MFW newbie - teetering on the edge!

Phirefly

hello, I'm an MSE veteran, but newbie to this board. I usually spend my time on the property board, but its getting far too depressing round there so the time has come for a change!

I've recently become self employed and if things carry on they way they have for the last month, it looks like this year I'm on for taking home double my income of last year.

I've been thinking about it a while, and just had a long chat with Mr Phirefly about what to do with the extra income. My business has very few overheads, so I can't really re-invest in that. I'd love to look into other forms of investments, but I'm currently working a 70 hour week (yes I'm looking to outsource!!) so I just don't have the time to gen up on what investments might be suitable. Now my Isa's choc-full for 2008, its time to think seriously about what to do with any spare cash.

We bought our house in April 2007, with 7k deposit and I'd have to check on our rate but I think its about 5.9% or so fixed till April 2010. We pay about £793 a month in mortgage repayments.

We both think that over paying the mortgage is our best bet, but this is purely an instinctive response, and we're not sure where to start when it comes to cold hard calculations. Our mortgage allows us to overpay, but I realy need to check the facts with them. I understand that when the overpayments are made has an important bearing on the abount of interest saved, but sums aren't my strong point and I'm struggling to get my head around it all.

Anyway, enough rambling, thought I'd introduce myself to the board and hopefully I'll be spending more time around these parts

lucien2k

I am in a similar situation, for god sake don't forget to save money for your tax (that money is holy and must be kept safe). Sit down and work it out properly, don't forget that you have to pay national insurance and the first tax payment you make will probably be 1.5 years worth (so for example you'd pay tax for 07/08 in January 09, plus a payment on account for 08/09 equivalent to 50% of 07/08, then another 50% in July). Also make sure you register as self employed, its a £100 fine if you don't do it within a set period of time (I think its 3 months).

Offsetting is a great thing, it lets you save money on your mortgage using your tax money to offset the amount. Failing that find the highest rate of interest possible for your tax money, its almost as good as offsetting but you have to pay tax on the interest.

Also check the terms of overpayment on your mortgage, many require overpayments to be at least £1000, and have a limit of how much you can overpay in a year (in the fixed rate period) usually 10% of the outstanding balance.

I am personally taking the approach of cash is king, and my goal is to have at least 12 months of mortgage payments set aside as a contingency fund, being self employed can be fantastic but it can be equally hard. Once that is in place I will focus on my mortgage.

owitemisermusa

Sorry to divert away from your original post but which is the Property Board, Phirefly?

UK007BullDog

the one under the mortgage board.

Phirefly

lucien2k wrote: »

I am in a similar situation, for god sake don't forget to save money for your tax (that money is holy and must be kept safe). Sit down and work it out properly, don't forget that you have to pay national insurance and the first tax payment you make will probably be 1.5 years worth (so for example you'd pay tax for 07/08 in January 09, plus a payment on account for 08/09 equivalent to 50% of 07/08, then another 50% in July). Also make sure you register as self employed, its a £100 fine if you don't do it within a set period of time (I think its 3 months).

You're teaching your grandmother to suck eggs here, but even so, thats an informative post that will no doubt be of value to someone.

lucien2k wrote: »

Offsetting is a great thing, it lets you save money on your mortgage using your tax money to offset the amount. Failing that find the highest rate of interest possible for your tax money, its almost as good as offsetting but you have to pay tax on the interest.

Could you rephrase this please? I'm not following. Thanks




*edit* right sorry I get it. By tax money you mean the amount I'm putting away for my end of year tax bill. Thats already squirreled away in an high interest account. My original post is regarding monies left over once I've settled up with HMRC....

setmefree2

Hi,

Sounds like you're are in a good position to start over paying your mortgage. Check with this though:-

http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings

All The Best

ailuro2

Put any spare money in the highest interest account you can find.

If your mortgage happens to provide that, then that's the place it should go.

http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings the calculator in this link lets you compare interest rates you need to earn to beat using your mortgage as a tax free shelter for your savings.

dimbo61

hi phirefly
as you have already got your ISA,s filled and TAX money set aside in a high interest account plus say 6/12 months worth of income in an emergency fund
in case work slows or you cant work then overpay as much as you can afford
and your lender will allow ??
you put down £7k deposit ( 5% ? ) on your home and if you can build up a lager share of equity in your home between now and 2010 you will be able hopefully !!! to get a good remortgage deal then.
as self employed offset mortgages give greater flexability and tax free savings. GOOD LUCK

lucien2k

Phirefly wrote: »

You're teaching your grandmother to suck eggs here, but even so, thats an informative post that will no doubt be of value to someone.

*edit* right sorry I get it. By tax money you mean the amount I'm putting away for my end of year tax bill. Thats already squirreled away in an high interest account. My original post is regarding monies left over once I've settled up with HMRC....

I'm glad you know about the tax money I always say that to anyone who is has just become self employed because its so easy to overlook when you have the money coming into your account.

The guide ailuro2 posted is really good, I hadn't read it before. Maybe sit down and work out the results of overpaying, I have an excel sheet I made where I can tweak and see how overpaying reduces term and the outstanding loan.

Phirefly

dimbo61 wrote: »

you put down £7k deposit ( 5% ? ) on your home and if you can build up a lager share of equity in your home between now and 2010 you will be able hopefully !!! to get a good remortgage deal then.
as self employed offset mortgages give greater flexability and tax free savings. GOOD LUCK

Thanks for that advice.

Ooooh but its so tempting to sack it off and go and see the world! I've been Suzy Sensible since my first payslip at 16....

Do I really have to overpay my mortgage?!