Ditching It

SpendingPennies

Hi
I’ve often looked at diaries in this section, but never been in a position to consider overpaying the mortgage until now. We’ve had a mortgage for nearly 30 years but still have a large balance and another 15 years to go. Got to the stage in life now where we should be planning for our retirement, we are lucky enough to have good pensions in place, but don’t want to work another 15 years just to pay the mortgage. We are going to have to ditch it sooner, much sooner.
By way of introduction, there is me an IT worker, late 40s now working from home, DH a teacher in his mid 50s. We have 2 adult DS living at home but financially independent. Despite all the horrors of 2020, it has been a good year for us financially. We previously had around £30k credit card / loan debt but have worked hard over the last couple of years to pay it off, our last payment was in April, yay.  We were also lucky enough to sell a small holiday home which funded some much needed structural repairs on our home. So our Victorian house is now warm, dry, looking lovely and most importantly no longer falling down. We did a lot of the repairs ourselves, but it still cost around £50k, pleased to say that  not a single penny went on a credit card.
So we want to keep up the good work. Our New Years resolution is to keep our finances under control. No more debts. Tonight DH and I are going to have THE CHAT. We will crack open a bottle of wine and review our budgets and spending. And hopefully come up with a workable plan to overpay the mortgage. We need to ditch it way before 2036. 

SpendingPennies

So last night we had the chat. DH is on board but is a bit sceptical about how much we should commit to. Lots of What If? questions. He is understandably concerned about the impact of COVID on our future income. To be honest I think the Brexit trade deal might have been an easier negotiation, but after a few hours and a few glasses of Malbec, we have reached what is hopefully  a good compromise. We are going to put £1000 a month into an easy access saving account. This will enable an emergency fund to build up. All being well, we will transfer the £12,000 to our mortgage account in December 2021. A £12,000 a year overpayment will reduce the mortgage term from 15 to approx 7.5 years which would be fantastic.  

Hettyhound

Welcome to your new diary 😁 Sounds like a good plan.  It also gives you the security of getting to your money should you need some during the year; only for emergencies though!

twinklie

I’m only allowed to make a maximum of 1K in overpayments in any one month. So that plan wouldn’t work for me. But I bet it would be super exciting to see such a big chunk disappear all at once. 

Good luck with your journey. 

SpendingPennies

Hettyhound said:

Welcome to your new diary 😁 Sounds like a good plan.  It also gives you the security of getting to your money should you need some during the year; only for emergencies though!

Hi and thanks for popping by. Yes I’m hoping it would only be needed if one of us was to be out of work. We need to be careful with our budgeting and spending to deal with any other expenditure that crops up. Our most important mantra that we both agree on is not to put anything on a credit card or other finance.  If we want something we can’t afford we need to save up until we can.

SpendingPennies

twinklie said:

I’m only allowed to make a maximum of 1K in overpayments in any one month. So that plan wouldn’t work for me. But I bet it would be super exciting to see such a big chunk disappear all at once. 

Good luck with your journey. 

Hi Twinkle, and thanks for your best wishes. I’ve checked our T&Cs and we are lucky enough to have flexible mortgage arrangements with no early redemption charges or limits for overpaying. 

twinklie

@SpendingPennies I would say I'm very jealous but I couldn't make OP's over the 1K anyway so it's not something I need to worry about.

SpendingPennies

So today I have taken the first step. I’ve opened up a new saving account with our existing bank, and set up a monthly standing order of £1000 to transfer just after pay day. There’s no turning back now 😀

There is still lots to work out. We now have the budget  spreadsheet showing monthly commitments  for household bills, food, petrol  and other  living expenses, these will continue to be paid from our current account. But I am thinking of setting up a second current account to manage day to day non-essential spending, this will be for things like DIY, days out, holidays (hopefully we will be able to travel again one day) . These are the areas we might typically overspend on as we haven’t properly budgeted until now. In fact up until a couple of years ago we didn’t have a clue what we were spending, that’s why we got ourselves in a mess. So I want to make sure we have non-essential spending under control and therefore be confident that we don’t need to touch the money allocated for mortgage overpayments. 

How do other people manage this? Do people on these forums have multiple  bank accounts? 

savingholmes

We have multiple bank accounts. It helps with the out of sight thing. We have one designated account for spending with cards. The rest are more DD type accounts. Perhaps you could set up multiple savings pots.

twinklie

Yes, we have various accounts too. I agree it helps with the out of sight out of mind. 

SpendingPennies

Ah ok thank you. Multiple accounts might be the way to go. I will revisit my SOA and see how best to portion things up. Just starting to realise what a big lifestyle change this is going to be. Luckily I love a challenge and can’t wait to get started. 🥳