Fighting the mortgage interest

savingholmes

Lots of people learn to drive later in life. Is it definitely the driving or do you need a different instructor?

Just caught up on your MFW journey. You are doing so well.

Numbercruncher_mfw

Merry Christmas, I thought I'd do my Christmas and 2021 update whilst I remember. I've just tidied the flat and I'm currently procrastinating from wrapping presents. 

This year has been the most challenging year for me so far: lockdowns, working from home and a change in role really took their toll on me earlier on this year and I've just started feeling back to normal and optimistic in the last couple of months. The experience has really reinforced what is important in life and reminded me of how good it is to have a bulky emergency fund when life throws you curveballs. 

Mortgage:
Mortgage at start of 2021: ~£139,800
Mortgage at end of 2021: ~£132,800. 

That's £7k off the mortgage capital, it was really £8k but my recent remortgage fee added £1k to the outstanding mortgage. The recent remortgage in October brought my interest rate down from 2.04% to 1.16% and is fixed for 5 years, which seems a good move given the recent BOE rate rise. We are still continuing to pay £834 per month towards the mortgage so our outgoings remain unchanged although the overpayment amount has grown. 

Savings
I currently have just under £12k in savings/investments which I think is a phenomenal emergency fund. I could currently pay my half of bills/food for at least a year if needed (if I lost my job) or could pay the household outgoings for atleast 7.5 months. I hope to add to this in next year. 

Some financial aims for 2022:

• Pay £10k off the mortgage capital. This will involve paying our current £834 per month and then repaying the value of the year's mortgage interest, this should roughly be ~£1,500 (1.16% x £132,800). I'm considering persuading my partner to do a very frugal February and try to pay this all in one go then by having a minimal spend month. It can be quite a fun challenge if you condense in to a month. I'm aware we are very lucky to have the incomes (and low expenses) that would allow us to save such a vast amount in a month. 
• Continue to save/invest. Whilst I am all for overpaying the mortgage, having liquid assets is really important for emergencies.

Have a great day tomorrow and feel free to let me know what your financial aims for the next year, I'm interested to know how similar they are to mine 

savingholmes

Well done on the EF and low monthly outgoings and good incomes. It all helps. Well done on the mortgage clearing too and the rate!

I think this year I am due to repay £7.5K off the capital with a 1.84% interest rate fixed for 5 years. I want to overpay at least £20 pcm - so that by year 5 I owe at least £40K less than I do now. I also want to top up my pension by around £50 pcm - as part of a mortgage neutrality goal.

Numbercruncher_mfw

savingholmes said:

Well done on the EF and low monthly outgoings and good incomes. It all helps. Well done on the mortgage clearing too and the rate!

I think this year I am due to repay £7.5K off the capital with a 1.84% interest rate fixed for 5 years. I want to overpay at least £20 pcm - so that by year 5 I owe at least £40K less than I do now. I also want to top up my pension by around £50 pcm - as part of a mortgage neutrality goal.

Sounds like a good plan

Numbercruncher_mfw

Well the new year has invigorated a lot of number crunching in me (staying true to my username). We are currently on a 5 year fix ending in summer 26. I've calculated that if we throw a good chunk of our disposable income to the mortgage up until that point then the outstanding mortgage would be below £50k. I've tested different interest rate scenarios to see what our monthly mortgage could be:

• 1.5% mortgage interest  (around current cheapest fix available)  would make our monthly mortgage ~£230 per month. 
• 3% interest would make monthly payments ~£270 per month
• 5% interest would make monthly payments ~£321 per month
• 10% interest (very worst case scenario) would make monthly payments ~£475 per month. 

Now that would mean roughly overpaying by £1k per month which is doable but expensive holidays could put a stop to that. The certainty that we would have mortgage payments of always under £500 a month in the future would allow me and my partner to both go part time (3/4 days per week) giving us up to 100 extra days of free time each a year. That seems like a dream for two people in their mid thirties. Is it a pipe dream? I don't know but the thought of 4 years of being a bit more frugal to ensure we have the option of never having to work full time again sounds too good to be true. 

I've convinced my partner of the benefits so we are both on same track for now. Started by overpaying £1,000 this month. We are going to make a point of celebrating every time our mortgage balance goes below another £10k i.e. next milestone is getting it below £130k. I'm glad I have this space on the internet where I can put my financial goals and know that I can be honest if they don't go to plan (I think in real life some people can be a bit happy when you fail).

South_coast

Not a pipe dream at all, it sounds like a wonderful plan 😀! Good luck to you x

Numbercruncher_mfw

South_coast said:

Not a pipe dream at all, it sounds like a wonderful plan 😀! Good luck to you x

Thank you. Have you noticed a big difference in your life since clearing your mortgage? 

South_coast

Hmmm.... I wish I could say yes, but there have been lots of other things I wanted to save up for since, so in terms of disposable income there hasn't really been much change. However, that was always the plan so I went into it with my eyes open. It does mean that my bills are now less than £400/month though, so I could very easily change my career/working pattern without any drop in my standard of living, as all that would be impacted is my capacity to save as much so that does give a huge amount of peace of mind. I'm definitely glad I did it

savingholmes

Sounds a fab dream. I would like the option to go part time in future too - but feel like it would take a miracle currently.

Numbercruncher_mfw

savingholmes said:

Sounds a fab dream. I would like the option to go part time in future too - but feel like it would take a miracle currently.

Good luck with it