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This is it! 2027 is the goal...

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Hello

I have been lurking around these boards for the past year, I have finally made the decision to start a diary to track the progress of my goal.  I'm hoping that it will hold me accountable and perhaps inspire others along the way.

As of May 2019 my mortgage balance was £118, 842 4 years into a 10 year fix over a 20 year term at 2.99 %.  At that point I decided that I didn't want to keep paying my mortgage until I was 60 so decided to do something about it.  I started overpaying the mortgage and today I have managed to bring that figure down to £106, 990, something that I am really pleased with.  At various points I looked at possibly remortgaging but the early repayment was so high that it would not have been worth it.  However, all that is about to change (fingers crossed) on the next stage of my mortgage free quest.

After discussions with my husband and a small inheritance we have decided to tackle the mortgage once and for all.  It has taken me a while to get my husband to the same viewpoint as me and he is now fully onboard.  We have gone over the figures, for what feels like a billion times, and we have booked an appointment with a mortgage advisor.  Our plan is to pay another £2000 to our current mortgage to bring it down to under £105, 000.  We will use the inheritance to pay off the ERP and product fees on the new mortgage (£7125). We will then take out a 7 year fix over a 10 year term at 1.45 %.  However, rather than overpaying as we currently do, we will save or invest the money (husband not keen on investing, but I will work on him!) so that when the 7 year fix is up we can pay off the mortgage and be mortgage free!!!  At the age of 52 instead of 60 (I really don't like seeing numbers written down).

I know that all of this is on the basis of switching our mortgage and it might not pay off, but we have all got to start somewhere right?
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Comments

  • FtbDreaming
    FtbDreaming Posts: 1,121 Forumite
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    Wow £7000 erc is a lot of money... would it be more beneficial just to stay with the product and pay the max op each year without the etc and save the rest to pay in 6 years when the fix is over? 

    I think you need to Calculate how much more 2.99% over 6 years is compared to the 1.44% over 7 and if the difference is less than £7000 then it’s not worth it. I think that maybe right but I have had a bottle of wine so I could be talking bubbles.

    good luck anyway 
    Mortgage started August 2020 £69,700
    Mortgage ends Aug 2050 MFW: Aug 2027 
    Current Balance: £60,200 (59.9% LTV)
    MFW2020 #156 £723.13
    MFW2021 #26 £1184.71
    MFW2022 #11 £197.87
    MFW2023 £785
    MFW 2024 £528.15

    Determined to make it! 
  • Mrs_Binxtoria
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    Thanks for your reply and we had considered this.  I think that we want the certainty of definitely finishing the mortgage in 10 years (but working on 7 all being well) so we think that paying the ERP might be worth paying for this certainty and a definite step towards our mortgage free date?

    However, you have got me thinking and doing my calculations again.  If we pay the ERP to our current mortgage and our original overpayments plus the additional payments of the new mortgage then as you suggest at the end of our current fix we will be better off, 29, 733 (current mortgage with o/p or 77,531 without o/p) vs 54, 402 (new mortgage without o/p) .  But and this is the big but... it all relies on our self discipline to save the money to get to the lower figure.  

    Now I don't know what to do???? When we speak to the mortgage advisor do you think that they will give us sound advice in the best interest of the customer or will they advise on what is best for the bank and their profit margins?
  • Coffeekup
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    If you have some money to sit on in these uncertain times.... I personally would sit on it. If hard times hit, id prefer to have something to keep me going.

    In the meantime I would keep making overpayments and saving the rest. Then re-evaluate your savings/mortgage balance situation say this time next year, when the erc could possibly be 1-2% cheaper.

    Be boring... Be safe

  • South_coast
    South_coast Posts: 4,980 Forumite
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    When we speak to the mortgage advisor do you think that they will give us sound advice in the best interest of the customer or will they advise on what is best for the bank and their profit margins?
    The mortgage advisor's job is to sell you a mortgage so they can earn their commission, so they are likely to advise on taking out a new mortgage regardless. You might be better off going to see an independent financial advisor, they will also be able to look at the situation more holistically and advise on the investing side to give you some thoughts on getting the best bang for your buck. If they recommend switching the mortgage, then go to see the mortgage advisor (but not one attached to a particular bank).

    I understand the pull of switching to the lower rate, but I think it would be a shame to use the inheritance on paying fees to the bank rather than bringing the mortgage balance down (which is what you actually want to use it for). Good luck with your decision x
    Mortgage start: £65,495 (March 2016)
    Cleared 🧚‍♀️🧚‍♀️🧚‍♀️!!! In 5 years, 1 month and 29 days
    Total amount repaid: £72,307.03. £1.10 repaid for every £1.00 borrowed

    Finally earning interest instead of paying it!!!
  • Mrs_Binxtoria
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    Well I am still undecided as to what to do.  DH is convinced that remortgaging is the best option but I really am wavering as I don't want to pay the bank more than I really have to.  I keep thinking if we are self-disciplined enough we can be in the same position as we would be remortgaging but keeping the £7000 in our pockets.  We would need to overpay by £575 each month.  This money I have worked out is the difference in the two mortgage payments £770 (current payment ) £950 (remortgage payment), so £180 and £395 that we would have been overpaying/saving to clear the whole mortgage in 7 years.  Currently we are overpaying regularly £300 per month.  We have been doing this for that past year, since then DH has got a new job which pays more so we can manage these figures whilst still maintaining a balanced life.

    On a more positive note I have just made a £2,000 overpayment so at least the thing is going down.  I needed to make this payment to either help with re-mortgaging as all our calculations are based on a figure of £105,000 or to achieve the mini-goal that I set of getting to £105,000 by the end of this year.  So I am pleased with that aspect.  :)
  • Mrs_Binxtoria
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    Well a decision has been made.  We have decided to hold off on remortgaging until next year as Coffeekup said:
    If you have some money to sit on in these uncertain times.... I personally would sit on it. If hard times hit, id prefer to have something to keep me going.

    In the meantime I would keep making overpayments and saving the rest. Then re-evaluate your savings/mortgage balance situation say this time next year, when the erc could possibly be 1-2% cheaper.

    Be boring... Be safe

    So we have decided to go down the be safe route.  Especially in light of COVID and Brexit we know that we would be able to cope if one us lost our jobs, out of the two of us this would more than likely be DH as he works in tourism.  Currently with our mortgage our overpayments are held in an overpayment pot and can be used to make underpayments if the need arrises.  Currently that has nearly £6000 in it which would cover our mortgage for about seven months.

    The plan now is to continue making overpayments for the time being as well as building our savings pot and look to remortgage in the future.

    I am not giving up on my seven year target though, I am still going to work towards it.

    I need to work out how to do a signature so that I can track my progress.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    I see you have changed your mind about the remortgage 

    A quick number crunch
    working on 5 years into the 10 year fix with 15 years left

    At the end of the 5 years left of the 10y fix (without the ERC free overpayments).
    £105,000 2.99% £724.61pm  £75,077 left
    or  a new mortgage over 10y at 1.45%
    £112,125 1.45% £1004pm £58,092 left.
    make the payments the same
    £105,000 2.99% £1004pm  £57,020 left

    the max saving(interest only) over the 5 years would be 1.54% on ~£105k = ~£8k  with the balance dropping and overpayments you will struggle to cover the ERC and cost to change in the 5 years 

    Needs running with max overpayments on the current deal  but I don't think the ditch the fix numbers would stack up.

    If the ERC gets lower  there may be a time it would be worth a switch 
  • Mrs_Binxtoria
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    Thanks getmore4less, it does seem to be a fine between the two, which is why we are on pause.

    In the meantime we will continue to save to make a larger overpayment in the new year as we have reached our personal target for this year.  The next few months are costly ones with birthdays, xmas and an October half term break.  Part of this process is striking a balance between overpaying and living so it is now time to live (very frugally of course!) before we start overpaying again.
  • Coffeekup
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    I have account's for a number of things that crop up over the year. I work out the yearly cost to have and keep so when it needs replacing or its the to pay for it the money is there. 

    For example I have account's for household bills (which include mobiles), luxuries, breakdowns (like the boiler and TV) and Christmas, birthday's, Easter and mother's father's Days. One for the car (not,fuel breakdowns and insurance, also a holiday/holiday spend account. They all have money going in a month and they can all have money coming out at various points, I tend to pay 10-15% in extra per year than what i have budgeted for, so they all slowly creep into healthier balance's. 
    Then I have one for savings which I don't touch unless really needed. Anything left on my main account which pays the above accounts, gets budgeted on food and treats. And the rest goes to a mortgage overpayment. I aim to pay down 100-200 a month, but if I can't I'll overpay the ££.pp on the mortgage to round it down to the nearest 100 or 50.
  • Mrs_Binxtoria
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    Just a quick update.

    We decided to keep our appointment with the mortgage advisor just to talk through our ideas and to get his take on it.  I must say I was pleasantly surprised that although he was attached to the bank he advised us not to switch.  He ran all the calculations through and because of the hefty repayment charge they just didn't stack up.  Currently our ERP is 6% of the outstanding balance, in two years time it will be halved to 3% so we might revisit it then.

    However, just because we haven't switched doesn't mean that 2027 is no longer the end goal!  In fact I am now more determined than ever to get this thing done.  This week has been a total nightmare in work and I have for sometime been questioning whether I want to sustain this level of work for the next 15 years until our mortgage is currently due to end.  Seven years seems much more preferable, it will be my choice then whether I stay in the same job working my butt off, not just to pay the bank and keep a roof over our heads.

    I do have a question for all you experienced MFWs, I am charged my interest on a daily basis.  Is it better to make overpayments monthly when I get paid or to save it up and make larger payments say 4 times a year?

    Coffeekup said:
    I have account's for a number of things that crop up over the year. I work out the yearly cost to have and keep so when it needs replacing or its the to pay for it the money is there. 
    I like the idea of separate bank accounts Coffeekup, at the moment I have my main bank account which has all my sinking funds in and a rather large spreadsheet to keep track of it all.  Because all the money is in one account it can be tempting sometimes to perhaps overspend!  I also have a separate account for my emergency fund which doesn't get touched (so far we haven't had to use it this year).

    If I am going to do this thing then I need to be seriously committed and remove any temptation to overspend.....




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