Tm's MFW ramblings

turtlemoose · 19 March 2014 at 9:48AM

oh dear, edinburgher you make my brain hurt! And there was me thinking I was not too bad at maths.

4.9% of £10k is less than 4.89% of £102k , so how come paying off the loan is better.

I'm sure you're probably right, but I just don't get it.... again I feel like I'm missing the bleedin' obvious!

turtlemoose · 19 March 2014 at 10:45AM

I snowballed it, you're definitely right (I thought you were, but I still don't understand it! ARGH!).

I'm going to read my snowball results and try to get my head around it, then swap my payments around.

What this means is, if my financial situation stays the same, I won't be OPing my mortgage at all, until April 2016. :eek::eek::eek::eek:

Feeling a bit wounded and disappointed, off to go and sulk in the corner for a bit.....

edinburgher · 19 March 2014 at 11:00AM

4.9% of £10k is less than 4.89% of £102k , so how come paying off the loan is better.

Two things to consider here:

The reason I phrased my point as a question is because you don't appear to have mentioned your mortgage interest rate anywhere else in the thread?
The power of the snowball is that the principal doesn't really matter (i.e. £10k, £102k, doesn't matter). The single consideration is the interest rate, because a higher interest rate will always cost you more £ for £ and is therefore a bad thing!) So, while there are some scenarios where paying off a lower interest rate make sense, they are few and far between.

As it stands, there's very little difference between your mortgage and your loan in terms of rates. If I were in your shoes, I'd still pay off the loan. You can ask your mortgage lender for a payment holiday if you've OPed (possibly), to change the term of the loan, or to go interest-only. The personal loan provider is less likely to be flexible (in my opinion).

Edinburgher, here to make your head hurt :rotfl:

turtlemoose · 19 March 2014 at 12:25PM

I've been reading the snowball results over and over (and messing about with the figures), and yes I do see what you mean about the mortgage provider being more likely to be more flexible than the loan provider.

I have mentioned my interest rates but as a one-liner so they kinda got lost, they are RENTAL 3.19% HOME 4.89% LOAN 4.9%

I'm realising my mistake is that I was focussing on the mortgages and not including my other debt, just letting that tick over. I need to take a step back and look at the bigger picture.

So, when I also add in the other things I owe.....

Personal Loan: Current balance £9256.10 at 4.9% 55 months remaining. I am going to change £165 mortgage OPs (the ones that the rental pays for) on to overpaying this, from April. This will have this paid off in September 2016.

£1745 to DS. Interest free obviously, and he's only 21 months old so has no idea, in theory we could defer this HOWEVER I'm concerned that if I put this off, then there'll be another excuse and another and so on, and we will never pay him back.

With that in mind, I'm going to keep paying my monthly £50 to DS until he's paid back, because regardless of interest costs elsewhere, IMO that's the right thing to do. (As in, morally right, not financially right) I am going to add the £5 from the Halifax reward too, as this has him paid back by Christmas 2016 and we'd like another baby to be on the way by then, so it has DS debt paid off and gone before having to worry about a new one.

I also need to look at my credit card debt. Current balance £4367.68 interest free until September 2014. I was paying just above minimum payment and planned to tart it, but actually I need to make sure I have provisions to get rid of this before the interest free ends and then it's not hanging over me. Previously I was sort of just expecting it to tick over on the 0% but actually I need/want this gone - if our financial circumstances changed for the worse then we need to make sure we could pay it.

The plan for this then: in April transfer £2357.32 to the new Nwide card, pay £75 off the original card for the month too. With the balance transfer fee, this will then give me:

MBNA CARD: £1935.36 interest free until Sept 2014
NWIDE CARD: £2375 interest free until May 2016

I'm thinking the plan is this:

I now have £100 a month available - £50 is the amount I usually pay off the CC, plus £46 OP on to the 'home' mortgage from joint account - I'll round this up to make the £100.

Pay £25 a month off Nwide (just over min payment). Pay £75 a month off MBNA. In September, get new 0% card for remaining MBNA balance (using existing card as example, 29 months interest free, 3% balance transfer fee). Total will be £1684.42 on new card, interest free until Feb 2017.

Then change the payments, pay just over minimum on the Santander (so £17 a month). Pay £83 a month off Nwide. This will leave a shortfall of £847 at the end of the interest free term. I'm not sure what to do about that right now.

As the personal loan will be paid off in Sept 2016, from October 2016 I will add that payment to the now-Santander card. This will clear it in December 2016.

Assuming I clear the rogue £847, this will have be DEBT FREE (excluding mortgage) from JANUARY 2017.

By that point, I would in theory be just about preparing to go back to work after maternity leave, with full time nursery fees to pay (same as now) plus wraparound care for the older one who will then be at school.

Assuming OH and I have the same income, we could then OP the HOME mortgage (leaving the btl alone!!) with all the money that we were previous spending on debt, minus the extra childcare costs - I reckon around £400 a month, then when no2 goes to school, we could double this. This would have the HOME mortgage paid off in the 4 months before my 40th birthday! And the BTL mortgage would have an outstanding balance of 30k at the same time.

We could then afford to pay off the BTL by Dec 2026 (making me 41) or maybe that should just tick over still and we'll just have LOADS of disposable cash every month?!?!?

Basically though....by doing this the right way around, even with another child in the mix, assuming our jobs stay the same (gamble I know), actually I *can* hit the MF x 2 by 42 target! I can stop sulking!!!!

The only thing I need to figure out is how to get the money together for maternity leave........

gallygirl · 19 March 2014 at 2:14PM

£1745 to DS. Interest free obviously, and he's only 21 months old so has no idea, in theory we could defer this HOWEVER I'm concerned that if I put this off, then there'll be another excuse and another and so on, and we will never pay him back.

What interest would you be able to get on the £1745? Why not set up a spreadsheet to calculate it, then pay him back with interest when ypu've paid everything else off?

this has him paid back by Christmas 2016 and we'd like another baby to be on the way by then, so it has DS debt paid off and gone before having to worry about a new one.

Well, if your 21 month old has acquired £1745 since birth I assume the new baby would do similar so if all else fails at least you'd have another interest free loan available

.

turtlemoose · 19 March 2014 at 2:29PM

New baby won't accumulate that much! DS' money was mostly made up from the child benefit, we've never spent it, just put it straight in to savings for him. It's £20.30 a week so soon adds up. The rest is from a standing order from me (£10 a month), various tilly tidies from my personal spends (around £150 worth last time I checked), plus birthday/christmas money.

When I bought the second house, that £2k made the difference between being able to buy it and not, so I used it.

I feel crap about it though and I don't want to do it again.

Second child gets £13.40 a week in CB - I can't have one child saving £20.30 a week and one £13.40 a week, so I'd pool it all and split the pot 50/50 between them at dishing out time.

I think there will come a time when I'll need to use the child benefit for his expenses - at the mo he's pretty cheap, everything is second hand and he's very easily entertained

I'm anticipating school age is when it gets expensive - uniform, "my friend has got a XYZ", school trips, that sort of thing. But at the moment I've always pretended we've never had that money.

I'm in two minds now as to whether I should be using that money now, and then build up savings for the kids once we are MF, or at least DF????

Hurdler · 19 March 2014 at 5:19PM

Ooof I thought I had caught up when I saw Edinburgher's post...

OK - not sure if this helps at all but here's what I did way back in the day.

First thing I did was get shot of a consolidation I had that got me out of some seriously bad CC debts.

Then where I had borrowed against the flat for things like buying a share of the freehold etc, they were much like your additional mortgages, and I got shot of them next.

Then I ploughed into my mortgage (somewhere along the way I got shot of a cruddy endowment policy and made it a straight repayment mortgage) and got that down to enough that I could borrow against it, to help put down a hefty deposit on Hurdler Mansions (see the stats of that little headache in my sig).

I would carry on morally putting money aside for the little'uns but put a more significant percentage of what funds you can towards the CCs, then the little mortgages.

Just keep chip chip chipping away on all fronts - someone here came up with a GREAT idea of allocating percentages to all of these spinning plates - and they are not set in stone.

Best of luckski!

edinburgher · 19 March 2014 at 9:12PM

Child Benefit isn't intended to be a trust fund for your child, but to help with the costs of raising him

I'm not saying that to be argumentative and challenge your decision to keep it - it's a lovely idea - but you need to think about these things holistically.

There's no moral imperative to give him the money and in fact, it's been proven that children given large handouts are statistically less likely to be as successful as their peers in terms of money management etc. (Jump in here GG

)

If using the money at this point in his life has saved you money, it will ultimately provide him with a more stable home and will give you more options to help him out in later life. That's not carte blanche to rob his piggy bank, but hopefully it helps with perspective?

We've got a baby on the way, not trying to be that guy who talks about things he doesn't really have any say in/on :rotfl:

turtlemoose · 19 March 2014 at 9:46PM

Any money saved for him he

A) wouldn't know about it until the day he received it

this day would be unlikely to come before his 25th birthday at least
C) wouldn't happen at all if I thought he'd spunk it on crap

I've messed about with spreadsheets all day. I'm going to stop saving the child benefit, and pay it towards the credit cards. I'm also going to stop stretching ourselves in order to pay him back all that amount. It got spent on the house that he lives in, the house in a catchment area for good schools, that is near his uncle and nan, etc etc etc. he'll get it back and then some as inheritance too. Out of money that was actually his (ie birthdays etc), we borrowed £440. I'm going to stop when we have paid him back £500. That's not a bad interest rate

I've moved the mortgage OPs to being loan OPs too. We will be debt free in March 2016, AND not having any debt payments outgoing will mean that baby can be born that month (onwards), we can afford for me to have a year maternity leave, then back to work full time - even with childcare we can then hammer the OPs on the mortgage.

So regretfully I have withdrawn from mfw 2014, as I am unlikely to make any OPs until 2017. However, even though I'm not starting my OPs until 3 years time, it actually has me mortgage free sooner than if I was oping now! Crazy! I'd have never got through those sums without you all, thank you so much!!

I'm still a mf wannabe, I'm just doing the proper prep work first

turtlemoose · 12 May 2014 at 1:45PM

I thought I'd come and update, so those who are interested can see, and if nobody is interested well at least I have a place to come back to for reference and to track progress

BTL Ticking over - making min payments, using profit to go in to debt (see below).

HOME I'd already rounded the payments up from £593.xx to being £600 - so making a tiny OP each month but just leaving it at that for now.

DEBT I last posted here in March. At that point my non-mortgage debt stood at £13783.78. Before posting here, if anyone had asked me if I was in debt, I'd have said "Not really, loan and a cc, no big deal". Yikes! How wrong I was! Loan is 4.9% and rest interest free. Two months later my total is £12640.32. Seeing as we have an average £720 nursery bill a month, I'm pretty pleased with this progress.

Debt breakdown:

£120 to DS - last payment July
CC1: interest free until May 2016 - £2466.92 - currently paying minimum payments +£1
CC2: interest free until Sept 2014 - £1101.74 - throwing all the money at this at the moment, so that it is gone when the interest free period is up.
Loan: 4.9% - current balance £8951.66 - currently paying min payment BUT soon as CC2 is paid then all the spare cash will go here. My estimated loan free date is now September 2015 (instead of November 2018). At this point CC1 will have a balance of £1793 and with no other debt and no loan payment, I can smash this in just 3 months, with the final payment in December 2015 clearing the card AND leaving £450 to put in the maternity leave pot. Assuming I stick to Baby No2 arriving March 2016 (onwards), I can then save our debt repayment money as maternity money giving us a minimum pot of £2750, which will make the difference between a frighteningly tight mat leave and a comfortable one.

Then, when I'm back at work, even budgeting for a full time nursery place AND wraparound care for one in school, assuming the same income as now we will have £300 pm available for mortgage OPs from April 2017. This is excluding any BTL profit, so this figure could be higher. Of course when no2 goes to school we'd have less childcare costs and could OP more, but even if we stuck at £300 that'd have me mortgage free in March 2027 - When I'm 41.

I love having a plan like this, and while I know things could change, we could lose jobs or the opposite get pay rises (haha I wish!), for now I know where we are and where we are going, and I can see my MF journey shining ahead of me

Tm's MFW ramblings

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