Let's Kill This Mortgage and Enjoy Life!!!

outoftheviciouscircle

I've thought long and hard about starting this thread. Overpaying the mortgage is something thats always been in the back of our minds but there's always something else that we need or more often want!
The reality really hit home when we just switched our deal from 1.04% to the best deal we could get at 4.08%. An extra £260 a month purely in interest. What scares me even more is that we still have another 31 years left on the mortgage which takes us well into our 70's when it comes to an natural end.
So here's the figures:
Mortgage Amount- £163,897.31
Mortgage Term- 31 years
LTV- 53%
Monthly Payment- £768.22
Interest Rate- 4.08%

We chose a 5 year fix,1 because it was the cheapest rate and secondly the thought of adding all the £999 product fees every 2 years really frustrates me. We can make 10% overpayments every year, the hope is that in a couple of years the full 10% will be possible but not at this moment in time.

We have some debt, £10,000 owed to family for a house renovation a couple of years ago and £11550 for a kitchen. Family are in no rush for the money back but the plan is to fully repay this in 2025 and the kitchen loan has another 3 years to run at 0% so it seems a no brainer to go after the mortgage.

The plan for now is to over pay by at least £100 a month and also any money I earn from Prolific will go at it. Small steps I know but it all helps, right???

Mark_d

Ir makes no sense to overpay on this mortgage when you can earn a higher interest/rate of growth putting money into an ISA.

outoftheviciouscircle

Mark_d said:

Ir makes no sense to overpay on this mortgage when you can earn a higher interest/rate of growth putting money into an ISA.

I appreciate your input but the difference over the term of the mortgage would be minimal compared to the freedom and satisfaction we would have from paying the mortgage off

Mark_d

outoftheviciouscircle said:

Mark_d said:

Ir makes no sense to overpay on this mortgage when you can earn a higher interest/rate of growth putting money into an ISA.

I appreciate your input but the difference over the term of the mortgage would be minimal compared to the freedom and satisfaction we would have from paying the mortgage off

I believe there is something incorrect with your modelling of the finances.  If you overpay in to your mortgage you are effectively earning 4% interest on that money.  If instead you put that into an ISA paying 5%, then you are earning more money...which will enable you to pay off your mortgage sooner.

Mark_d

Just to throw another idea out there for you - This is not a suggestion but merely to share what my plan is -

I've got £260k remaining on my mortgage and this mortgage ends in 15 years when I am 60.  I am not going to repay the mortgage early because I believe that over the next 15 years I can earn more money in my investment portfolio than from repaying more mortgage.  Like you, I also want to enjoy life...so my plan is to switch to an interest-only mortgage.  Whilst this removes the guarantee that my debt will be repaid in 15 years time, it does give me more control over what I do with my take-home pay.

outoftheviciouscircle

I understand the basics completely but for me it's not about that. Its the piece of mind that once its gone from my account, its gone to where I want it to go rather than sitting in an account where I could potentially find something else I want from it. That's just the way I am, impulsive and it really is the best choice for me.

Money_Monkey

There is a useful overpayment calculator vs savings on the MSE site. It depends on what your income tax rate is as well.

Just my personal thoughts, but I am not sure in 1-2 years the ISA rates are going to be around 5% so it may become even more marginal. 

LadyWithAPlan

Sounds like you have a real plan in the OP and gameifying the OPs is definitely motivating - there is an old diary on here where ‘TIlly Tidies’ were born where the poster literally scrapped pence from everywhere to OP. She is now living abroad in her fully paid home 

best of luck! 

on the s&s savings  vs op interest debate it’s always an individual decision (don’t forget in the calcs  that outside your isa there is tax on your interest which I am currently paying annoyingly ) 
I do understand the reasoning for peace in one’s life by getting that mortgage down and it’s probably more exciting to pay off debt than save  
Some people on here though aim or track  mortgage neutral position 

if either of you are (or when you get there ) HR tax payers it can be v tax efficient to look at increasing pension contributions and then look to pull the tax free 25% lump sum from your pension to pay down the mortgage post 57 etc 

South_coast

Interest rates on savings have already started dropping (even before last month's BoE rate cut), so you're very unlikely to be getting 5% on savings in 5 years' time. I would agree with overpaying, you've got to do what feels right for you 👍

outoftheviciouscircle

Money_Monkey said:

There is a useful overpayment calculator vs savings on the MSE site. It depends on what your income tax rate is as well.

Just my personal thoughts, but I am not sure in 1-2 years the ISA rates are going to be around 5% so it may become even more marginal. 

Thats my thoughts exactly and its the best thing for keeping me motivated.LadyWithAPlan said:

Sounds like you have a real plan in the OP and gameifying the OPs is definitely motivating - there is an old diary on here where ‘TIlly Tidies’ were born where the poster literally scrapped pence from everywhere to OP. She is now living abroad in her fully paid home 

best of luck! 

on the s&s savings  vs op interest debate it’s always an individual decision (don’t forget in the calcs  that outside your isa there is tax on your interest which I am currently paying annoyingly ) 
I do understand the reasoning for peace in one’s life by getting that mortgage down and it’s probably more exciting to pay off debt than save  
Some people on here though aim or track  mortgage neutral position 

if either of you are (or when you get there ) HR tax payers it can be v tax efficient to look at increasing pension contributions and then look to pull the tax free 25% lump sum from your pension to pay down the mortgage post 57 etc 

I have read Tillys diary many years ago and this was something that motivated me to pay my debt down. I cleared £30k in 18 months!!