Project 2018

I've been lurking a while so I thought I'd post my thoughts!

We bought our house in 2007, with a mortgage of £235,000. The mortgage was ported from the previous property with part 4.5% and part 6.2% fixed (as this was pre credit crunch!) Repayments were a whopping £1500+ per month (ouch!)

Nine years later the balance is £91,000 and I've repaid the ported amount and switched the fix to 2.99%. The repayments are now just over £600 per month.

The fix only allows 10% repayment per year so I do that every year and put the rest in an ISA. The aim is to have enough in savings to pay the remaining balance when the fixed rate and associated restriction comes to an end in July 2018. This requires an 'overpayment' that actually goes into a savings account of £1500 per month. Currently saving £1600 per month so I am on target to do this. Every month I use the mortgage overpayment calculator on MSE to check I am on track.

If it goes well the savings will meet the mortgage balance before the end date dictated by the fix. Due to the interest I earn on the savings and the penalty on the mortgage, ditching the fix is not worth it.

I'd be interested if anyone else is taking a similar approach?
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Comments

  • For your savings is that a S&S isa or a cash isa. As with the changes to interest and tax coming in from april, a cash isa isn't the best bang for your buck. You can find 4,5,6% interest rate current accounts, where you'd be able get £500- 1000 pounds a year tax free interest depending on if you're a hrt payer or not.

    You could always shift that into a cash isa again in future years if the interest rates improve on those. If it is a S&S isa though then that's different and you're probably best keeping that as is.

    You've done amazingly though to get it down to £91k, keep up the good work.
    MFW OP's 2017 #101 £829.32/£5000
    MFiT-T4 - #46 £0/£45k to reduce mortgage total
    04/16 Mortgage start £153,892.45
    MFW 2015 #63 £4229.71/£3000 - old Mortgage
  • turtlemoose
    turtlemoose Posts: 1,640
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    How much interest are you getting on your ISA? could a current account beat it?
  • Hi Ms Bristol,


    http://forums.moneysavingexpert.com/showthread.php?t=4167417

    Supersecretsquirrel is going for mortgage neutrality and like you is limited by the 10% and a fixed term. He uses more than an ISA and has an interesting approach to savings and investment.
    Would recommend reading his thread

    Our mortgage started in 2012 at the same level as yours. I can't envisage what £91k feels like so good to hear you've managed it.
    Good luck.

    MIB x
    MFW2020 #5 £2,000/2,000 MFW2021 #5 £1,850/3,500MFW2022 #5 £3.001/3,000Sep'12 £233,750 Jan'15 £222,329 Dec’21 £139,584 MFiT T4 #24 £48k/£34k MFiT T5 #24 £22,186/£41k MFiT T6 #24 £4,700/£29k
  • Ms-Bristol
    Ms-Bristol Posts: 27
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    Thank you for your replies and encouragement. The savings are in various ISAs and bonds, probably not earning the highest rates I could get but they are really just a holding pot whilst I can only pay 10% a year. It is only relatively recently that I have had surplus like this because in the first few years the 10% was a more significant figure so I didn't bother with savings.

    The next milestone is July when the new year starts for the 10%. I'll be in a position to pay the entire 10% on the first day so I'll then save about £60 a month (which will go into the pot!) from then on.
  • User1489
    User1489 Posts: 400
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    Hi Ms B - Man v Mortgage here,

    I've just started and also have a 10% rule - are you absolutely certain when your 10% year-ends are? I thought mine would be the anniversary of the product but it's actually Dec 31st - although you got me questioning that now! I'm with the H@lif@x.

    I will be offsetting in future, but yes, until I hit the 10% rate I will be plugging it into the mortgage pure and simple.

    Bon chance!

    MvM
    Baby Step 1 - £1k Emergency Fund - COMPLETE
    Baby Step 2 - Pay off all debts except the Mortgage - £9,326 to go
    Baby Step 3 - Save 6 months of expenses into full Emergency Fund - £4,300 to go

    Baby Step 4 - Put 15% into Pension
    Baby Step 6 - Pay off the Mortgage early
    Baby Step 7 - Live like no-one else :D
  • Ms-Bristol
    Ms-Bristol Posts: 27
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    edited 11 September 2016 at 9:57AM
    I paid 10% throughout the year that ended 30th June 2015. Then on 1st July 2015 I had enough to pay the full 10% at the start. I am now waiting for 1st July 2016 so that I can pay the next 10%.

    So this will be my second year of paying the full 10% at the start. The bank confirmed this date a while back when I queried it. I am not sure what this is the anniversary of but it might be related to the product rather than when I took out the mortgage.
  • User1489
    User1489 Posts: 400
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    Which bank are you with MB?
    Baby Step 1 - £1k Emergency Fund - COMPLETE
    Baby Step 2 - Pay off all debts except the Mortgage - £9,326 to go
    Baby Step 3 - Save 6 months of expenses into full Emergency Fund - £4,300 to go

    Baby Step 4 - Put 15% into Pension
    Baby Step 6 - Pay off the Mortgage early
    Baby Step 7 - Live like no-one else :D
  • chelseablue
    chelseablue Posts: 3,289
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    Our mortgage started last month and we owe just over £230,000.


    Curious to know how you got yours down to £91,000 in nine years??


    Please share your secret! :)
  • Our mortgage started last month and we owe just over £230,000.

    Curious to know how you got yours down to £91,000 in nine years??

    Please share your secret! :)

    It is not really a secret - you just have to shovel all spare funds into the mortgage! If the bank let you borrow that much money, you'll have an income to pay much more if you are prepared to be a bit frugal.

    I started by putting all my savings into the mortgage (no point earning tiny amount of interest when the debt was costing over 6% a year). Then I set up an overpayment each month, which I increased over time. Then it starts to snowball because the bank reduce the monthly payments to retain the length of the term. When the payments are lowered, the overpayments can be increased without paying any more per month.

    There is lots on here about saving money and I have done all that good stuff (pay-as-you-go phone, no Sky TV, own an old car, etc, etc.) It gets quite addictive! I have averaged £800 a month overpayments but this month I paid £2000 into my savings account at the start of the month which will go towards the 10% overpayment in July.
  • Kittenkirst
    Kittenkirst Posts: 2,563
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    Fantastic work so far MsB!

    I'm yet to start my mortgage (buying a new build which should be ready in Sept time, awaiting mortgage confirmation), but am avidly reading this board and trying to get into good habits!

    Reading threads like you've started are really inspiring. I shall be subscribing and cheering you along :T
    First home- Oct’16 until June’21: £170.995- Overpayments made £13,784 (25% extra!).
    New forever home- Sep’21 £309,449 @ 2.05%. Plan to clear it before 30 years!!!!!!
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