Bit the bullet

I have finally started my quest to be mortgage fee again. I did owe £203995, and had 23 years left. Last week I overpaid £12k and reduced the term down to 3.5 years. I fear I have now over committed. So the excitement of last week passing the affordance test, has now been taken over by fear.
The plan was to save each month and overpay the 10% each year, but after looking at various ways to invest my monthly savings, I decided that reducing the term is a much better way to save money.
When I was setting the term, 42 months seemed like nothing, but now I have the new term showing on my account, it is daunting.
My biggest worry is now having something unexpected crop up.
Has anybody else feel they have over committed? What is your out?
Debt free. March 2020
Mortgage free-August 2021
Planned retirement date- 19/5/2026
£29500 saved. Target £420000(19/05/2026)
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Comments

  • MM10
    MM10 Posts: 57
    First Anniversary Combo Breaker
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    Have your monthly payments changed significantly? Do you have an emergency fund?
    Total mortgage when started £256,809 in May of 2011; 2018 MFW #5
    Main mortgage was £214,309; now [STRIKE] £110,716 at Feb 2016 [/STRIKE]; [STRIKE] £63,645 at Feb 2017 [/STRIKE]; [STRIKE]£10,600 at May 2018[/STRIKE]
    Original repayment date 2036; Main mortgage free date [STRIKE]July 2021[/STRIKE]; [STRIKE]Dec 2020[/STRIKE]; [STRIKE]January 2019[/STRIKE] June 2018:)
  • Hi,

    Firstly, you need to stay positive and focused.

    Secondly, you need to think about how to cut down on your spending and save more.

    Some ideas:
    1, Post a SOA on here so the others can help you with cutting down on your outgoings.
    2, Budget - this will help you to plan your expenses and give you peace of mind
    3, Save up for an emergency fund - you can have a set amount go towards this every month in your budget.
    4, Cut costs wherever possible with utilities and insurance etc., using cashback and comparison sites.

    Stay focused on your target and you will get there!
  • andys15
    andys15 Posts: 1,102
    Name Dropper First Post First Anniversary Combo Breaker
    Forumite
    Yes my salary changed a bit. I withdrew from my final salary pension. So I now contribute nothing to my pension and my employer pays into my salary what they used to pay into my pension. My pension is now with Investec in a SIPP which I contribute nothing to, nor intend to. My aim is to pay off mortgage in 42 months and then when that is paid off, then save the money into my retirement fund. Hopefully retiring before I am 50, and I am currently 41. I cannot draw on my SIPP until I am 57, so effectively i need to save money to cover me for 7-8 years with no income.
    My SOA:Statement of Affairs and Personal Balance Sheet

    Household Information

    Number of adults in household........... 2
    Number of children in household......... 1
    Number of cars owned.................... 1

    Monthly Income Details

    Monthly income after tax................ 7000
    Partners monthly income after tax....... 0
    Benefits................................ 0
    Other income............................ 1850
    Total monthly income.................... 8850


    Monthly Expense Details

    Mortgage................................ 4794
    Secured/HP loan repayments.............. 467
    Rent.................................... 0
    Management charge (leasehold property).. 0
    Council tax............................. 159
    Electricity............................. 60
    Gas..................................... 60
    Oil..................................... 0
    Water rates............................. 42.9
    Telephone (land line)................... 20
    Mobile phone............................ 0
    TV Licence.............................. 12.12
    Satellite/Cable TV...................... 40
    Internet Services....................... 26
    Groceries etc. ......................... 500
    Clothing................................ 0
    Petrol/diesel........................... 80
    Road tax................................ 0
    Car Insurance........................... 30
    Car maintenance (including MOT)......... 35
    Car parking............................. 0
    Other travel............................ 0
    Childcare/nursery....................... 0
    Other child related expenses............ 62.5
    Medical (prescriptions, dentist etc).... 35
    Pet insurance/vet bills................. 0
    Buildings insurance..................... 10
    Contents insurance...................... 8.37
    Life assurance ......................... 51.33
    Other insurance......................... 26.9
    Presents (birthday, christmas etc)...... 0
    Haircuts................................ 0
    Entertainment........................... 0
    Holiday................................. 0
    Emergency fund.......................... 0
    Total monthly expenses.................. 6520.12



    Assets

    Cash.................................... 4900
    House value (Gross)..................... 380000
    Shares and bonds........................ 60000
    Car(s).................................. 30000
    Other assets............................ 0
    Total Assets............................ 474900



    Secured & HP Debts

    Description....................Debt......Monthly...APR
    Mortgage...................... 191605...(4794).....2.58
    Hire Purchase (HP) debt ...... 35000....(467)......4
    Total secured & HP debts...... 226605....-.........-


    Unsecured Debts
    Description....................Debt......Monthly...APR
    tesco loan.....................23000.....578.......3.1
    wife loan......................22000.....517.......3.9
    Total unsecured debts..........45000.....1095......-



    Monthly Budget Summary

    Total monthly income.................... 8,850
    Expenses (including HP & secured debts). 6,520.12
    Available for debt repayments........... 2,329.88
    Monthly UNsecured debt repayments....... 1,095
    Amount left after debt repayments....... 1,234.88


    Personal Balance Sheet Summary
    Total assets (things you own)........... 474,900
    Total HP & Secured debt................. -226,605
    Total Unsecured debt.................... -45,000
    Net Assets.............................. 203,295


    Created using the SOA calculator at https://www.stoozing.com.
    Reproduced on Moneysavingexpert with permission, using other browser.

    My wife gives me £1850 a month. Thats £500 for grocery and £1350 contribution. We pay for holidays out of her yearly bonus, and then as and when we get money, for instance our next holiday is from work shares we just sold. We generally don't save for holidays. I put £1000 aside each month for me. I never go over that.
    Debt free. March 2020
    Mortgage free-August 2021
    Planned retirement date- 19/5/2026
    £29500 saved. Target £420000(19/05/2026)
  • Is the value of your car correct? It seems high but I don't know what you are driving.

    You don't spend anything on clothing?

    Also, it looks as though you have £80,000 of other consumer debt. This is at a higher rate than your mortgage. What made you decide to reduce the mortgage term instead of paying off that debt?

    Are you overpaying the debts or just making the minimum payments?

    You have committed to paying 55% of your monthly income to the mortgage, which is higher than a 'perfect' budget, but think of the relief you will have in 3 years when it's gone!! Many people pay that much in rent or mortgage and get along just fine, without the prospect of owning a big house outright at the end of 3 years.
    Mortgage started at £318,000 in June 2016. Original MF - 2041 :eek:
    2nd Property Mortgage at £275,000. Mortgage free: 2049 :eek:
    Total OPs: £29529
  • andys15
    andys15 Posts: 1,102
    Name Dropper First Post First Anniversary Combo Breaker
    Forumite
    Tropically. The car is a Merc on a PCP deal. This is my third one doing the same. I basically give it back after 3 years. I have had this one 2 months. Its probably not worth £30k now, and although it shows I owe £35k, the reality is that I won't pay £35k back, as I will just get a new one in 3 years. Its not money saving and it is a waste of money, but I like hassle free motoring and this provides me with this.
    Yes the loans are going against all the experts, but it makes perfect sense in my head. My mortgage monthly interest was about £500 and the loan monthly interest about £50. I could have paid the loan of in about 3 months, using the 12K I overpaid the mortgage, and delayed the reducing the term, but I just thought the interest rates were so similar, that paying off the one attracting the higher interest payment would be better. As I am writing this, it maybe wasn't.
    Debt free. March 2020
    Mortgage free-August 2021
    Planned retirement date- 19/5/2026
    £29500 saved. Target £420000(19/05/2026)
  • It's not necessarily a bad idea to pay off your mortgage before you pay off your debts. It's quite easy to get 0% interest cards, but it can be harder to remortgage especially if you are retiring or near retirement age.

    It's a difference of £142 per year for every £10,000 you owe to anybody from the 4% loan to the mortgage. You could easily trim that off your budget elsewhere, to be budget-neutral but feel better.

    Do you find yourself with £1200 left over at the end of the month? If so, I would save up some more cash. You do have lots of savings, but less than 1 months emergency fund in cash. Some stocks and bonds are easy to access but others take up to a week. I would try to get £6520.00 in cash, then you have exactly one month which would be plenty of time to liquidate anything else.
    Mortgage started at £318,000 in June 2016. Original MF - 2041 :eek:
    2nd Property Mortgage at £275,000. Mortgage free: 2049 :eek:
    Total OPs: £29529
  • andys15
    andys15 Posts: 1,102
    Name Dropper First Post First Anniversary Combo Breaker
    Forumite
    I don't have anything left over at the end of the month. Well its pay day tomorrow and I have £46 left. Come pay day tomorrow I will take that £1200, and put it into an account named, Andys Grand. That will then be my money to live off for the month. I won't go over it. I won't spend it recklessly but will buy clothes/go out/play golf/play more golf. Some months I cannot spend it, but then things crop up like golf tours or some repairs etc etc. Things always crop up, but its covered with the grand.
    Debt free. March 2020
    Mortgage free-August 2021
    Planned retirement date- 19/5/2026
    £29500 saved. Target £420000(19/05/2026)
  • It sounds to me like your ultimate aim in all this is to retire in 9 years at 50! So I think you need to consider mortgage freedom as just part of the journey to achieve this.

    You should really be aiming to make the best and most efficient use of your income during the next 9 years.

    I am a MFW through and through, achieved it 10 years ago at 32 years old then moved house. We are two years away from paying our current mortgage off... BUT I haven't done this at the expense of my pension savings, because I want to retire at 55 (though 50 would be better:D). In fact we've recently extended our MFW date to fund an increase in my husband 's pension.

    Withdrawing from a final salary pension scheme rings massive alarms with me, they are like gold dust nowadays and buy you a guaranteed pension that is usually very generous.

    You must also be a higher rate tax payer looking at your income. It is incredibly tax efficient to save into a pension when you're a high earner because your contributions are, in simple terms, not taxed. In contrast, you are paying off your mortgage with taxed income.

    If you have a clever master plan with regard to your retirement then by all means ignore me...but if you haven't suggest you start reading the pensions forum. There are some incredibly knowledgeable (if a little scary a times!) people on that forum who can help you with any pension questions and planning.
  • I agree with Happier Me (even as someone who has just paid of their mortgage in full - today in fact).

    Withdrawing from final salary seem really wrong + you are missing out on the tax savings on the pension too.

    Personally I would keep the final salary and contributions + private pension up to the full amount of the tax relief on the pension and then use the extra money from the reduced tax bill to overpay the mortgage (all as Happier Me says). Unless of course your pension is already very healthy.

    You also have a lot of debt too I would look at clearing this.

    If I was trying to clear the mortgage I would overpay , but not reduce the term to give you breathing room.
  • getmore4less
    getmore4less Posts: 46,882
    Name Dropper First Anniversary First Post I've helped Parliament
    Forumite
    edited 28 November 2017 at 5:28AM
    andys15 wrote: »
    I have finally started my quest to be mortgage fee again. I did owe £203995, and had 23 years left. Last week I overpaid £12k and reduced the term down to 3.5 years. I fear I have now over committed.
    .........
    My biggest worry is now having something unexpected crop up.
    Has anybody else feel they have over committed? What is your out?
    Mortgage...................... 191605...(4794).....2.58


    That really was a bit extreme a longer term, 2y fix and overpayments would have probably given a lower rate(less interest) and some contingency.

    what's the LTV 2.58 seem high if it is better than 80%.

    So I now contribute nothing to my pension and my employer pays into my salary what they used to pay into my pension. My pension is now with Investec in a SIPP which I contribute nothing to, nor intend to.

    With your tax rates that does not seem a sensible option.

    edit silly me
    House value (Gross)..................... 380000

    LTV very close to 50% that mortgage rate is way too high should be under 1.5%
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