Mortgage free by 40-wishful thinking?!

eternal_sunshine

caeler said:

Good luck with your journey. Re overpayments, maybe check what the ERC would be of you go over £1000? Might not be too awful, better than OP on SVR? 

Hi and congrats on being mortgage free-I’m sure it hasn’t sunk in yet!!

really great suggestion about the ERC,I hadn’t even considered that! Yet another call to my lenders required to figure that out lol. Thank you so much!

eternal_sunshine

eternal_sunshine said:

caeler said:

Good luck with your journey. Re overpayments, maybe check what the ERC would be of you go over £1000? Might not be too awful, better than OP on SVR? 

Hi and congrats on being mortgage free-I’m sure it hasn’t sunk in yet!!

really great suggestion about the ERC,I hadn’t even considered that! Yet another call to my lenders required to figure that out lol. Thank you so much!

Sorry to quote again and you maybe don’t know the answer but just checked and you get charged 3% of any overpayment made during the fixed period that is over the 1000 limit. Is there a simple way for me to work out if this would be more worth while? My planned maximum overpayments per year would be 12000 (with the monthly payments on top of that). So that would cost me 360 pounds a year? So would I just need to see if I would pay more than that amount in SVR v Fixed in a year to see if it was worthwhile. Eg if svr work out 50 pound a month dearer ie 600 a year then it’s better to stay on fixed and take the ERC hit? Am I thinking about that correctly in the slightest lol.

South_coast

We'd need to know the interest rate you'd be charged on the fixed rate deal to be able to do a comparison. 

I'd call your lender and have a chat about your aspirations and see which product they recommend. Maybe they have a tracker available, which would allow you to overpay more? Being limited to £1000 a year is pretty pants when you want to OP 12x that, so it might be that another lender is the better option for you. A broker would be able to chat through the options with you and let you know the likelihood of being approved for borrowing elsewhere. 

eternal_sunshine

So I spoke to my lender this morning and confirmed that the ERC is 3% of whatever is overpaid beyond the 1000 limit. So for every 1000 overpaid it will cost me 30 pounds.

As much as everyone says to avoid ERCs,I really just want the mortgage gone and I know I would need to throw the money off it as soon as I had it in my account otherwise the money would be frittered on ‘important things’ (ie not important at all). For me the ERC is worth it for the moment. That may change and if it does I will rethink my options.

But as of now,my goal is to pay my rates, get my emergency fund back to 5000 (it was 6000 but I will settle with 5000) and then overpay the mortgage. My goal for the end of 2021 is to get the mortgage below £80,000. Hopefully I can overpay by 8000 this year along with my regular monthly payments. 

South_coast

I've been paying the ERC's on my mortgage - sometimes it makes better financial sense than to keep paying interest on a higher balance. If you hit your goal of £8k in OP's then it's only going to cost you £210 (as the first £1k will be within your allowance), sounds like a reasonable trade-off to me. 

eternal_sunshine

South_coast said:

I've been paying the ERC's on my mortgage - sometimes it makes better financial sense than to keep paying interest on a higher balance. If you hit your goal of £8k in OP's then it's only going to cost you £210 (as the first £1k will be within your allowance), sounds like a reasonable trade-off to me. 

This is what I think too. I feel like I’m reasonably savvy with money but everywhere I look it’s saying about avoiding ERCs like the plague but for me,for now at least,it’s a charge worth incurring. 

Look how close you are to clearing your mortgage! I’m sure you can nearly smell mortgage free day,that’s so exciting!

eternal_sunshine

So I have overpaid a further 900 which means a total of 1000 overpaid for April and also marks me reaching my ‘free’ overpayment limit,so any OPs from here on will incur the 3 percent charge. I can’t update my signature yet because my bank are so slow at updating my balance-is anyone else the same? It drives me mad!

also do people just keep track of what term is left on their mortgage by waiting for their statement or is there a way to work out how much term is left based on your current balance? 

South_coast

eternal_sunshine said:

Look how close you are to clearing your mortgage! I’m sure you can nearly smell mortgage free day,that’s so exciting!

Thanks 😀 I'm trying not to get too impatient now!!!

eternal_sunshine

It was nice to see the interest on my mortgage didn’t put too much of a dent this month because I had made an overpayment which cancelled some of it out. When you break down the interest to daily amounts it’s scary how much it is-nearly a fiver a day for me! I’m looking forward to seeing that coming down.

i will be able to make another overpayment on Wednesday when I get paid and then that will be me until the end of May. Frustrating that I can only really overpay once a month because it feels so long away and I just want to keep chipping at it. May have to think of some other methods of getting a bit of extra income. 

Feeling a bit disheartened as well because my husband is totally on board with clearing the mortgage but has zero interest in how we do that so I feel like I’m on my own in that respect,I can see his eyes glaze over when I mention anything mortgage related. I suppose that’s what these boards are for,we all have the same excitement for getting mortgage free!

bubblycrazy

eternal_sunshine said:

also do people just keep track of what term is left on their mortgage by waiting for their statement or is there a way to work out how much term is left based on your current balance? 

I use this calculator: https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

Have you done an SOA? That may help to work out where you can save some money.
I'm aiming for my 40th too in 2025, my balance is currently just over £35000.
I think ERC's aren't recommended because of the massive mortgages most people have. Once down to smaller amounts I think they can work out worthwhile paying.
Good luck!

ETA: Oh and I love your username