The ups, downs, and occasional sideways bits of trying to be mortgage free

armchairexpert · 13 June 2017 at 11:54AM

Bank visit very good, although now I have to dig out some documentation I'm not 100% sure OI have, like the formal lease agreement with my mother. Anyway.

1. Home loan goes to a P&I loan rather than IO, but with an offset and ability to redraw any overpayments, so that's fine. Interest rate goes from 5.15 to 3.98%. I'm running calculators now and it seems like that will take $200 off the interest every month - from $930 to $730, more or less. Which seems like a lot? More than I'd have expected? I guess it's a 20% reduction in the interest rate, and $200 is about that, so...wow.

2. Investment property showed up as having gained so much equity that we are re-doing it as a stand-alone loan instead of cross-collateralising, meaning that I can sell or shift that mortgage to another bank without hassle. It showed up on their valuing tool as being worth $330K, which is nuts because I bought it for $250K four years ago and I haven't done anything improvement-ey to it at all.

3.I negotiated to keep that one as an IO on the same rate - the advertised rate for an IO is now 5.98 which is CRAY but I gather the banks are trying to dissuade IO loans because it looks bad on their risk sheets if they've got too many?

So the investment will stay the same and I will go back to ignoring it, but having run some numbers on the main mortgage, if I can keep repayments at $2400, my new mortgage free date is August 2026 which is almost two years earlier than before (May 2028).

Tahlullah · 13 June 2017 at 6:18PM

This is absolutely fantastic news. Congratulations on this and I bet you are over the moon with the new figures.

Fabulous that the other property has gone up in value and you have managed to separate it, so if and when you are ready, you can re-mortgage to a lower rate. But great that it remains IO so you can ignore it for as long as you can afford to ignore it. Brilliant investment!

And what a great saving on the main mortgage. Who cares if it's P&I when it comes with an offset and allows you to draw down any over-payments. I would class that as a fantastic mortgage, because you are eating into the principal with every payment and you don't have to worry about finding a lump sum if you haven't been making those regular payments in an IO, , especially when life gets in the way.

Can't tell you what great news this is! Oh, yes I can, it's your mortgage! Sorry, getting excited there!!

armchairexpert · 14 June 2017 at 2:45AM

I am very very dubious that the new value for the investment property is at all correct, to be honest. The unit next to ours sold for $295 last year, and they did substantial renovations including taking out an internal wall, putting in a new kitchen and landscaping the garden. But it doesn't matter to me, since I don't intend to sell it, I'm just pleased about the extra flexibility it gives us now they're separate.

P&I on the main mortgage will stop us getting slack again and spending more than we earn on the busy months, which is what we did last year: we put a series of lump sums in between August and October, and then ate them away again until I took control in March.

Thanks for sharing in my excitement Tallulah! Although the bank themselves intiaited this review, not us, I can't help feeling like it was connected to my finally taking a close look at the finances. I was starting to think about shopping around for a better rate, and lo and behold they gave us one!

Gorgeous day today. We've had a bunch of frosty mornings, but it's a lovely mild sunny 12 degrees out there now, so I skived off work for an hour or so and went for a run around the lake. Bliss.

armchairexpert · 16 June 2017 at 1:46AM

Got dressed in my running clothes this morning but then it started raining and I just can't face it. Might do a few star jumps and things later instead.

I was right, we have lost the lease, so I have to redraft it and of course my mum's away on the first holiday she's had in three years so can't get her to sign until next week. Hopefully that's the last thing we need to do to get the refi through.

Mr Expert was booked in to have heart surgery today, just a minor op, but we found out yesterday that our private health insurance doesn't cover it although we assumed it did so now we're back on the public system and we don't know how long the waiting list will be. Not sure if it's the same situation in the UK: we have Medicare, like the NHS, but our government also really pushes hard for higher income earners to have private health cover so it subsidises it and there are tax penalties if you don't have it. By higher income I just mean top 50% of earners, so basically most of the middle class/anyone in a white collar job, not the super rich. Anyway I'm grateful that we sitll have the public option of course but it's galling to discover that we've been paying all this money for all this time and it doesn't cover something as integral as heart conditions! We wouldn't have been looking at that when we took out the policy, and nobody can remember all the inclusions and exclusions in a policy. It costs us $250/month and I am seriously considering just putting that money into a savings account instead. But then again, Mr E needed an ambulance the other week and that would have cost us $1100 if it hadn't been for the insurance. And a couple of years ago my Mum needed a knee op, and the waiting list for that on the public system is three years plus, and she literally couldn't walk without one of those three-pronged metal hospital walkers. She paid out of pocket because she doesn't have private health and that was $5k on her credit card. And also, also, I need some dental surgery and both my girls will need orthodontics and our public system doesn't cover any dental treatment at all, not even checkups, which is crazy.

It's tricky. I just wish we had a decently funded public system still. I'd happily pay more tax and be glad that everyone had the same amount of cover instead of all this poring over fine print and trying to out smart the insurance companies.

Okay, that digression is over! On the money front we FINALLY got around to changing mobile phone providers so that should drop the monthly bill from $150 (+ excesses when Mr E goes over his data limit which he does regularly) to $80 with double the data. I think that's the last of the low hanging fruit now: everything else is as cheap as it can be (except the darn health insurance!) and it's just a matter of plodding along and pushing any income rises towards the mortgage.

Tahlullah · 16 June 2017 at 6:37AM

Wow. You don't realise how good the NHS is until you have to make comparisons. I couldn't imagine the Ambulance costing over £1k, and thats before any actual medical treatment.

Is it possible to increase premiums to get better care, or change insurance provider, or are you stuck with it for good? I guess it's not an organic insurance that you can add to as necessary.

So, the only way you could have got it right was when you took it out, many moons ago when you were younger, healthier and not earning as much, you would have had to purchase the most expensive insurance there was, based on the fact you might need it in the years to come.

Think I'll stick to the NHS and pay to go private when I can, which has not been wildly expensive when I have needed to. You said wish you had it still. Did you have it once? What happened?

Congrats on the phone tariffs. Great saving. and I would award the brownie points for just thinking about wanting to go our for a jog.

armchairexpert · 19 June 2017 at 2:01AM

What happened? I moved to Australia! We have a public system after the NHS model, but over the past several years successive right wing governments have gutted it, and added various levies and subsidies to incentivise people to pay for private health cover. And then when the left get into power they don't roll back those reforms. There are also some gaps in the public system - dental has never been covered here in Australia, nor ambulances for some reason. You can get just ambulance cover, which is a fraction of the price of a comprehensive policy.

I can change policies, but unless we pay for the absolute top cover, there'll always be something that isn't covered. To get heart covered, we'd need to pay an extra $100 month, meaning $350/month, which is a LOT of money. Not to mention, even the top private cover doesn't cover everything: a friend of mine was telling me that she took out the top cover possible when she was planning to get pregnant with her first kid, and then had both children in private hospitals and ended up with a $6K bill because the cover has a cap, and her obstetrician and anaesthetic charged more than that cap. Private health insurance is a ridiculous concept, and I am furious that we're blindly following the US down a path that is proven to not work. US health care isn't just immoral, it's inefficient: their government pays more in health costs per person than anywhere else because there's a whole layer of bureaucrats, coders, debt recovery agencies and the like, all of whom also get paid.

armchairexpert · 19 June 2017 at 2:04AM

I'd like to follow that rant with a nice cheery post about my lovely weekend of gardening and cycling with the girls. And it was lovely, but I feel really flat and angry this morning for no good reason. As if there's just nothing to look forward to. I don't mean that in an all-caps Depressed way, I'm fine, but just - you know. You get up, you plod through your days of work which are fine but aren't changing the world, on Fridays you buy yourself a beer or a block of chocolate and maybe once a month you see a friend for dinner and that's it, that's life. Blah. It's probably just a case of the Mondays.

In this mood, I wonder whether the Pay Off The Mortgage project isn't just me avoiding the real issues in my life. As if paying off the mortgage is a magic door to an amazing new life of wonder and joy, but also allows me to put the visualisation of that life off for ten years rather than confront it now.

Blah blah blah. I am sure I will feel better tomorrow.

Tahlullah · 19 June 2017 at 10:20AM

I think the rant would have helped. Venting is good for you. But it also allows you to think about the bad things, which add to the general feeling of dis-satisfaction. And yeah, I know exactly what you mean, which is why I bought a bar of chocolate last week!

I think if you stand back and look at life for what it is, you will get depressed. It is a perpetual cycle of get up, go to work, earn money, work at home, sleep and start again.

The lucky ones, whereby I mean rich, can break the cycle of work. But you still have the issue of getting up and going to bed. And not necessarily making a difference.

What difference do we want to make? Well, I'm not about to find the cure for cancer or anything interesting like that. And when I die, no-one will remember me after a couple of generations. So you then have the 'what is the meaning of life' conundrum.

There is no answer to this, so the next time you are having a 'what on earth am I doing here on this beautiful day? This is the only life I've got' type of moment (and I have them all the time), next time try a drink of water and a few deep breaths!!

Paying down the mortgage gives you focus. It allows you to think about how you want to live your life, as opposed to how you have to live your life. Once the mortgage is gone, you wil have more freedom. You don't have to work as hard. You can get up in the morning and think about what pleasure you can get from the whole day without having to consider what you have to do because someone else instructs you to do it.

Deep breaths, you are doing fine.

armchairexpert · 19 June 2017 at 11:31AM

You're 100% right and I needed to read that, thank you. Even if I were rich it wouldn't solve anything, because my malaise comes from a feeling that I'm not doing anything significant, not that I have too little leisure time. More leisure time wouldn't solve that, and more 'stuff' certainly wouldn't! As far as the stuff I really value goes, I already have it: lovely children, a beautiful relationship with a great man, a house which is safe in an area which is clean and healthy, friends and family.

None of which are stopping me from having a right old sulk!

Wysiwyg49 · 19 June 2017 at 7:15PM

I completely understand your need to rant - I often feel despondent about the 'treadmill' life is, in exactly the same way. I think trying to keep tabs on money and paying off mortgages/debts contributes to it, cos you realise how tiny the progress is each month. I have two days I get really excited about YNAB - payday and the first of the month when I see if I've managed to roll over more than last month! The rest of the time it's a bit of a grind.

But I think we should feel good that we ARE confronting stuff and sorting it out, not just carrying on racking up credit card debt etc. without thinking. I'm hoping after a year of YNAB I start to feel the difference. Even after 4 months, I have got much more of a handle on things, so when DH was made redundant I could see straight away how we needed to stretch the remaining money out to give a few months to find another job. Without that I think I would have felt much more helpless.

This might not apply to you but some of my despondency is to do with my situation being the result of years of not thinking very far ahead - still got a large mortgage way too late in life really. So I wish I'd got to this way of thinking 20 years ago! But hey. We had some fun along the way. I've read some of the blogs about people who lived on next to nothing, no holidays, watched every penny, to retire early - and decided I wouldn't have liked to do that either!

The ups, downs, and occasional sideways bits of trying to be mortgage free

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