the balance will be charged giving a maximum charge you could pay during this period of £xxxxx.xx
31/01/2022 - 4%
2023 - 3%
2024 - 2%
2025 - 1%

That will be referring to the ERC(Early Repayment Charges)

There will be an ERC free overpayment allowance and if you go over that you will get charged that % on the excess.

Which lender?
They probably have some pages that explain in more detail

confusedftb

getmore4less wrote: »

That will be referring to the ERC(Early Repayment Charges)

There will be an ERC free overpayment allowance and if you go over that you will get charged that % on the excess.

Which lender?
They probably have some pages that explain in more detail

WestBrom BS.. was recommended this by lender because our jobs are not full-time permanent but we have been in the same jobs for over 4 years.

i did not see the early repayment in the mortgage documents i got, maybe i will have to read more thoroughly.

getmore4less

confusedftb wrote: »

i do not have pension, my partner does have it. we are in our early 30s. i just don't like the idea of pension i don't know why.

As a very rough number you need 20-25 times your spends in saving to fund retirement.

If you spend £10k a year that's £200k-£250k in some form or another, state pension will cover some of that but that kicks in a lot later these days.

The advantage of the pension wrapper is you get tax relief on the money going in and pay tax on the money coming out which in most cases is less than you would have paid if you kept the money and invested.

For a 40% tax payer the numbers stack up far better than paying of a mortgage and for the 20% taxpayer they are still very favourable.

When you factor in compounding growth and inflation reducing debt saving for the future over paying down a mortgage wins.

Probably worth reviewing your fear of pensions by some reading up.