How to be mortgage free after 8 years

Rebob

ListerS wrote:

Hi all,

Just a hopefully daft question,
Ive just taken on a Mortgage, I can afford to overpay each month, but the overpayment limit set on the mortgate is 10% otherwise we pay in the end if we finish early.
Can we get around this? Do I go and speak nicely to my mortgate provider? or should I have thought about this before.

BTW thanks to the OP, enlightening aspirational reading, definately will be making a good attempt at shaving the years of the mortgage!

Ask your bank if you can shorten the length of your mortgage. I did this as appart from the 10% I could not make overpayments but they let me do this.
HTH

RoadeRunner

I really cannot believe all the negative stuff flying back at TFG. We have lived by all his rules and have reduced our £140K mortgage down to £30 this month - 2 years ahead of our target date. It has taken us 10 years. We don't have flash jobs paying mega money but we have always believed that paying off the mortgage was a hign priority. As has been said in a number of posts you have to have your priorities in life. We have watched friends with double our mortgage, credit cards at max, going on 2 or 3 expensive holidays each year. They believe in the ' live now worry about it later' lifstyle. Good luck to them - that is their choice.

Here are a few of our tips which may or may not be helpful :

We had an interest only mortgage - took out term assurance life cover just in case anything happened to either of us its quite cheap depending on age.
Interest only means the repayments are lower than a repayment mortgage and we saved up the difference and made capital reductions as and when we could. This soon mounts up. I agree with TFG about choosing the type of mortgage carefully so that you can make capital repayments.

We both get a bonus each year - not huge ones.(It saves our employers from giving us a decent pay rise !) This has always been used again to make a lump sum repayment. Any extra money received over and above wages should be usedfor this. You don't miss it as its extra money.

We have always pooled all our money. Its doesn't matter who earns the most. Some people would think this is a terrible idea and that you lose independence but we take out an equal amount from the pot for personal use and feel that means we maximise our savings. Also it means we have an equal relationship finacially. I currently earn more than my husband but this may change in the future but we will always take an equal amount out even though we have just about paid off our mortgage.

Hope this might be of use to someone !

Rebob

Just been on the phone to abbey. My mortgage is in 2 parts. £5.8k from last house and £38k top up for this house. This amount was £46k in total 3 years ago meaning only £2.2k has been paid through the normal amount and there are another 22years to go! :eek: I phoned and asked for the monthly payment to be rounded up by £24 pm and the small bits term has gone down to 10 years!! :T This means paying an extra £24pm has removed 12 years!!!!
:j :T :j :T :j
Yipeeee!!!!!!!!!!!!! :j :j :j Just to manage the same on the larger bit now. :rolleyes: We might get central heating first though!!!!!!!

Bob_Terveuren

Thefunkygibbons said

Depending on circumstances some people may find an offset mortage better than repayment, but there is quite a high cut off (possibly £30000) that needs to be offset before the benefit is higher than the higher interest rates on such products.



Hi

We are on a Woolwich offset mortgage at base rate + 0.75%. Originally we got that via a broker but, when we moved house last year, we took the rate with us - short term the interest rate is not fantastic but, over 15-20 years???

The main advantage is that your 'rainy day fund' can sit there offset against the mortgage (OK so you could maybe get a better return that base rate +0.75 if you invested it but - hey! This way is safer.)

Main downside is that you must be disciplined and NOT touch the offset cash (Ok if you are reading this thread then you are probably disciplined enough)

... ad dleading on from an earlier post - if you are in a relationship (married or not) then your finances must be transparent for this to work. We operate a single, joint account - you could have your own individual accounts but that requires a lot of trust - you may be a MoneySavingExpert but, is the other half?

budgetflyer

A few things I picked up.
The 10% overpayment limit on some mortgages is on the TOTAL AMOUNT OWED ie you owe 100K so you can overpay 10K that year (pro rata to amount owed ) and not just 10% of your monthly payments as I think some people may think.

Every little does help.
Borrow a pound over 25 years @ 5.5% and you pay back nearly 2 pound.
So especially in the early years when money may be tight the reverse is true-overpay 50 and its worth a 100.

Thefunkygibbons

Bob, Very true, but how much of a rainy day fund does one need?

I keep a small amount in cash, and the rest in ISAs, they are easy to get at for an emergency but the process of throwing away the tax benenfits gives one pause

Wirenth

I'm currently saving up for my first house - I'm planning to save until 2010ish. I don't want to buy at the moment as I consider it unwise and poor value for money.

Hopefully, with a decent sized deposit and some financial discipline, I'll be in the same position as many of you - debt free. Until then, I plan to use the Funky Gibbon method to build my savings pot.

Thank you for this thread and all the ideas.

barbelbashers

In response to "Thefunkygibbons"
EverSoRegular MoneySaver

I'm new to this chatting on Martins website etc, and I too am making big steps to pay off my mortgage earlier. Your contribution of which I just read is 100% spot on. We think so alike with reference to paying off the mortgage that I just 'connected' with what you had to say.

I have had my mortgage for just 1 year so far, my payments are around the £500 mark, and I have another 23 years to go (traditionally), but I'll get rid of it in 5 years. And I'm doing more or less the same as you are. Nice to see it isn't just me who thinks like this. With a little bit of help, we've saved over £10k spare in as many months towards paying off our 'dead money'.

Great ! ! ! Here's to a debt free life (soon . . .)

Barbelbashers

Jasmin

Hi agree with the way you think.

I am just about to take out a mortgage and have every intention to pay every penny I save to be overpaid ASAP. My husband thinks i'm from a diffrent planet where this is not normal behavior. I am so glad to here that there are more of us out there that are normal.


Thanks for your advice

thriftmonster

I really agree with all this as well. Would also like to say that it really is worth overpaying by a small amount - we started overpaying by £25 a month. Then each time you get a payrise, allocate a bit more to the OP - you never miss it because you haven't had it. We now OP by £440 a month on one salary and it's all been increased a bit at a time so it never felt too bad. And once the mortgage is paid off next year - after 12 years instead of 25 - the OP is going straight into savings rather than to be spent as we still won't miss it.