30th Birthday challenge

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  • getmore4lessgetmore4less Forumite
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    MilneBay wrote: »
    Hi MFWs
    I have been following the posts on this forum for a few weeks now and think it!!!8217;s finally time I got down to it and joined in.
    I have to agree with all the people who say that being a mfw is addictive as I have found that without even starting a diary.
    My situation is that I bought a flat in 2007 for £100,000 and put down a deposit of £20,000 so took on a mortgage for the remaining 80k.
    I have been fortunate on a number of fronts !!!8211; I took out my mortgage before the financial squeeze kicked in and was able to borrow four times my salary on a flexible mortgage which tracks at 0.59% above the base rate.
    Obviously this means the amount I am required to pay has almost halved. I also got a new job 18 months ago paying 10k more than I was earning previously and my partner has moved in so have more free cash!
    As a result, I have been overpaying my mortgage, firstly by £300 a month and in the last six months by £400.
    I!!!8217;m 29 now and currently owe approx £63,500 on the mortgage. I thought I!!!8217;d start my challenge by seeing if I can get it to under 60k (for some reason 50-something sounds like a massive milestone!) before I turn 30 in February.
    Now I just need to work out how to get a pretty signature with the figures in it to keep me motivated!:j
    MB

    Stop overpaying immediately and start saving this money you can get more than 2.5% in loads of places and even after tax you will be better of with a mortgage of 1.09%

    NET(debt-saving) is the number to track.

    Review the savings whenever any of the rates change.

    If you are with Barclays check if there is a convert to offset option on the mortgage might come in handy if rates do go up, they also have a regular saver which would be a good place for some of the savings at 3.25%

    I don't think we will see rates like this again so if you ever move you will want as much of this mortgage as you can to port with you idealy not needing to borrowe any more so if you keep it as high as possible while it does not cost anything save rather than overpay
  • Hi Milnebay,

    I'd have disagreed vehemently with getmore4less only a few weeks ago until, too late in the day for us, I found out about offsetting. If it is an option for you, I'd now recommend it. Being officially mortgage free is great and getting there before 30 was a nice bonus for us but our mortgage was at 0.89% above the base rate. The decision to go for that reaped benefits as our interest payments crumbled but, with the likelihood that we'll need to borrow again at some point with a view to building our big house, an offset would have been the smart move. Whatever your view on future plans, make sure you understand fully what facilities, if any, you have to reclaim any overpayments or to borrow back into your mortgage at the great rate you've got should the requirement arise.

    On the mortgage front, I cannot stress enough how much a detailed SOA, a regularly updateable signature and visits to this board help in the quest to being mortgage free. We had originally intended paying off a few hundred pounds a month but, by applying a detailed penny by penny approach to what we were spending and then taking the decision to steer clear of a few things over a 15-month period, we ended up overpaying an average of just over £2,000 per month. I hope you're in a similarly fortunate position but I'm sure, if you haven't done so already, taking a systematic approach to seeing what is feasible will give you a figure higher than you're currently overpaying. Divide that into your existing mortgage and then you've got a prospective mortgage free date and there's little more encouraging than trying to meet or exceed that date. We ended up paying our mortgage off 12 months earlier than we had planned and, in total, 19 and a half years early.

    Cheers,

    Billy
    Mortgage Free: 28/10/2010
    Time / Interest Saved: 18.5 years / £61,866.50
  • Hmm, a lot to think about there!

    I do appreciate that I could get a slightly better rate if interest saving rather than overpaying but I'm not sure I would be quite so dedicated! Also, while the mortgage is a great deal now, if interest rates were to rise rapidly at some point in the next few years it might not be.
    While I don't think I'll be in this flat forever, it is a good size (three beds and a garden) and will do us for a few years to come.

    My main reasoning for paying as much as possible into the mortgage now is that (hopefully) in the next couple of years we will be wanting to start a family. As the higher earner, it will hit us harder if I take time off or reduce my hours. My mortgage allows for payment breaks etc so my reasoning was that if I could get well ahead of myself now, it would give me greater flexibility in the future.
    I know savings would too (and I do have an emergency fund) but I hate spending my savings and feel it would be harder to judge what I would realistically need to earn on a long tern basis than a reduced amount on the mortgage - though I'm willingly to hear other suggestions as I'm far from an expert on these matters!
  • SpiggleSpiggle Forumite
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    Stop overpaying immediately and start saving this money you can get more than 2.5% in loads of places and even after tax you will be better of with a mortgage of 1.09%

    NET(debt-saving) is the number to track.

    Review the savings whenever any of the rates change.

    If you are with Barclays check if there is a convert to offset option on the mortgage might come in handy if rates do go up, they also have a regular saver which would be a good place for some of the savings at 3.25%

    I don't think we will see rates like this again so if you ever move you will want as much of this mortgage as you can to port with you idealy not needing to borrowe any more so if you keep it as high as possible while it does not cost anything save rather than overpay

    Hi MB,

    I think that the advice from GTM4L is right IF and only IF you are the kind of people that won't touch savings. For us, we're not and we did think long and hard about the options, examining the benefits and the pitfalls of each. In strict financial terms with the rates we're on saving makes more sense. But for us because of the people we are, overpaying is the only way to go.

    I just wanted to put a bit of balance from another perspective. Sometimes the pure mathematical mechanics can be such a draw we can forget who we are.

    All the best,
    Spigs
    Mortgage Free October 2013 :T
  • Thanks Spigs

    I really appreciate everyone's feedback. I know that savings might be the better way to go but my fear of debt ensures I'll be more dedicated this way. I also tend to be overly cautious and think I would hate spending my savings (even to pay the mortgage) and would just want to leave them in the bank so I could look at the numbers.

    I'm a strange one but think the phsychology of reducing the morgage would keep me focused better.

    I find owing £65,000 terrifying, depite fact this is probably quite a low amount in reality. Assume I'm not alone in this as we're all frantically trying to overpay!
  • Hi MB,

    There was nothing in the world that would have convinced me that the extra 1% or so on a saving rate was worth giving up my mortgage freedom for so I completely understand your thinking. Seeing that balance reduce (eventually) to £0 was great as a motivation tool. I think we were worse off in the long run by about £280 but I wouldn't have done it any other way - possibly even with the knowledge of offsetting that I have now!

    Cheers,

    Billy
    Mortgage Free: 28/10/2010
    Time / Interest Saved: 18.5 years / £61,866.50
  • Cheers Billy

    Great to hear from someone who has actually done it.

    Having looked at the figures and with wanting to have a reasonable Christams/birthday think I have to accept that I will miss out by at least five days - i.e. I will need my pay cheque at the end of Feb to make my target. But so long as I know that as soon the next installment goes in I'll be at my little target I will be happy - just consider it a late brthday present!

    So in the next three months I need to overpay by another £550 (on top of the £400 a month on the dd).

    I drive a long way to work (70 mile round trip a day) but have Christmas period off so the £40 a week petrol money will be going into the tin - that's £80 for starters and February is a council tax free month so another £120 in my jar.

    Just another £350 to save then. Hope the family aren't expecting much for Crimbo!!
  • edited 22 November 2010 at 6:13PM
    getmore4lessgetmore4less Forumite
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    edited 22 November 2010 at 6:13PM
    wynnvegas wrote: »
    Hi MB,

    There was nothing in the world that would have convinced me that the extra 1% or so on a saving rate was worth giving up my mortgage freedom for so I completely understand your thinking. Seeing that balance reduce (eventually) to £0 was great as a motivation tool. I think we were worse off in the long run by about £280 but I wouldn't have done it any other way - possibly even with the knowledge of offsetting that I have now!

    Cheers,

    Billy

    But you don't you get there quicker.

    If as MB there is a "savings" thing going on you just have a seoperate set ofg savings that is "mortgage" and treat the total mortgage-savings as the real number.

    then you have other savings that is the real savings which will exist after mortgage free date.

    You can do the same with zero % spend credit cars, save the money that you would normaly spend and there will be some left over when you have to pay off the CC and that can go to the mortgage as well.

    Ok these 1-2% are not a lot but when/if rates go up the numbers will be bigger especialy on the CC so you make even more money.
  • Interesting reading regarding the savings vs overpaying.

    Debt is a very emotional thing and quite often the logical thing to do is not often the best for everyone.

    That said I have adjusted my emotional attitude to be more logical - mainly thanks to the forums here.

    I am currently overpaying the max I can on a 3.45% mortgage. However I have spotted an 8% savings account fixed for 12 months (maximum £300 per month). I did consider ignoring this and continuing to overpay rather than save. I haven't done the full calculations but over 12 months I may be up to £100 better off (2 accounts). When I'm working on pushing the envelope and working to the max that extra £8.33 a month is worth blocking the emotional hatred of the mortgage.

    Another example.

    We have had to buy a kitchen (as in the house we bought didn't really have one). In the past we have shunned 0% loans as morally we didn't like the debt and have the savings. However I now lapped up 0% finance on the kitchen and the £3K is now sitting in the offset earning another £15 a month in interest savings.

    Again I have readjusted my out look and logically it is mad when we have £170k of debt on the house to get snooty about paying outright for things at 0% credit, because we didn't like debt.

    Make your money work the best way you can if you can detatch yourself from the emotional side.

    The two examples above will "earn me" around £21 a month, just by adjusting my emotional thoughts on debt.

    Just my two pennies.

    Good luck by the way - which ever way you do it, its a great thing to do.
  • Will definitely take that advice on board. Think I will keep up the over payment on my dd so keep it at what I class as a 'realistic amount' i.e. the minimum I would be paying if interest rates weren't so low (otherwise it will be too painful for me when it goes up!)
    But all the extra money I hope to save by being thrifty I will put into a savings account. Going to have a look around for a good rate now!

    Off to a good start this week - was hoping to do my weekly shop for the two of us for £30 and came in at £30.15. Didn't add anything up going round so not sure how I managed to get it that close but I have an eye for a bargin!

    Thanks everyone for your suggestions
    MB
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