Powers’s mortgage free thread

Hi everyone,
I’ve been reading lots of MFW diaries and wanted to start my own, sorry it’s going to be long!

background: met a nice man with a not so nice house that he still owned with his ex wife and was in negative equity. Eventually remortgaged it together in May 2017 with a mortgage of £68k. 

We’ve made some overpayments on an ad hoc basis and the current mortgage stands at around £58k. Lockdown has helped us crystallise a desire to move and we’ve done all the necessary diy to get our property sold 😃. We are hopefully moving in February to a house with more space, a garden and less drug dealers hanging around 😱 . Despite not being in a v nice area, the improvements we’ve made over the last few years have meant we have sold for £108k- unthinkable when 3 years ago we struggled to get a mortgage on it. 

New house purchase price £170k. Mortgage is with the same provider in 2 parts:
part 1 £58k at 1.99% until July 2022
part 2 tbc but agreed rate is 2.69% for 5 years
Here’s where the dilemmas start....
Original plan was to borrow £77k as part 2, which gives us 80%ltv and allows us to pull equity out of around £12k after fees etc. Plan for equity was to do bits for the new house and need some furniture. Current savings are £6k earmarked for wedding, about £17k in a contingency pot. Also want to upgrade the car as currently driving the worlds most uneconomical pickup truck on a 150 mile commute 2-3 times a week. 

Now can’t make up our minds as to whether we chuck all the proceeds of the sale at the new house and so borrow around £60k on part 2 of the mortgage. Means doing things slower to the house and potentially contingency fund gets hammered on furniture/ car/wedding. Which is ok, but focus will be on rebuilding on that pot rather than overpaying the mortgage.

Next bit of dilemma- part 1 has a much better rate now but I’m expecting that things won’t be as good in 18months when we remortgage that part. So if we make over payments it would be to part 1 in the hope of reducing the amount that will potentially end up on a higher rate. 

So taking the equity out now means we can afford to make the overpayments to part 1 in prep for remortgage. Overall mortgage amount is probably the same but shifts the balance between part 1&2. I’ve got it completely wrapped round my neck! 

Does anyone have any wisdom that might help decide what to do? 
MFW 2021 #76 £5,145
MFW 2022 #27 £2,850 / £7,200 target 


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Replies

  • powerspowerspowerspowers Forumite
    704 Posts
    500 Posts First Anniversary Name Dropper
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    Also some background about me and him!
    I’m 34 work in local government earning £30k 32hrs pw
    OH is 43 works in engineering earning £32k. He does 4 days a week to manage childcare responsibilities as has 2 boys under 10 on a 50/50 basis.  Current working days really work for us and we aren’t keen to up our hours- in fact doing so would mean less time with the boys with a knock on increase in child maintenance. 
    MFW 2021 #76 £5,145
    MFW 2022 #27 £2,850 / £7,200 target 


  • powerspowerspowerspowers Forumite
    704 Posts
    500 Posts First Anniversary Name Dropper
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    Been thinking this through the last few days.
    the rates if we put down everything Are better than the deal we are on, so the part 1/part 2 is pointless. I’ve emailed YBS to ask for the details. 
    I think we’d got caught up in the idea of pulling money out (we had gone for a different property originally that needed major work). The things we want to do are definitely manageable on the money we have, although maybe not as quick. It wouldn’t occur to me to go borrow the money to do them though so why did I think borrowing it on the mortgage was? I guess I didn’t perceive the mortgage as debt and saw the equity we’ve built up as free cash 😳

    MFW 2021 #76 £5,145
    MFW 2022 #27 £2,850 / £7,200 target 


  • FtbDreamingFtbDreaming Forumite
    1.1K Posts
    1,000 Posts Second Anniversary Name Dropper
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    I’m no expert but I thought you always pay the highest interest first so I’d probably pay down part 2 if the amounts are similar. However if part 1 Is a lot lower balance then I’d pay off that one just for the satisfaction of getting rid of it xx years early. 

    I know what you mean about borrowing to do renovations. I’m the sort that likes to do it slowly as and when I can afford it. Having said that I will be getting a kitchen on finance as I don’t want to scrimp on it and have just the basics that I won’t be happy With in a year or 2 time. I want a timeless forever (at least 10 years) kitchen which is outside of my immediately available budget. 

    Good luck with the MFW journey anyway xxx
    Mortgage started August 2020 £69,700
    Mortgage ends Aug 2050 MFW: Aug 2027 (Now: June 2049)
    Current Balance: £64,700
    MFW2020 #156 £723.13/£2000
    MFW2021 #26 £1184.71/£2500
    MFW2022 #11 £43.93/ £1500
    Backup/ Neutral fund £730/£1000
    House fund £16.00/£1500

    Determined to make it! 
  • powerspowerspowerspowers Forumite
    704 Posts
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    My logic with part 1 is that it ends in a year and I’m expecting interest rates to be awful, I have no crystal ball though! Agree would normally focus on the higher interest. 
    We did very slow renovations on our current house, mostly diy and spent a lot of time redoing things and trying to make a bodge job look better- not sure I can go through that again for the whole house! So would like to at least have plaster and skirting done professionally. Just need to go slower I think. 
    We did kitchen on a zero % for a year deal and that worked nicely as we saved before hand and in the year after to get it paid off so didn’t pay any interest. DIY fitting kept the cost down but to be honest I wish we’d paid someone for some parts as they aren’t right which I don’t want to do in a long term home. Good luck with the renovations! 
    MFW 2021 #76 £5,145
    MFW 2022 #27 £2,850 / £7,200 target 


  • eat_that_frogeat_that_frog Forumite
    174 Posts
    100 Posts First Anniversary Name Dropper
    Good luck on your mortgage overpayment journey @powerspowers.
    I agree with your logic about overpaying on part 1 now. Then once you've got your new rate, you can then concentrate on the one with the higher interest rate.
    Original mortgage total: £250,000 (Feb 2019)   
    Current mortgage total: £177,000 (May 2022)
    Original mortgage end date: Feb 2044
    Current mortgage end date: June 2039
    Mortgage free start date: 13th July 2020
    Total overpayments since July 2020: £46,300
    Current Savings: £13,700 

    https://forums.moneysavingexpert.com/discussion/6168574/quest-for-mortgage-freedom#latest 
    2022 MFW #58
    MFiT-T6 #16

    Goals for 2022

    Mortgage: £18k overpaid in 2022; £175k left owing on mortgage by end of 2022 (£18000/£18000 so far) - goal met!
    Savings: increase by £3k (£2250/£3000 so far)
    Weight: 14lb lost in 2022; weighing around 9 and a half stone by end of 2022 (4/14lbs so far)
    Decluttering: 2022 items decluttered by end of 2022 (1450/2022 items decluttered so far)
  • powerspowerspowerspowers Forumite
    704 Posts
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    So we decided to commit to this mortgage free plan and started by both over paying £1000. I’ve also contacted our mortgage advisor about putting in all our equity to the new property. Realised that the LTV means it’s cheaper than either of the 2 parts and we can fix for 5 years. 

    Been paid today, not got a lot left after moving to bill account &clearing credit card (just the months expenses +Christmas + I bought my wedding shoes in the Black Friday sale). Also put down deposit on our new bed. 

    overpaid £47 from today’s wage 
    December overpayments total £2047
    remaining balance £55,000 (nice round number 😀)

    absolutely no movement on the new house and not expecting anyone to get in gear before new year now *grumble*

    Merry Christmas wannabes x


    MFW 2021 #76 £5,145
    MFW 2022 #27 £2,850 / £7,200 target 


  • powerspowerspowerspowers Forumite
    704 Posts
    500 Posts First Anniversary Name Dropper
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    My credit card took a huge hit last month. I cleared it on payday but this means not left with a lot in my current account (household bills are separate account and that’s fine). Ideally I  would like to stay off the credit card in January so writing here to stay accountable:
    Account balance: £321
    bills due £98
    cheque out in the wild for nephews birthday £100
    book order not gone thru yet £17
    remainder- £105 😬 
    so it’s going to be tight but something to aim for. 
    MFW 2021 #76 £5,145
    MFW 2022 #27 £2,850 / £7,200 target 


  • powerspowerspowerspowers Forumite
    704 Posts
    500 Posts First Anniversary Name Dropper
    ✭✭
    Failing at the no spends! Bought a new mattress in the Sales! It was on the list of things to buy when we move so it’s swings and roundabouts. Its British made and all natural fibres so could do with another mortgage to pay for it! Going to pay my half OH on January  pay day 😱
    MFW 2021 #76 £5,145
    MFW 2022 #27 £2,850 / £7,200 target 


  • powerspowerspowerspowers Forumite
    704 Posts
    500 Posts First Anniversary Name Dropper
    ✭✭
    No spends going fairly well- 
    £47.55 diesel 
    £9.15 prescription
    £9.02 forgotten direct debit (covers online content from personal trainer, I know there’s freebies online but want to keep supporting him in lockdown)
    Balance after bills £39.68 - 19 days til payday 😬 
    other accounts are looking more healthy  😃



    MFW 2021 #76 £5,145
    MFW 2022 #27 £2,850 / £7,200 target 


  • bit_by_bitbit_by_bit Forumite
    864 Posts
    Fifth Anniversary 500 Posts Name Dropper
    ✭✭✭
    All the best for your journey. Exciting times for you both  :)
    Wife, mother, gardener, nurse, Big C survivor. Officially retired at 55 2021 [/b][/b].Mortgage free April 2021
    Challenges 2022: Decluttering Campaign 64/100 bags plus 11 large items. Make £2022 in 2022#17 £811.28 /£2022 Using my craft stash 8/52 Reading books 7/52 Donations for the CS from others (in and out bags) in 2022 X 35 plus about 10 tins of part used paint..
    Medal x 1 awarded by Mrs-Salad_Dodger and 2 ⭐️
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