The "Grand Plan" - Phase One well underway!

EssexHebridean

Well as some of you may have noticed I have been lurking about on here for a few weeks now - occasionally posting but mostly lurking. I've been trying to work out where best to post my thread - you see, the long term plan IS to be mortgage free, but that's a way off, and there are both targets to be met ahead of that, and a big goal/reward waiting for us at the end if we want it.....

....that's jumping a little ahead of myself though - I mean, I haven't even introduced myself yet, how rude! I'm EssexHebridean as you can see - Essex for where I live now (having been forced out of my hometown of London after not being able to stand a hope of affording a house 5 years ago) and hebridean in honour of the beautiful Western Isles of Scotland - somewhere we spend as much time as possible and intend to live permenantly one day. There's just the two of us here - myself and OH, plus the cat, henceforth to be known as Her Ladyship (as this is how she would prefer us to address her I think), and we live in a rather nice two bedroom ground floor flat with - bizarrely - two balconies.

So - the Grand Plan then. Well, it's gradually coming together - in fact, thanks to inspiration from you guys and of course Martin himself, it's coming together quite fast now, although this is the first time it will be written out and set in stone, as it were, for others to see. We currently have a 94k mortgage with, in theory, 20yrs remaining on the term. We remortgaged in 2006 when our previous deal ended and thankfully had the foresight to get a 5 year fixed rate. We also have an unsecured loan taken out last November to fund the purchase of a new car - this currently stands at £6500 outstanding, and is due to be paid off in May 2010. We have already started to overpay the mortgage, and have so far reduced the term remaining down from 20 yrs to 17yrs 5 months. The plan is, initially to continue to OP the mortgage as we are, and throw all extra spare cash or money we can raise into a fund to pay off the car loan early......a whole 15 months early to be exact! :eek: Once that's done we increase the OP on the mortgage whilst also saving cash for the next car purchase which will hopefully be a cash purchase or pretty close thereto....and so it will continue until the mortgage is gone. I'm not setting a firm date for this yet but I'd like it to be in around ten years ideally. Once that's gone, and here's the reward - we will be in a position to buy a place on the Western Isles and move across there...:j

For an opening post this has probably gone on long enough (Shouts of "More than!" from the cheap seats I hear!) so I'll finish for now by saying that we have started putting some cash raising / saving schemes intom place - more about that in due course I would think. Lots of help and inspiration would be much appreciated guys 'n' gals - you've already gone so far towards helping me get the ideas of how to do this straight in my head, but there's a long way to go yet!

phizzimum

Hi E/H - welcome!

what is the interest rate on your car loan? and how does this compare to the rate on your mortgage?

would it be worth focusing your overpayments on just the car loan first of all to get it paid off even quicker? it's worth having a play around with an overpayments calculator to see how much you will save - a great motivating tool!

sorry to not be more coherent...that first cup of tea hasn't quite kicked in yet!

alfiesmum

Best of luck, hope it all goes really well. You sound very focused! I'll be following your thread with interest. I love reading how others are getting on - it keeps me going at our little quest to be mortgage free too. There's loads of help to be had on all the other boards too, it's fab.

alfiesmum
xx

StuartGMC

Well done, the first steps are obviously coming together. I agree with Phizzimum, if you can pay the car loan early without penalty it is likely to save you more than the interest earned even in an ISA?

Good to see also that your overpayments have already had a big impact. Sounds like you've got expenditure under control, and if you've also got your 3-6month income saved for the emergency case, then even better. Whilst you are comfortable with the fixed rate now, have you thought whether in 3yrs time you will be in a position to offset, certainly worth considering as you are looking to OP and reduce term rapidly. Good advice here on this vs the savings options in the article plus one or two threads of course!

I've found that looking at OP etc in a number of ways helps to keep you motivated, and others have also noted that, say £25 extra OP is worth £xx over the remaining mortgage term, hence "leveraging" the psycologial benefit. If you glance at my thread, you'll see I've become somewhat obsessed with the spreadsheet approach - just a warning you may get hooked too!

Looking forward to hearing of your progress through good and bad, you sound like you have the right approach already.:T

EssexHebridean

phizzimum wrote: »

Hi E/H - welcome!

what is the interest rate on your car loan? and how does this compare to the rate on your mortgage?

would it be worth focusing your overpayments on just the car loan first of all to get it paid off even quicker? it's worth having a play around with an overpayments calculator to see how much you will save - a great motivating tool!

sorry to not be more co-herent...that first cup of tea hasn't quite kicked in yet!

All seemed perfectly coherent to me!

The rate on the car loan is 8.9%, as opposed to 5.39% on the mortgage. The next date I can make a clearance on the car loan is Feb 09 - hence setting that as the date to aim for. According to my spreadsheet (yes StuartGMC - I've already got spreadsheets too!) paying off in February will save us over £700 on interest payments, but it does need to be done as a lump sum apparently.

We've been "meaning to" overpay on the mortgage since we moved here in 2003, but as is the way with sonmany things in life, we've just never got around to it until I basically got a kick up the backside from a friends husband a few months back. Initially the OP was just £30 per month - taking account of the small extra amount we each gained when the tax allowances changed in April. Then of course they changed again as the government corrected the god-awful pigs ear they'd made of it, and we've now added that extra £30 too. The idea is that at the moment, OP's on the mortgage go from putting across money we didn't have previously like the tax - the theory being it's not going to be missed. The OP's on the loan will all go into one central fund at the moment ready for paying across in february to clear it off.

StuartGMC wrote: »

.......
Good to see also that your overpayments have already had a big impact. Sounds like you've got expenditure under control, and if you've also got your 3-6month income saved for the emergency case, then even better. Whilst you are comfortable with the fixed rate now, have you thought whether in 3yrs time you will be in a position to offset, certainly worth considering as you are looking to OP and reduce term rapidly. Good advice here on this vs the savings options in the article plus one or two threads of course!

I've found that looking at OP etc in a number of ways helps to keep you motivated, and others have also noted that, say £25 extra OP is worth £xx over the remaining mortgage term, hence "leveraging" the psycologial benefit. If you glance at my thread, you'll see I've become somewhat obsessed with the spreadsheet approach - just a warning you may get hooked too!

Looking forward to hearing of your progress through good and bad, you sound like you have the right approach already.:T

Don't know much about offsetting I must admit, although it sounds like it's something we should look into over time to see if it would work for us. Expenditure is pretty much in hand, I'm shopping on my own now which has massively reduced the food budget as I'm far more likely to follow and stick to a list than OH! :rotfl:

I read your threat last night Stuart and yes, I take your point about your spreadsheets! They are by far the easiest way to see and keep a handle on what's going on though so I don't think we need to mark ourselves down as spreadsheet-nerds quite yet!

h the whole I'm really enjoying the challenge - we need to stash aside £462.50 per month between now and Feb 18th 2009 to make the early payoff on the loan - it's a tall order but I believe we can do it - just!

StuartGMC

EssexHebridean wrote: »

According to my spreadsheet (yes StuartGMC - I've already got spreadsheets too!) paying off in February will save us over £700 on interest payments, but it does need to be done as a lump sum apparently.

The idea is that at the moment, OP's on the mortgage go from putting across money we didn't have previously like the tax - the theory being it's not going to be missed. The OP's on the loan will all go into one central fund at the moment ready for paying across in february to clear it off.

If it is tight to make your target for the loan, then put all extra cash to that first, you'll soon have over £400 a month to overpay the mortgage it seems once the loan is gone, and you can save the money you use now for the loan thereafter as your monthly saving to the next car.

(I assume you have your 3-6months income emergency fund already?)

Don't know much about offsetting I must admit, although it sounds like it's something we should look into over time to see if it would work for us. Expenditure is pretty much in hand, I'm shopping on my own now which has massively reduced the food budget as I'm far more likely to follow and stick to a list than OH! :rotfl:

That's my excuse for not doing the shopping with OH (plus she does so on a weekday when she is not working but I am).
Happy to send the spreadsheet I use if you want to run your numbers through it for the offset.

I read your threat last night Stuart

Gulp, I know I'm getting obsessed with this, but threatening people with it seems OTT. Should I get help?:eek:

I take your point about your spreadsheets! They are by far the easiest way to see and keep a handle on what's going on though so I don't think we need to mark ourselves down as spreadsheet-nerds quite yet!

Should there be a support thread here in preparation for us spreadsheet fanatics? :rotfl:

we need to stash aside £462.50 per month between now and Feb 18th 2009 to make the early payoff on the loan - it's a tall order but I believe we can do it - just!

I'm sure you will achieve this, the spreadsheets will drive you.

Keep us posted.

setmefree2

Good Luck:j:j:j:j

earthgirl

Wow, sounds like a great plan and an amazing goal!

I also want to pay off this mortgage and move up to scotland - I would love to live on the islands but worry about income. Our plan is to build up our business and sell it, so we need to stay here for a while first. Its great to have something to visualise when times are hard. I have pictures and estate agents details blu-tacked everywhere at work to motivate me!

What are you plans for when you move to the islands? Will you be able to relax and not work?

Best of luck for your challenge!

EssexHebridean

StuartGMC wrote: »

If it is tight to make your target for the loan, then put all extra cash to that first, you'll soon have over £400 a month to overpay the mortgage it seems once the loan is gone, and you can save the money you use now for the loan thereafter as your monthly saving to the next car.

I can see what you're saying on putting all the spare towards the loan target, but we've decided to stick with what we've arranged on overpaying the mortgage at the moment because it's important to us to feel we're doing something concrete towards that as well. The aim so far as I'm concerned is to clear the loan as of February, then to increase the overpayments by another level and continue to divert all spare cash towards the aim of making the next car purchase a cash one. If we don't make Febraury, then it'll be March. I'll be disappointed but it's not the end of the world.

StuartGMC wrote: »

(I assume you have your 3-6months income emergency fund already?)

In a word, no. Inititally the loan payoff fund will work as a cushion, once that's gone to pay off the loan we'll have one less committment to worry about anyway and will be starting to save the money that was previously going to that - we have mortgage payment holidays built up also and of course there is insurance in place for loss of income for paying the mortgage which would kick in after three months. Bottom line is, we'd cope.

StuartGMC wrote: »

Happy to send the spreadsheet I use if you want to run your numbers through it for the offset.

Cheers for the offer - probably a bit early for us to be thinking about that at the moment - we've got another three years to run on the deal we're on at the moment. Might well be getting back to you on that in a couple of years though!

StuartGMC wrote: »

Gulp, I know I'm getting obsessed with this, but threatening people with it seems OTT. Should I get help?:eek:

LOL! If you're going to make a typo, make it a good one eh!! :rotfl:

StuartGMC wrote: »

Keep us posted.

I will do!!

EssexHebridean

earthgirl wrote: »

Wow, sounds like a great plan and an amazing goal!

I also want to pay off this mortgage and move up to scotland - I would love to live on the islands but worry about income. Our plan is to build up our business and sell it, so we need to stay here for a while first. Its great to have something to visualise when times are hard. I have pictures and estate agents details blu-tacked everywhere at work to motivate me!

What are you plans for when you move to the islands? Will you be able to relax and not work?

Best of luck for your challenge!

Income can be a problem up there - you need a clear idea of what you can and would be prepared to do before you start really. OH works in the Legal industry so his work doesn't travel up there at all - Mine is construction industry related so whilst it travels anywhere, job opportunities are fairly limited on an Island with only two construction firms! Our plan is obviously to be mortgage free for a start, thus not having to worry about that major bill each month. Then from there we'd look to earn our cash in a number of different ways with odd-jobs as needed seasonally to top up. We'll also want to make ourselves as self-sufficient as possible with veggies, Hens, a few sheep etc. It can be done - it's really a case of looking at what sort of work there is on offer and deciding what you could do to make ends meet.

Good luck with your goals too!

Welshlassie

Wow what a plan, and you sound so motivated to get there. Well done.
We have recently started OP'ing and, as Stuart has said, got myself addicted to spreadsheets. I was looking through my money folder the other days and there must have been 6 or 7 different spreadsheets in there, all for various different things, but the one that gets opens the most is the mortgage OP one. I'm always plugging possible figures in there to see how much of a difference I can make before our fixed rate ends.

Best of luck getting your loan OP sorted before Feb, have a look at some of the challenges on the Up Your Income and DFW board such as £10 a day extra (some people have made £300 extra for the last 10 or so months) that would really help towards your target.