Mortgage free & able to live the dream!

SWSEGirl · 12 October 2017 at 9:02AM

Hi all,

I've followed these boards religiously during my epic daily commute & had a thread over on debt free wannabe - although was terrible at keeping up with it

My husband & I bought our first flat in London a year ago with 15% LTV & a mortgage of £322,000 :eek:
This seems to be miles higher than most people on here. We've got a 35yr term & are currently due to finish paying by time I'm 65

obviously the plan is to pay it off much sooner than this.

We're both in reasonably well paying jobs & put roughly £1300 in savings a month, we've got a pot of £10k - but I'm now wondering if we should channel £1000 a month to a mortgage OP (this is the maximum OP we're permitted to make without charges). We're currently OP'ing by £200-£300 pm. If we OP'd by the maximum we could be mortgage free in 15 years!!!!

Our ultimate plan would be to buy somewhere close to where we're both from & hold on to our London flat. This is obviously a long way off - but that's what we'd work towards. The problem is I cant work out if we should be paying off our current mortgage quicker or saving for a deposit.

The added complication is that we would like to start a family in the next year - which will definitely impact one of our earnings & probably our savings pot

At least this diary will help me stay accountable & help us acheive the end goal! :j

SWSEGirl · 12 October 2017 at 9:10AM

A bit more info on our mortgage we're 1 year in to a 3 yr fix at 2.24%.

I'm keen to start throwing what we can save at the mortgage now, especially as I'm nervous about interest rates rising by the time our term has come to an end.

Recent money changes I've made are the basics - taking lunch into work, not spending money on clothes (before the January sales anyway

)

I'm trying to tackle both my & my husband's financial complacency (ie. Laziness) we need to shift our savings into a higher rate interest account for starters.

I'm also keen we both switch accounts to First Direct & use the switching bonus to put towards Christmas.

I'm just generally trying to become more mindful financially & hopefully I can apply this to our mortgage too!

pjcox2005 · 12 October 2017 at 9:18AM

All the points you mentioned around financial discipline is a great start.

There is no clear answer, and probably depends on whether you think you can continue having discipline to save and not access them if they are easily accessible.

Personally I'd have a balance of overpaying the current mortgage slightly as you are but putting the majority in other savings options - start with high paying current accounts & regular savers at around 5%, and I'd then split the rest to start saving in peer 2 peer and a stocks and shares ISA (assuming you are already making pension contributions as if not that would come before it).

For me, that gives greater flexibility for the future to access money if circumstances change, and for I'd expect you'll be getting higher interest than you pay on your mortgage (but worth checking).

When you come to remortgage you could always pay off a chunk then if you need to get to a better LTV by accessing the savings you'll have set up.

SWSEGirl · 12 October 2017 at 10:43AM

Thank you pjcox2005!

I hadn't really considered paying a chunk off when the time comes to remortgage - that is a really valid point.

I think to secure a lower interest rate when the time comes to remortgage, we need to have paid off an additional 5% in equity - in order to get there we need o be paying £800 pm in overpayments, which I don't think we'll hit - although we are able to at the moment.

I just have to hope that interest rates don't increase too much come 2019!

Now to research and get ourselves organised on the savings accounts....

pjcox2005 · 12 October 2017 at 11:21AM

SWSEGirl wrote: »

I think to secure a lower interest rate when the time comes to remortgage, we need to have paid off an additional 5% in equity - in order to get there we need o be paying £800 pm in overpayments, which I don't think we'll hit - although we are able to at the moment./QUOTE]

It may be easier to hit than you expect as the other side of the loan to value calculation comes in to play, so as well as lowering the loan amount by overpaying over the next couple of years, you'll also probably have an increase in house value meaning you ultimately need to overpay less to make that 5%.

SWSEGirl · 12 October 2017 at 12:51PM

That's also a really good point, thank you! According to Zoopla (unreliable I know) our property has increased in value by roughly £8k in a year - so hopefully we can rely on a rise in the value to help us with interest rates. I just hope the current instability doesn't mean that prices drop.

My first steps in maximising our savings & making a little additional cash here and there are as follows:

Switch to First Direct – get £125 bonus
Open Regular Saver Account w/ FD – start SO for £300 pm. (locked away for 12 months) = £3600 over 1 year = £180 interest.
Start SO for £500 to Mortgage – call to check if amount can be split into 2 payments
Put existing £10,000 svaings into high interest Harrods account (fixed for 1 year 1.9% = £190 interest)
Put £400 pm into an easy access account

This should make us around £800 in the next year if my calculations are correct - which would be a nice bonus!

Tropically · 12 October 2017 at 8:21PM

Hello! I am in London too. £318,000 over 25 years! Welcome, good luck.

SWSEGirl · 12 October 2017 at 11:40PM

Hello Topically! :j Do you live in SE London by any chance? I have to say seeing someone else with a similarly terrifying debt is quite comforting! Xx

pjcox2005 · 13 October 2017 at 3:53PM

Can't get the full £10k but may be worth considering Tesco or Nationwide current accounts paying 3% or 5% respectively on I think £3k and £2.5k balances. You could basically open second current accounts to benefit from the rate.

Ratesetter as an alternative which is peer to peer lender has 4.5% rate currently. Higher risk as not protected under FSCA but it is regulated and has had no issues to date. If you're referred in you'll get £50 for £5k invested too, so then refer your husband for the other £5,000 and you'll get another £50 each. So you'd get more like £600 in the first year rather than £190 with Harrods.

Edited to say it appears to now be £100 for the new member so £700 in total with interest for the first year

Tropically · 13 October 2017 at 4:38PM

I do live in SE London! It was the best option for buying a house, as I lived SW before, in Wandsworth, and couldn't find anything I liked to buy.

SWSEGirl · 14 October 2017 at 9:10AM

Blimey - thanks pjcox! That sounds like sound advice - I'm having a financial management day today - so I'll look into all those suggestions - thank you!

Nice to know you're in the neighbourhood Tropically! It's hard leaving the areas you're familiar with, but I'm fond of SE London now & glad that my mortgage is affordable (despite being really high!)

So I'm having a morning of financial shuffling - applyimg for the best accounts etc. I'm also going to draft an email to my employer detailing the reasons I should get a payrise in the new year, so fingers crossed.

I also need to reassess our joint budgets - my husband has had a payrise & my student loan is gone, so we're £600 a month better off than when we bought our flat - although goodness knows where we've been frittering that! :eek:

Mortgage free & able to live the dream!

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