That 25 year interest-only mortgage...

drspouse

It's not seeming such a good idea over 21 years on!
21 years ago DH and I moved in together and rented out my old flat. 
Two kids later, one now a teenager, and DH retiring, we realise we forgot to pay it off .. and we'll have much less of a choice if we remortgage while he's retired. 
So we have a bit more than 3 years to pay it off. 
It's on a pretty good deal and we also get mortgage relief due to it being a BTL so we are saving rather than paying off lump sums. 

Total owed £140,731
I have 
£3388 in one ISA and £10881 in another. 
I'm saving about £500 per month in Plum and another £500 per month standing order to a new ISA.
DH says he has about £30000 in ISAs (will enquire more closely!).
Our first bad money habit is a takeaway every Friday. We are swapping that for choose your own ready meal (not as cheap as cooking from scratch but definitely a saving).
I'm already quite a Vinted queen but my bad shopping habit has to stop. Setting myself a two month ban on new clothes and signed up to discount emails from the only skincare brand that doesn't bring me out in hives. 
I'll report back at the end of this month I think! 
I'm on the Mortgage Free in 3 thread now too.

Brie

Do you mean interest only mortgage?  

What's the interest rate?

And I ask almost everyone - do you need a TV license?  (i.e. no watching live TV or iPlayer)  I know it's not a lot but so many of us do it.  And any phones on contracts that are ending soon that you could switch to sim only?

A quick calculation suggests that with the numbers you've put in above and assuming 5% interest you'll still have about £80k to pay in 3 years.  That's a hard slog but not impossible.

Best of luck with it - looks like you'll be exercising some good budgeting muscles soon!!!

drspouse

Sorry it IS interest only. Serves me right for multi tasking while trying to get the kids to tidy up! Can I get the title edited? 
We do watch BBC, a lot in fact, especially iPlayer for the kids as it saves them watching ads and pestering. They are pretty good about that actually. 

Both the kids have SIM only but neither of us are near to any such savings unfortunately.

We have a couple of free trials of streaming that are due to end soon - we usually switch to another one when one ends.

Current interest rate is 5.45%

timjim

How is it a BTL interest only mortgage if you are living in the property?

drspouse

timjim said:

How is it a BTL interest only mortgage if you are living in the property?

We rented it out, sorry if it wasn't clear, maybe a different use of "rented out"?
We live in a different part of the country.

Voyager2002

Have you considered selling the flat?

drspouse

Voyager2002 said:

Have you considered selling the flat?

We have, but it's a good income - the mortgage is about 1/3 of the property value now and rent is good. 

Brie

So maybe all of the rental income should be going against the mortgage??

lr1277

Further to @Brie’s point, can you overpay the mortgage? Just because it is a BTL interest only mortgage doesn’t mean it can’t be overpaid. This would reduce your total interest payable. Any decrease in the interest payable can be fed into the mortgage as an overpayment.
i suppose the other question is do you have any pension provision other than this property? If you don’t then I understand why you are reluctant to sell it. But be aware your health may deteriorate and neither you nor your OH are able to manage the property. In which case would your teenagers take on the responsibility so that you and OH continue to have an income?

I know you have not retired yet but worth making LPA’s for you and OH to deal with property affairs should neither you or OH are able to do so, especially regarding the property. A tenant might be sympathetic if you take time to do things but their patience won’t last forever.

drspouse

@Brie @lr1277 we can make more in interest on ISAs than we would save because the interest is tax-deductible due to it being a BTL.

I would find it easier mentally to pay it off in chunks - we can pay once a year I think - than to save and then pay it all, but it's more cost effective to save and pay it all off at once in just over 3 years' time.

BTW I managed to report my grievous error and get the title changed to interest-only!

@lr1277 we do have other pensions but DH has changed job several times and I worked overseas and then had some time off with the kids, so it's a top up. Management is done by the estate agent as with it being at a distance, we can't just pop round to find out whether the tenants really need the electrics mending or whether they have just failed to change any light bulbs (seriously, this has happened. Also "we can't change light bulbs because we don't have a stepladder")

It's really a case of "as we have this equity, this is probably currently the best place for our investment, this might change in the future but currently we are better off keeping it in a rental property".

We have the LPAs all sorted - thanks - and our wills are as recommended by the solicitor, updated after the second child came along, and I have life assurance because I'm currently the main earner.

I'm going to be going through all our regular outgoings with a fine tooth comb and as I said I've set myself a challenge of 2 months no spending on clothes/items for me (neither the kids nor the husband are that spendy on fun/luxury items, they are going to the cinema today as their holiday treat but taking their own sweets and they are going on 2 for 1 deal).

I looked at my irregular (i.e. not direct debits etc.) spending and there is a heck of a lot on coffee. I try and curb this by putting my lunch/coffee money in a Starling account and only spending from there, and saving any left over into my Plum account weekly, but this clearly wasn't enough of an incentive and I need to get that part of my house in order!

ladysummerisle

Perhaps a statement of accounts would be a good idea, to see the bigger picture.