Stoozing seems a great idea!

jo_b_2

Welcome to the site, Linda Jane. :wave:

The best place to start is by reading through the stoozing article (Just click on the stoozing word in blue to go straight to the article.)

Angelina-M

Right I've read the article and it seems straight forward enough. However Martin says he's heard of a man who was stoozing with 80k and made 5k off his offset mortgage. Surely this is wrong and it would be a lot more?

Lets say he had a 100k mortgage, by having 80k sat in his account, that would mean he would only have in theory a 20k loan. I dont have an offset calculator to hand but I would have thought it would have saved him tons more than 5k over the year?

Martinslovechild

Angelina-M wrote: »

There's just one thing that bothers me. Your signature says you had a £129k mortgage in 2001. Are you saying you borrowed approx that amount on credit cards??:eek:

If this is the case then you have more bottle than me, I'm worried for you just thinking about it.

Yes, almost!!

There's a full discussion of the 'ins' & 'outs' here - http://forums.moneysavingexpert.com/showthread.html?t=493119.

However, just to quickly answer your question. My mortgage was indeed £129,000 in 2001. Up to that point, the mortgage had been on an interest-only basis (I also had two endowment policies at that point which had been running for 8 years & 5 years respectively).

In 2001, with the threat of redundancy, I carefully reviewed all of my outgoings and two large debts stood out - my car loan and my mortgage. At this point, I began to view my mortgage differently; I was no longer happy paying only the interest on a mortgage when at the same time I was receiving letters informing me that my endowments were showing a shortfall and were at risk of not hitting their targets.

It was at this point that I chose to change the mortgage from being interest-only basis to being a full repayment basis. In 2001, there were 17 years remaining on the mortgage term, which I initially stuck with.

About 6 months later, it suddenly hit me that I didn't need to stick with a term of 17 years if my mortgage allowed me to repay more each month. It was at this point that I phoned the bank and asked them if I could make overpayments. They said 'No'. Some people would have potentially walked away at this point, but I thought about it for a few seconds and then asked them 'Can I reduce the term of the mortgage?'. They said that this would be fine. How's that? It's the same result as making overpayments!!

Anyway, I asked them how much it would cost me to reduce the mortgage by 2-years, 3-years, 5-years, 7-years & 10-years. Effectively, they told me that reducing my mortgage by 10 years (to a remaining term of just 7 years) would cost me around £435 per month.

I went for this option. Think about it - that one phone call reduced my mortgage term from 17 years to just 7 years for just over £100 per week!

About 18 months later (in 2003), I discovered stoozing and this brought down the remaining term yet again, this time from 7 years to just 4. The mortgage was finally paid off last summer.

When I look back, I really can't believe that I was managing credit card 'debt' of more than £100,000 (this was in addition to 0% deals in my wife's name!). But I never worried because I knew that every single penny was accounted for and was completely risk-free.

In some respects, I benefitted from doing what I did during a period of low interest-rates and lots of 0% offers, both of which have changed during the past year, but there are still lots of similar opportunities to the ones I've experienced, particularly for those people with flexible mortgages, a logical mind and a real determination.

Good Luck.

Angelina-M wrote: »

Right I've read the article and it seems straight forward enough. However Martin says he's heard of a man who was stoozing with 80k and made 5k off his offset mortgage. Surely this is wrong and it would be a lot more?

Lets say he had a 100k mortgage, by having 80k sat in his account, that would mean he would only have in theory a 20k loan. I dont have an offset calculator to hand but I would have thought it would have saved him tons more than 5k over the year?

Sounds about right over the course of 1 year.

At the end of the day, if the interest rate on your mortgage = 6% and you stooze £100,000 into your offset fund, you'll save £100,000 * 6% = £6,000 in one year.

I was able to save more than £11,000 because this is the total saved over 4 years. As my mortgage balance fell to zero over the 4 year period, each year the savings get progressively less & less, so whilst you may save £6,000 in year one (assuming an average balance of £100,000), you're likely to save less than that in years 2 onwards (particularly if you're able to clear the mortgage in a short period).

Angelina-M

Thank you for being so honest.

Fantastic idea reducing the mortgage timescale. I am going to really look into this because at the moment I'm cruising along paying out a fortune on everything as nothing has been changed in a few years. (i've got a couple of buy to let mortgages who's fixed rate ran out a couple of years ago and now i'm paying top whack!)

People who know me or who have read my blog will know that I lost my darling daughter to cancer last year so the last four years I've let all my accounts slip whilst spending precious time with her.

I'm just in the process of selling a couple of houses, not massive amounts made but enough to make a good dent off my own mortgage.

What is gutting is that I now owe 10k more on my mortgage than I did four years ago... great eh :mad:

I'm actually quite good at the financial side of things and have a good credit rating... I'm just paying a blumming fortune for everything at the moment.

I will get my finances in order this year....

Angelina-M

Martinslovechild wrote: »

Sounds about right over the course of 1 year.

At the end of the day, if the interest rate on your mortgage = 6% and you stooze £100,000 into your offset fund, you'll save £100,000 * 6% = £6,000 in one year.

I was able to save more than £11,000 because this is the total saved over 4 years. As my mortgage balance fell to zero over the 4 year period, each year the savings get progressively less & less, so whilst you may save £6,000 in year one (assuming an average balance of £100,000), you're likely to save less than that in years 2 onwards (particularly if you're able to clear the mortgage in a short period).

But what I was thinking was this: If he had a 100k mortgage and had 80k sat in his account, then he would still be paying a monthly payment on 100k so he would be overpaying loads and this interest saved surely must be taken into account and would be a lot more than 5k?

Martinslovechild

Angelina-M wrote: »

But what I was thinking was this: If he had a 100k mortgage and had 80k sat in his account, then he would still be paying a monthly payment on 100k so he would be overpaying loads and this interest saved surely must be taken into account and would be a lot more than 5k?

His payment would be based on the £100,000 outstanding, however because he has £80,000 in his 'offset' account, he will only pay a fifth of the interest that he would have paid if his offset account was empty.

Let's go back to my original calculation. If he owes £100,000 on a mortgage charging 6%, but there also happens to be £100,000 in his offset account, then his interest charged over the year = £0. However, over the course of the year, if his payments are £1,000 per month and his offset savings remain at the level of his outstanding mortgage balance, then his mortgage account would look something like this (approximately):-

Month....Balance....Offset Amount....Interest Paid....Cumulative Interest Saved
Jan........£100,000.......£100,000................£0...................................£500
Feb........£99,000..........£99,000................£0.................................£1000
Mar........£98,000..........£98,000................£0.................................£1500
Apr........£97,000..........£97,000................£0.................................£2000
May.......£96,000..........£96,000................£0.................................£2500
Jun........£95,000..........£95,000................£0.................................£3000
Jul.........£94,000..........£94,000................£0.................................£3500
Aug.......£93,000..........£93,000................£0.................................£4000
Sep.......£92,000..........£92,000................£0.................................£4500
Oct.......£91,000..........£91,000................£0.................................£5000
Nov.......£90,000..........£90,000................£0.................................£5500
Dec.......£89,000..........£89,000................£0.................................£6000

So, in this example, his mortgage has reduced from £100,000 to £89,000 but he's also saved an additional £6,000 in interest payments that he would have normally needed to pay (therefore somebody with no offset account using the above example would owe £95,000 at the end of the year, i.e. £89,000 + £6,000 interest = £95,000).

The figures aren't exact because the interest would clearly decrease ever so slightly month-on-month, but I think this allows you to get the picture.

Angelina-M

Yes of course. What I was doing is taking into account the money he is actually paying out every month on the mortgage and adding that rather than seeing it as a 'payment made'

And of course there's the time factor.

I'm off reading the stoozing and moneysaving boards. Watch out for me on there this year lol!

Thanks again :-)

nearlyrich

MLC I knew it was you and we have never even met LOL...

What a master stoozer, you came across really well in the film, made my best ever stoozepot of £34k look like peanuts LOL.

Martinslovechild

nearlyrich wrote: »

MLC I knew it was you and we have never even met LOL...

What a master stoozer, you came across really well in the film, made my best ever stoozepot of £34k look like peanuts LOL.

:j :j :beer: :j :j

Hey NearlyRich, Thanks!!

How are you doing?? Good to hear from you.

BTW - nothing wrong with £34K! Well Done

nearlyrich

Martinslovechild wrote: »

:j :j :beer: :j :j

Hey NearlyRich, Thanks!!

How are you doing?? Good to hear from you.

BTW - nothing wrong with £34K! Well Done

Good to hear from you too, I still remember your great advice for eating out in Malaysia LOL, the £34k was a couple of years ago I have given up since BT charges but it was fun whilst it lasted.;)