Onwards to freedom!
SuperSecretSquirrel
Posts: 1,045 Forumite
Hello and welcome to my MFW diary. Not sure how often I'll update as I'm going down the boring 'increase monthly mortgage direct debit' route, not the more interesting to read 'random repayment as and when a bit of extra money is made' route. Still, no harm in starting a diary here, even if it's just for me to look back on in a few years time!
It seems like a good idea to start with a bit of background, so here goes...
We bought our house in July 2010 with an 87k repayment mortgage, fixed for 10 years at 5.29%. Nearly two years of £525pm standard repayments allowed us to rebuild our savings, but after 20 monthly payments (over 10k paid out) the mortgage balance had only dropped around 2.5k thanks to all the interest being paid...
We decided to make a small start on overpaying - small overpayments early on have quite an impact over the long term so why not start small and ramp up later? March 2012 we made our first regular overpayment, £50pm. Amazingly, if we were to keep up with this £50pm over the life of the mortgage we'd be mortgage free nearly four years early (Nov 2031) and save ourselves a tidy bit of interest. Not bad rewards for just £50 a month!
A few days ago I decided to step things up a notch. From next month the regular overpayments will increase to £250pm, £200 less will find its way into my long term savings (paying 2.8%, minus basic rate tax), £200 more will find its way to the mortgage provider. Makes a lot of sense looking at the interest rates! I'll keep on saving in a normal savings account though and won't be putting every penny into the mortgage - I'm used to seeing my savings grow monthly, and like to try to be prepared for any eventuality, so I'll keep on squirelling away a chunk of my income in savings each month. I know this isn't the most efficient option in terms of reducing interest payments, but it's a balance that keeps me sane, if there's any major disasters the savings are there to fall back on, that kind of peace of mind is well worth a few pounds! Anyway, here's where the numbers get really interesting - by overpaying £250pm for the life of the mortgage we'd be mortgage free nearly eleven years early (Oct 2024). Wow!
Seeing the massive savings I started looking into this stuff in more detail. We're allowed to overpay up to 10% of the mortgage balance each year without penalty. I don't want to increase overpayments over £250pm right now, but maybe after another year or so of growing my savings I'll step up the overpayments to £500pm. Two years later the overpayment would need to drop to £450pm (to avoid penalty), year after that drop to £400, and the following year drop to £350, and the years after that drop to £250 at which level the op's would have to remain until the end of the fixed period (August 2020). If we were to follow this plan, at the end of the fixed period our mortgage balance would be around about 20k which we could pay off with a lump sum from savings. Mortgage free fifteen years early, at age 36, sounds awesome, and what's incredible is that it also sounds very realistic.
At the moment overpaying is my project. OH and I have our own accounts that our wages are paid into, and a joint account that we feed monthly to pay the bills. As I earn a little more I also do the grocery shopping, pay a few extra bills, and overpay the mortgage. Beyond feeding the joint account OH's income is none of my business, it can be spent on whatever OH likes, same goes for my income. This works well for us - if I want to splash out on a new computer game or a night out or whatever I can do so without needing to consult OH, and if OH wants to splash out on a night out or clothes or whatever no need to consult me. We're both debt averse and savers by nature, so as long as we spend less than what's coming in and all the bills get paid all is well. I'm hoping that seeing the mortgage balance reduce might convince OH to get involved in overpaying the mortgage (or at least split savings into two pots, one 'spendable' short term pot for holidays and home improvements etc, and a long term one earmarked for paying down a lump sum on the mortagage), but there'll be no pressure, if OH joins in that would be excellent, but if not that's ok.
Finally, I know life doesn't always go smoothly - anything could happen in the next 8 years, babies, redundancy, armageddon, "the best made plans of mice and men, often go awry"... But if things don't go to plan, nevermind, we'll have made a great start on the mortgage regardless, any overpayments we make early on will benefit us later on, so we may as well give it a shot while circumstances allow
It's nice to remember that circumstances can go up as well as down too - maybe there will be payrises and good fortune along the way that make achieveing the target easier, who knows!
__________
January 2014 Update:
Things have changed quite a lot since I first started this diary... The new aim is to hit the MFiT3 target of a 40k mortgage balance by end 2015, and to have 40k in savings by that time too, making us mortgage neutral 20 years early! Anything can happen, but I think it's time to aim high!
__________
March 2015 Update:
We did it! We are mortgage neutral (savings balance higher than outstanding mortgage) and are locked in to achieve the MFiT3 stretch goal of mortgage below 40k by the end of the year I'm going to keep this diary going, the aim is total financial independence now! 
__________
January 2018 Update:
Paid the mortgage off in full today (12/01/2018)
It seems like a good idea to start with a bit of background, so here goes...
We bought our house in July 2010 with an 87k repayment mortgage, fixed for 10 years at 5.29%. Nearly two years of £525pm standard repayments allowed us to rebuild our savings, but after 20 monthly payments (over 10k paid out) the mortgage balance had only dropped around 2.5k thanks to all the interest being paid...
We decided to make a small start on overpaying - small overpayments early on have quite an impact over the long term so why not start small and ramp up later? March 2012 we made our first regular overpayment, £50pm. Amazingly, if we were to keep up with this £50pm over the life of the mortgage we'd be mortgage free nearly four years early (Nov 2031) and save ourselves a tidy bit of interest. Not bad rewards for just £50 a month!
A few days ago I decided to step things up a notch. From next month the regular overpayments will increase to £250pm, £200 less will find its way into my long term savings (paying 2.8%, minus basic rate tax), £200 more will find its way to the mortgage provider. Makes a lot of sense looking at the interest rates! I'll keep on saving in a normal savings account though and won't be putting every penny into the mortgage - I'm used to seeing my savings grow monthly, and like to try to be prepared for any eventuality, so I'll keep on squirelling away a chunk of my income in savings each month. I know this isn't the most efficient option in terms of reducing interest payments, but it's a balance that keeps me sane, if there's any major disasters the savings are there to fall back on, that kind of peace of mind is well worth a few pounds! Anyway, here's where the numbers get really interesting - by overpaying £250pm for the life of the mortgage we'd be mortgage free nearly eleven years early (Oct 2024). Wow!
Seeing the massive savings I started looking into this stuff in more detail. We're allowed to overpay up to 10% of the mortgage balance each year without penalty. I don't want to increase overpayments over £250pm right now, but maybe after another year or so of growing my savings I'll step up the overpayments to £500pm. Two years later the overpayment would need to drop to £450pm (to avoid penalty), year after that drop to £400, and the following year drop to £350, and the years after that drop to £250 at which level the op's would have to remain until the end of the fixed period (August 2020). If we were to follow this plan, at the end of the fixed period our mortgage balance would be around about 20k which we could pay off with a lump sum from savings. Mortgage free fifteen years early, at age 36, sounds awesome, and what's incredible is that it also sounds very realistic.
At the moment overpaying is my project. OH and I have our own accounts that our wages are paid into, and a joint account that we feed monthly to pay the bills. As I earn a little more I also do the grocery shopping, pay a few extra bills, and overpay the mortgage. Beyond feeding the joint account OH's income is none of my business, it can be spent on whatever OH likes, same goes for my income. This works well for us - if I want to splash out on a new computer game or a night out or whatever I can do so without needing to consult OH, and if OH wants to splash out on a night out or clothes or whatever no need to consult me. We're both debt averse and savers by nature, so as long as we spend less than what's coming in and all the bills get paid all is well. I'm hoping that seeing the mortgage balance reduce might convince OH to get involved in overpaying the mortgage (or at least split savings into two pots, one 'spendable' short term pot for holidays and home improvements etc, and a long term one earmarked for paying down a lump sum on the mortagage), but there'll be no pressure, if OH joins in that would be excellent, but if not that's ok.
Finally, I know life doesn't always go smoothly - anything could happen in the next 8 years, babies, redundancy, armageddon, "the best made plans of mice and men, often go awry"... But if things don't go to plan, nevermind, we'll have made a great start on the mortgage regardless, any overpayments we make early on will benefit us later on, so we may as well give it a shot while circumstances allow
It's nice to remember that circumstances can go up as well as down too - maybe there will be payrises and good fortune along the way that make achieveing the target easier, who knows!__________
January 2014 Update:
Things have changed quite a lot since I first started this diary... The new aim is to hit the MFiT3 target of a 40k mortgage balance by end 2015, and to have 40k in savings by that time too, making us mortgage neutral 20 years early! Anything can happen, but I think it's time to aim high!
__________
March 2015 Update:
We did it! We are mortgage neutral (savings balance higher than outstanding mortgage) and are locked in to achieve the MFiT3 stretch goal of mortgage below 40k by the end of the year
I'm going to keep this diary going, the aim is total financial independence now! __________
January 2018 Update:
Paid the mortgage off in full today
(12/01/2018) 2
Comments
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That sounds like a sensible well thought out plan - all the best in achieving your goals,
Good luck,
D91 -
Hello and welcome to another squirrel! Good luck in your mf journey.Paid off mortgage nine years early in 2013. Now picking and choosing our work to fit in with the rest of our lives!
Still thrifty though, after all these years:D1 -
A long way off yet but to inspire you more what if you change the length of the mortgage term (as many on here do) to maintain the £250 per monthMy DW and I are both MSE's
I'm Money Saving Expert
She is Money Spending Expert1 -
Hi, and welcome. We have a similar balance to you on our mortgage so will be interesting to keep up to date with your progress. Good luck.Fashion on a ration 0 of 661
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Good luck! I've just started my journey to be a MFW as well with the aim of paying off our mortgage by the time I'm 40 ( so 13 years to go ) I'd love to be able to pay it off in 10 but I thought I'd give myself a little leeway as we're hoping to start a family soon
Looking forward to following you on your journey New House... New Mortgage! February 2017: £144,000 :eek:
Current Mortgage Balance: £96,440.99
2017 OP's:£5,935 2018 OP's: £11,956.00 2019 OP's: £11,988 2020 OP's: £1,998
Total Debt[STRIKE] £29,209[/STRIKE] £0 :j:j:j Debt free 6/8/161 -
Thank you all for popping by
I've received a confirmation letter from our lender detailing the direct debit amendment, but they've somehow managed to get the amount wrong... Monthly payments set to £723.33, not the requested £773.33. I'll have to call them tomorrow to correct this. I've been playing around with the figures and think I might increase the monthly payment to a nice round £800 while I'm at it. That'll serve em right for messing up lol!
I don't plan to have the lender officially recalculate the term of our mortgage. My understanding is that there could be an admin charge to pay, and once the term has been recalculated we are effectively locked in to the new monthly payment. I like the idea of overpaying now, but should circumstances change for the worse have the option to reduce monthly payments back down to the minimum (£523.33) without any hassle. Since we're paying a set amount per month, and the overpayments are repaying the capital at a faster rate, we are effectively reducing the term anyway I think? Am I missing some benefit to recalculating the term? This is all quite new to me so it's entirely possible that is the case!1 -
I'm quite glad there was a mistake with the overpayment amount in the end, gave me a reason to call back - and a chance to ask a few questions that hadn't crossed my mind last week!
- Although statements are only posted out once annually, an online service will be introduced at some point in the future to let us check the balance whenever we like. In the meantime we can call to check the current balance if needed.
- Ad hoc payments can be made if we choose to, either by cheque, at bank branch, or via online banking. Currently planning on just increasing the monthly direct debit and letting all this take care of itself, but if I get obsessive I could shift in the extra few pounds now and then nice and easily through online banking (could maybe sweep in remaining balance from current account on payday, or try selling some stuff on ebay and paying the proceeds in, etc). This might help me get OH involved, the option of paying in a few pounds now and then but not committing to paying in each and every month might suit nicely.
- Confirmed that anything over the standard repayment each month is paying off the capital, meaning every month the amount of interest charged is less and less (far more so than if we were just making the standard repayments). Since we pay a set amount per month, and the amount owed keeps shrinking, each passing month a higher proportion of what we put in is paying off the capital. As we reduce the loan at a greater rate the term gets shorter and shorter. I was advised that a formal recalculating of term is more for customers in the opposite position where they may wish to extend the term to allow smaller payments over a greater period of time, in our case there is no benefit to formally recalculating the loan.
It was also nice getting an up to date mortgage balance figure... Doesn't quite match my spreadsheet, which leaves me scratching my head a bit, but happily the mismatch is in our favour, we owe less than the spreadsheet reckoned!
Today's balance: £82,354.10
Looking forward to putting a major dent in that over the next few years 1 - Although statements are only posted out once annually, an online service will be introduced at some point in the future to let us check the balance whenever we like. In the meantime we can call to check the current balance if needed.
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Sounds like that little mistake turned out to be a blessing, and woo hoo for owing less than you thought!!New House... New Mortgage! February 2017: £144,000 :eek:
Current Mortgage Balance: £96,440.99
2017 OP's:£5,935 2018 OP's: £11,956.00 2019 OP's: £11,988 2020 OP's: £1,998
Total Debt[STRIKE] £29,209[/STRIKE] £0 :j:j:j Debt free 6/8/161 -
I've been trying to come up with ways to make a little extra cash. Overtime is not an option, so needs to be something outside of my regular job.
I'm not sure swagbucks etc are for me, looks like a lot of time needs to be spent on it to earn anything worthwhile. I already use quidco whenever possible, and will keep doing that. I have matched betting, adsense from blogs/youtube, and people per hour, on my 'I should investigate a little further' list.
Does anyone have any other worthwhile suggestions?
Am pleased to have made a very easy first step this morning - just applied for a 3% cashback credit card. It's capped at £100 cashback per year, and has a low £250 credit limit (so no good for booking holidays etc), but I figure if I use it to pay for petrol and weekly shop, and maybe christmas and birthday gifts, I should easily get the maximum of £100 a year cashback. When that's received it can be used as a bonus overpayment £100 a year may not seem like much, but I'd be spending that money on petrol and weekly shop anyway, so getting a bonus £100 a year for no effort at all (other than applying and paying off balance in full each month) seems like a brilliant idea!
If anyone else wants to give it a go, google aqua+cashback. Make sure you pay off in full each month though, massive interest rates mean you have to be disciplined to make any money from it.1 -
SuperSecretSquirrel wrote: »Am pleased to have made a very easy first step this morning - just applied for a 3% cashback credit card. It's capped at £100 cashback per year, and has a low £250 credit limit (so no good for booking holidays etc), but I figure if I use it to pay for petrol and weekly shop, and maybe christmas and birthday gifts, I should easily get the maximum of £100 a year cashback.
You would need to spend £3333 per year to get the full cashback so that would be impossible with £250 limit. Are you able to increase the credit limit after a few months?1
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