How to be mortgage free after 8 years

Ian_W

skintchick wrote: Just thinking that if I do the savings thing then if there's an emergency the cash is there, whereas if I overpay it's gone.

And I live on a VERY tight budget.

Because you pay tax on savings, usual advice is to pay off the mortgage. However, you should ALWAYS try to have some rainy day savings for unforseen happenings, so you don't need to borrow to deal with them.

Haven't contributed to this thread before and what OP has done is commendable. It may have been pointed out elsewhere, but you should almost always get rid of other debt before your mortgage. Apart from 0% CC or finance offers your mortgage is almost always the least expensive debt you'll have cos it's secured against property. Most unsecured debt is far more expensive because it's a bigger risk for the lender.

So whilst clearing your mortgage is great - it's got to be put in that context. It shouldn't be your first priority if you have more expensive debts you can clear.

In your case skintchick - keep your money in savings [tax free ISA's if you haven't used your annual allowance] until you have a reasonable reserve, then see if you can chip away at other debts without penalty, then overpay your mortgage. Hope that helps.

Thefunkygibbons

Ian hit the spot

The only thing I would add, is that having cleared the other debts and having the rainy day fund, some people (but not all) find it easier to overpay the mortgage by a fixed amount each month automatically as it removes the temptation to spend it on other things

skintchick

Thanks - all my other debt is 0% though. Little bit on cc which will be paid off on November, then a car loan at 0% which it doesn't make sense to pay off early.

In the light of that, is my idea a good 'un?

Thefunkygibbons

Sounds like the best idea is to save for the time being and then once you have a sum, then divide it into the rainy day fund, which can be in a cash mini-isa and then the rest should be off the mortgage

Twopints

skintchick wrote:

I have a question. Bear with me because i don;t understand all this offset/overpayment stuff.

Is saving in a high interest account adn then using the cash to pay off a bit of your mortgage when the fixed rate comes to an end and you remortgage a good idea?

I get marginally more interest on my savings than I pay on my mortgage.

Or should I overpay?

Just thinking that if I do the savings thing then if there's an emergency the cash is there, whereas if I overpay it's gone.

And I live on a VERY tight budget.

THanks for any help

You need to check how your lender deals with over payments / repayments. E.g. Alliance and Leicester only allow repayments (up to 10% of the loan) in a particular month (I think December or January). However they allow you to "overpay" up to £500 per month BUT it only gets applied to the mortgage outstanding on an annual basis. So they could have your money for up to a year when it could be earning you some interest.

How your lender deals with repayments / overpayments could make monthly overpayments better than saving or vice versa.

[NB: the above relates to my own Fixed Rate mortgage at A&L - other products may have different terms]

Corley

sorry total silly question, but whats a stooze pot?

Thefunkygibbons

A stooz pot is the cash you can collected from 0% credit cards and saved in a savings account earning money

There is a sub-board devoted to it under the credit card board

Corley

ahhh i see, cunning thanks!

Darryl

Hey Funky G

Nice story. Just wish I could get the wife to see it your way. She's of the view that we might not live that long (although there's nothing to suggest this will be the case), so prefers the 'pay as little off your mortgage a possible' approach... Any tips on how to combat this view would be gratefully received!

The other reason for this message is I was wondering how you do your shopping at Booker. On their website, it states that "To register as a Booker customer you have to be a bona-fide independent trader or caterer", so how do you shop there?

If there's a way around this rule, I'd be interested to know...

Darryl.

zag2me

Fantastic post, inspired me to look at my outgoings. Having just started a 25 year mortgage Im glad I read this thread now. I got the egg tracker mortgage which means I can overpay by as much as I want without penalty at any time.

I think im going to overpay by £50 a month and work up from there as I grow older, £50 a month means I will pay my entire debt off 4 years ealier which is pretty amazing.

here is a link to a nice overpayment calculator.

http://new.egg.com/visitor/0,2388,3_54988--View_1028,00.html