Mortgage free - What next

Up_the_Creek_4

This is our route, please accept it is not advice, just the way we chose, at some points it was very hard. Worked through Uni to make sure had no debts, back then we were lucky as you did not have to pay fees.

Upon leaving Uni got a job and with partner put in an offer on a reposession through a sealed bid system. We offered £500 above asking price as it was the only mortgage we could afford (normal prices were about £50-55k). We got it for £43,000 and it was 1995. The house had no fixtures or fittings so we spent 5 years putting our money into the property, did not feel the need, too young and arrogant to even considering paying off mortgage, why it was £300 a month!!!!

In 2000 decided to move as wanted to start a family and needed more room, put it up for £90,000, but accepted £85,000 with the condition sale was completed in 3 weeks. Searched local area and the best deal was a 3 bed with flooded ceilings and major work required for £190,000. No way. So we looked further away and found a great 3 bed immaculate with lots of room and outbuildings, tried to beat them down to £160,000, but had to pay the full £170,000.

So there we were in 2000 with a £120,000 mortgage yikes! Our IFA had set up a scheme where we had an interest only mortgage, and an elaborate pension scheme to pay off the balance, I did not understand this I was just happy in my new home.

2001: mortgage statement arrived, yikes, the balance was the same, what was going on, oh yes looked into it and then discovered the pension thingy, did not understand it, did not like it, needed to fix it! Read a book, the second eureka moment, no more spending on LCG's (luxury consumer goods). Remortgaged myself spent hours searching for deals, and found a nice repayment rate fixed for 2 years. Decided we would save as much as possible over the 2 years and pay it towards mortgage at the end, and find a new, deal at a better rate and continue.(this pattern has continued ever since).

Good, now knew what we were paying monthly, and baby no 1 arrived in 2002. Spent lots of days at the park and shopped in charity shops. I actually managed to find clothes of amazing quality far better than I would have bought new. Took the 8 months maternity and back to work.

Baby no 2 arrived in 2004: Oh my goodness were things to change. We had taken the decision to move away from work and with this was a 2 hour commute each way. This could not continue with 2 children so packed in work. Hubby set up new business.

These were the dark days: We worked 24/7 to set up the business, gain new clients, and look after the children. The lowest point was walking around a supermarket with £40 to buy the weekly shop for 3 and a baby (bear in mind nappies were £9). I sat in the car and cried.

However, we kept on going and through good old fashioned home entertainment and home cooking managed to save £10,000 a year. We do not earn mega salaries, have large inheritances, we have just saved hard and somehow managed.

The shiny happy days are those when the mortgage statement arrives and you see the lower figure, feel proud and say, yep we did that.

Now here we are in March 2008:

Our fixed rate 2 year term finishes in April and as we stand:

:T Mortgage balance £39,000

:j £27,000 in the mortgage saving account

:cool: £10,000 in the never to be touched, unless in dire emergency fund

£25,000 in the tax saving account
:T £6,000 in cash ISA's

So technically, we can pay off the mortgage by December, or we can dip into the tax account and pay it off compltely, but have to save the tax money up again before Jan 09 - not sure if I am brave enough, although I know it will save us a marginal amount of interest, probably 2%, but not if interest rates go down soon.

And here lies the dilema. We have been in the mortgage tunnel for 8 years, and now the light at the end is blinding our eyes.

I dislike pension schemes as my parents lost out in their saving days, and my experience is bitter as mentioned. I like the ISA suggestion as our means for saving. I am open to all ideas, especially the inventive ones. I will of course let you know how we progress....

Sweets2

Sorry, nothing constructive to add to answer your question, but a big thank you for a thought-provoking post.

Up_the_Creek_4

More info for those watching the market...

We have been fixed at 4.25% for the last 2 years. Just found out today the standard variable we move to will be 7.05% (if no change in rates). We can make a lump sum repayment, i.e. put down the whole 27k, and increase our payments up to £1,000 a month, however, it's looking like it will be worth cashing in those ISA's to get it down and completed, there are no early payment penalties, but a £50 redemption fee - worth 50 quid I feel.

It is frightening how much things have changed over 2 years, nornally I would change to a new rate, but with most having a £500 cost to do so, I tink we shall be Bullish.

Dithering_Dad

Up_the_Creek wrote: »

I dislike pension schemes as my parents lost out in their saving days, and my experience is bitter as mentioned. I like the ISA suggestion as our means for saving. I am open to all ideas, especially the inventive ones. I will of course let you know how we progress....

Pension schemes and non-cash ISAs are invested in the same places, so there is no reason to dislike one and like the other as far as 'losing out' is concerned. The real difference between them is that an ISA is funded out of money that has been taxed and pensions are tax free. ISAs are yours to spend whenever and Pensions cannot be used until age 55 and only 25% can be withdrawn, the remainder used to purchase an annuity or used in income drawdown.

Cash ISAs are poor long-term investments because inflation decreases the value of the savings. An example of inflation I really like was used on an advert (I forget what was being advertised). It showed that £500 in the 60's bought a Mini, £500 in the 70's bought a scooter and £500 in the 80's bought a bicycle.

Up_the_Creek_4

Thank you, you may have just convinced me, off to dome research.

smudgy_2

Hi
Well done to both of you!!! It sounds like a jouney and a half! I paid my mortgage off in January. Well infact I transfered the remaining balance to a 0% credit card and Im paying it off without interest!

I work for myself and my business has been un and down had a really fustrating two years, with no money! Lowest point too many to mention! Last year everything went wrong, everything!!! I felt like throwing myself of a bridge if I had the courage.

But after xmas everything changed Im still not making loadsa money! but I dont care any more I sat down and sorted out my financies as I normally do but made some major decisions.

With the tax refunds I got I paid that off my morgage. My tax that I pay I put away in a savings account and hand this over the my accountant, who is tax deductable and sorts it out foe me.

I have like you the emergency funds, tooked aqay in a isa. And the remaining mortgage, which is 3600 is a manageble amount to owe, the only debt I have.

I have a cash back credit card, which I buy everything on and pay off each month. I have moved my gas and electricity to an internet account saving more money.

Im not looking at a pension or investments! im too worried about what is going on in the global market.

But at the moment I have my deeds and the house is mine ive just turned 45. My home is worth about 180k but selling it might be a problem! especially today!

But Im happy I have a roof over my head and ALL this talk about mortgages and stuff is quiet scary especially when you have just bought your home, wouldnt want to be in that situ. I started to plan to pay my mortgage off 8 years ago and although I still have a 3600 debt on interest free. I have the deeds and its mine, I also have the funds in the bank to clear this debt so Im not worried.

So well donw you! and I hope things just get better and better. I would look at your calculations maybe using some of your money and doing what I have done to clear this off without interest! its an option if you dont want to use all your savings!

So get the champers out and pat yourself on the back!!!

Good Luck and Take Care

smudgy_2

Hi

Now I have paid my mortage off I dont have a pension my uncle who is abit of a mythical god actually warned me of the credit crunch some years ago. I was thinking about taking out a pension, he told me to pay my mortgage off instead!!! thank god! I wanted to do both! but would have stretched me too far!

So the mortgage is paid, Ive just turned 45 has anyone got any finanical advice? about building my future for retirement?

Dithering_Dad

The best time to buy shares isn't when they're flying high, breaking all records. It's when they're on their knees and everyone is talking about stocking up on emergency food and ammo and moving down into the storm cellar.

Usually when everyone tells you not to do something, that's the time to do it (and vice-versa).

TOP TIP - Buy as many HBOS shares as you can get your hands on. Do it ASAP.

Up_the_Creek_4

Why HBOS, are they not in a very, very vunerable position, I can understand buying low, but why buy on the verge of nuclear fallout? And being an investment newbie, how do you buy shares?

Dithering_Dad

HBOS are very very safe and very undervalued. There is no chance of a Northern Rock situation, plus someone started a rumour about them to lower their shreas (FSA investigating) and it worked. We might as well all take advantage.