Beating the interest rates..

carrotstick_2 · 30 June 2023 at 12:02AM

It's been a tough year financially, after moving to a bigger house with a bigger (35 year mortgage). We fixed for 5 years, and have just under 4 year left on the fixed term. I doubt we'll see such low interest rates again soon (if ever). So we will be concentrating on overpaying as much as we can to make the most of the low interest rate. It was always our plan to reduce the term but now we will have to prioritise and get on it sooner. We've got just under £230,000 left on the mortgage, and I would like to be under £200,000 by the end of the fixed term. Not a massive goal but I'd rather overachieve if we are able to do better.

We're just getting back on our feet after dropping down to one income, for nearly a year. But there is a lot to spend money on, renovations, new car (current car is on its last legs), and I would like to fit in a holiday abroad next year. We haven't been on holiday for nearly 5 years, hopefully we can squeeze one in next summer.

The plan is to increase payment by £100 a month for now.. and we'll go from there.

Wish me luck, and feel free to follow along.. our budget is going to be very tight for the next year at least but every little helps and it's better to start sooner rather than later.

South_coast · 30 June 2023 at 5:42AM

Good luck, Carrot 😀! Definitely a great idea to try and make the most of having the lower rate while you still can - it'll make such a good impact to get going early, especially with a longer term

carrotstick_2 · 30 June 2023 at 12:23PM

I increased our monthly payments by £100 this morning, which knocked 5 years 2 months off the term!! Wow!!

I also worked the maths out.. at the end of the fixed our monthly payment would have jumped to £1100 a month. So I am tempted next year to get as close to this figure as we can with our monthly payments. We may have to get used to it eventually 🙈 and that is a terrifying thought at the moment.

Sapindus · 30 June 2023 at 4:33PM

Pardon me mentioning this, but I think the perceived wisdom is that if you can get more in interest on your savings than the interest the bank is charging you on your mortgage, it makes more sense to put the "overpayments" in as high an interest account as you can find and then pay off a lump sum when you come out of the fixed term.

I'm not sure what's advised if you think when you come to the end of the fixed deal you'll want to lock into a new one before it ends, say if interest rates are climbing at that point. With my mortgage, I have a set amount I'm allowed to overpay each year. At the very least I'd be paying that amount right at the end of year so that it had time to sit in a savings account earning interest in the meantime.

carrotstick_2 · 2 July 2023 at 11:28PM

Thanks Sapindus, I appreciate it makes sense to put the money in to a high interest account, but as our overpayments this next 12 months will be minimal, knowing the term is reduced is more important at this moment in time. I just wouldn't have the same peace of mind if the money was in the bank. We will probably put money in to a high interest savings account for future overpayments, but for now it's going straight towards the mortgage.

carrotstick_2 · 3 July 2023 at 3:24PM

I've redone our budget this afternoon, we need to try and reduce our spends on food as there's just no budget at the moment. We don't have an oven and only a single ring hob, so we have been buying more convenient food that can be cooked in our Ninja foodie / microwave or on the BBQ. So we're going to try and keep it under £100 a week for groceries, including toiletries! Not sure if I'm being unrealistic, as I'm trying to buy good quality and less processed food.

I will be looking at ovens and hobs tonight. A bit of an outlay, but hopefully this will help to reduce our food bill, we have solar panels and no battery (yet) so the cost of electric isn't to much of a worry this time of year.

HotDog2020 · 3 July 2023 at 6:09PM

Good luck carrot stick May your journey be successful. Did you know that when you make over payments you will receive an immediate relief on next months payment, so maybe there is wisdom in paying off the mortgage rather then wait for the interest after a year. O.A.O.

carrotstick_2 · 3 July 2023 at 11:22PM

HotDog2020 said:

Good luck carrot stick May your journey be successful. Did you know that when you make over payments you will receive an immediate relief on next months payment, so maybe there is wisdom in paying off the mortgage rather then wait for the interest after a year. O.A.O.

Thank for dropping in Hotdog. I didn't no, but that's reassuring to know.

It also can't be a temptation to spend the money on a very nice holiday somewhere

South_coast · 4 July 2023 at 6:46AM

That's a huge factor, I think. The MFW journey is often an emotional one as much as it is a financial one, so if it feels better to you to pay it directly off the mortgage than to save it, then do what feels right for you. I paid some early repayment charges along the way to clearing mine, but it was worth the extra cost (and then some) just to get it gone and not have to pause for months because I'd hit my overpayment limit.

Good luck with the cooker shopping. I'm sure the investment will quickly pay you back once you're able to cook properly

carrotstick_2 · 22 July 2023 at 10:00PM

South_coast said:

That's a huge factor, I think. The MFW journey is often an emotional one as much as it is a financial one, so if it feels better to you to pay it directly off the mortgage than to save it, then do what feels right for you. I paid some early repayment charges along the way to clearing mine, but it was worth the extra cost (and then some) just to get it gone and not have to pause for months because I'd hit my overpayment limit.

Good luck with the cooker shopping. I'm sure the investment will quickly pay you back once you're able to cook properly

Yes, it certainly is an emotional journey, A couple of new emotions since the interest rate have rocketed too.

The cooker and hob arrived a couple of weeks ago and have been wired in by the electrician. I forgot how much I love baking, and how much easier it is to use an oven and to have more than one hob!! I am missing the induction hob however, it was much quicker to bring temperatures up and get things cooking.

The £100 a week budget is proving to be fairly tight, we are spending closer to £120 by the time we've done a top up shop for milk / butter. There are a lot of stores food that we are buying at the moment, baking powder, spices, herbs etc... so I am going to leave the budget as it is for now. But I will keep an eye on it, as the budget will need to be amended if it continues.

Not much else to report, other than the challenge to stick to the budget over the summer holidays is going to be difficult!

L9XSS · 23 July 2023 at 9:39AM

Good luck on your journey, it’s a great feeling when you up payments and the term decreases! I took out a 25 year term in 2008 and managed to shave off 11.5 years by overpaying.im so glad I did, I made my last payment in August last year and became mortgage free.