eye-watering mortgage and 23 years left

bricoleur

Thread title says it all. My London mortgage is higher than £200K, way too high considering the circumstances. I'm a single parent in my early 40s and I don't want to pay a mortgage until almost retirement age.  The positives: my income is OK, job is secure-ish, I have no loans/credit card debt, and I'm no longer paying childcare. Mortgage repayments are £902 but I rounded up the amount to £1000, and I've been paying that for the past couple of years. I'm also good about paying bills on time, I have some savings, and I'm contributing a decent % to pension. However, I spend too much on groceries, fun, holidays, clothes, and so on. The plan going forward is to be more careful with spending, and start making frequent over-payments to the mortgage, on top of the £100. Also possibly increase the regular over-payments when I get a pay rise next, although I plan to increase pension contributions too, so need to be careful on that. Some short term to dos: 

1. As much as possible, packed lunch to work and no more take away coffees. 
2. Overpay mortgage by a minimum of £5 each week and gradually increase OP amount. I need to figure out how I can do this, I've never made ad-hoc overpayments. Not ready to increase the regular direct debit yet. 
3. Review all bills, switch providers, cut some services? (Already started with some bank account switches, I made £175 from HSBC and in the process of switching to TSB for another £100. Sadly that money won't be going to over-payments as it's already earmarked for something else). 
4. Cheaper holidays. Last year we went on an inexpensive adventure/camping holiday in France and we had a fabulous time (OK, fabulous apart from the coach ride).

Any other ideas / nudging are welcome. Thank you. 
S

PS. Just checked Barclays, the current mortgage balance is £204,147.34. Ugh. 

CathT

Hi there, have you played around with the overpayment calculators? It's amazing how those little overpayments build up and have a compound effect.

A few things have popped in my head, am sure others will be along too.

is your mortgage on the most competitive rate/deal?
have you considered doing a Statement of affairs and a spending diary? 

Wherever I save money whether her it's food shopping, cash back, surveys etc I send as an overpayment. 

Once you play around with the calculators and see the effect of overpayments it's so motivating .

bricoleur

Thanks Cath, yes I did play with the calculators in the past and I know the effect... however for a long time, mostly due to childcare expenses, my pension contributions and mortgage overpayments were low, there was no wiggle room. 
My mortgage is on a 5-year rate at 1.79%, ending April 2023. I wanted peace of mind due to Brexit uncertainties so I fixed for longer. The LTV is good and I think it's a decent rate.

Regarding SOAs and spending diaries, I did a SOA several years ago and tried to use budgeting software (YNAB) but it didn't really work for me. I'm using an Excel spreadsheet for bills and that is quite accurate and it includes monthly but also a few annual bills that I have, so I budget for those. I don't track everyday spending though, perhaps I should... It's much easier now as I don't use much cash, all spending is on my main debit card plus one credit card that I use for larger purchases. 

The weather is terrible and I have a mild cold (no fever, phew) so instead of parkrun I did my March budget this morning. After all direct debits (bills + Oyster) and standing orders (savings) leave my account on the 2nd of March, I am left with £512 until next pay day. I get paid on the 25th. I am going to try to overpay the mortgage by at least £10 per week, if not more. 

I need to come up with a routine or some sort of rule, to maybe overpay on a certain day, or set up a weekly budget and overpay whatever is left. In March we also get our salary increases and depending on what the % is, I plan to up my pension and/or regular mortgage overpayments. 

bricoleur

Feeling very daft now. So I logged in to the mortgage account to make the first over-payment and I realised I have no idea how to do it. I already overpay £98 every month but that's regular OP by direct debit; I set it up when I locked in my current fixed rate. I'm with Barclays and there are several options online: "single overpayment" and "make a payment by debit card" - what is the difference between the two?

The single overpayment tab gives me a warning, it tells me to check to ensure I won't incur early repayment charges - surely Barclays could improve their system and display an amount online (something like - don't pay more than X, to avoid paying ERC). My mortgage allows for up to 10% overpayments so I don't think I will incur any charges by overpaying £10 per week, but that warning is unsettling

I'm in a queue to chat with their advisor, 6 minutes wait. 

bricoleur

Right, had a long chat with the adviser and figured out the difference between the 2 methods and how much I can overpay by (a lot) and I made the first £10 overpayment! Just realised it's 29th of February today in a leap year, I'll take that as a good sign  

savingholmes

Well done on getting started. Yes the ERC warning threw me when I first did it too.

Moneyminded

You mentioned that you are looking for some sort of rule or routine for overpaying your mortgage. How about logging into your bank account once per week on a set day and rounding down your balance to the nearest £10? This way all the pennies you won't miss are being put against your mortgage. 
I also find that I spend a lot less if I spend in cash only. I have all my direct debits coming out of my bank account and a withdrew a certain amount of cash from the ATM just after pay day. I have envelopes for food/ groceries, entertainment, clothes, etc. That way I know how much I am allowed to spend each month in each category. If I get near the end of the month and i'm nearly out of money for groceries I have to live off freezer items or get inventive with what I have left in the cupboard/ fridge. I'm a couple of months into doing this now and it is working wonders for me. I've already managed to overpay/ save double what I usually would as i'm not wasting money by having little treats here and there on my debit/ credit card. 

bricoleur

Thanks all! Wow moneyminded, you are so organized! I like the idea of a regular day for overpayments, so I chose Friday! 

So... I did a quick review of bills and the amount left over after savings and I decided to increase my regular mortgage overpayments NOW (why not now) by £100, so from April the total repayment amount will be £1,100 (minimum is £902). And I made another £90 over-payment for March, to round up my initial over-payment to £100. I don't think I will struggle with the extra £100, as I'm due a salary increase soon. (Depending on what that increase is, I might increase the regular OPs again, and will also increase pension contributions by 1%...)

There are 4 Fridays left in March, so let's see how much more I can throw at it. (hint: probably not much until Fri 27 after pay day, but still better than nothing). 

--
Current mortgage balance: £203,087.15
March over-payment to date: £198.

mirko

Like others I like to keep my mortgage to the nearest whole number, if it were 203087.15 I would pay £7.15 into it to round it down. 
To be honest I normally get it to the nearest £100, and then overpay on the credit cards.
Actually learning how to overpay your mortgage in the first place is a big step. I learned 2 years ago and have trickled a few hundred pounds into it over the past two years. I am sure that money would have disappeared down a different drain otherwise!
Good luck with your plan!

bricoleur

Thanks, I like the idea of rounding down! Will try it on Friday

Jessy103

Good luck bricoleur and you've made a great start!