Start As I Mean To Go On [Gorg's MFW]

Gorg · 20 July 2015 at 3:52PM

Husband and I have only signed the mortgage documents today, and haven't even moved yet. But I've been applying advice from MSE to my finances for a few years now with great success, and as this is the biggest chunk of debt I've ever taken on, it seems sensible to cut it down as fast as possible (without causing any financial strain).

The debt is £170,995 (90% LTV of £190,000 plus fees). 25 year term. 3.49% interest fixed for 32 months, standard rate after that.

Combined annual pre-tax income is £50k (approx. £3,300 a month between us after tax etc.). No debts, except a small amount on 0% credit cards (which we always pay off before interest), and my student loan (which comes directly out of my pay).

In addition to what we will spend on the mortgage (around £850 a month), we estimate £600 in additional necessary spending (bills, council tax, food, and saving up to pay off the credit card balance for the furniture we're buying). We also save approx. £350 a month. This leaves us with about £1800 between us per month.

I'm trying to work out how best to use our money for the following aims:

- Pay the mortgage off within 15 years, sooner if possible.
- Buy a new car within 1 year (current car will fail its next MOT, a new or nearly new one would suit us best for the amount of driving we will be doing).
- Have a savings buffer of £6,000 at all times in case of emergency

First steps:
- Actually move into the house and start making our mortgage payments, and see how our actual bills stack up against the estimates [DONE]
- Look into better savings methods than a standard savings account

Feel free to tell me if this seems in any way ridiculous! Open to advice etc.

somethingcorporate · 20 July 2015 at 4:10PM

Looks like you are on plan. Are you both lower-rate tax-payers?

You should consider investments in the longer-term they should provide you with better returns over the long term than your pretty decent fixed-rate mortgage so you may want to balance paying off your mortgage with savings alongside.

Gorg · 20 July 2015 at 4:42PM

somethingcorporate wrote: »

Looks like you are on plan. Are you both lower-rate tax-payers?

You should consider investments in the longer-term they should provide you with better returns over the long term than your pretty decent fixed-rate mortgage so you may want to balance paying off your mortgage with savings alongside.

Yes, we are both lower-rate tax payers.

Another small monthly expense I neglected to mention which will be coming up is our pensions - our companies are both switching over to auto-enrolment, and when they do we are joining the highest possible level of contributions. So that'll be around another £150 between us per month.

I don't know anything much about investments. Looks like I've got some reading to do!

Gorg · 20 July 2015 at 5:13PM

Update:

Have filled out the MSE budget spreadsheet based on our mortgage payments, estimated new bills, and lifestyle expenses (which we aren't willing to change).

Of the estimated £1800/month after mortgage, bills, and current savings, we have approx. £1,100 after our lifestyle/entertainment expenses.

I think our first steps will be to save this amount (or close to it) until we have the £6k buffer for emergencies.

Secret_Saving_Squirrel · 20 July 2015 at 5:57PM

All sounding good, but buying a two year old car will save you thousands and will still be in very good shape, possibly even still with some warranty left. When you are spending a lot on a car, another few thousand doesn't seem to matter, but when you think that amount on your mortgage will be nearly doubled by interest, it is best to save three thousand, say, by buying xthe cheaper car, and by doing so save six thousand on the mortgage.

Secret_Saving_Squirrel · 20 July 2015 at 5:58PM

And I meant to add, very good luck on your mf journey!

gaffel · 20 July 2015 at 7:31PM

Good luck on your journey, I look forward to following.

I guess for your emergency savings ensure you get top rates at savings. At present this appears to be current accounts (like tsb?) which pay 5% up to 2k etc. Having a few of these will be much better than having a paltry savings/isa account at the moment.

Gorg · 21 July 2015 at 1:20PM

Secret_Saving_Squirrel wrote: »

All sounding good, but buying a two year old car will save you thousands and will still be in very good shape, possibly even still with some warranty left. When you are spending a lot on a car, another few thousand doesn't seem to matter, but when you think that amount on your mortgage will be nearly doubled by interest, it is best to save three thousand, say, by buying xthe cheaper car, and by doing so save six thousand on the mortgage.

Sound advice; the only issue with new vs. second hand is that we're unlikely to have all the cash up front (given how soon we are going to need the car), so we were looking at 0% finance options. I'm not aware of any 0% finance options on second-hand cars (although cars aren't my strong point so I could be wrong about that). With the interest on second-hand financing plans (between 2.4% and 4.4% on the cars we are interested in), it seems like we may as well get a new one...

bexster1975 · 21 July 2015 at 1:39PM

Hello gorg

Sorry to contradict but I suspect you will find the money saved on a 12-18 month old car will far outweighs 3% interest you may pay on a used car. It's a matter of preference. Lots of people won't buy a brand new car on the principle that it depreciates so much, so quickly. You can often buy 12 -18 months old. I saved 5,000 on my last car as it was 18 months old and had done 5,500 miles. Even at the more pricey 6% interest rate I borrowed half of the money on via a personal loan I certainly never paid even half of £5000 in interest.

Just a different viewpoint

Bexster

Khrisjun · 21 July 2015 at 2:52PM

Hi Gorg,

Just remember most loan providers for cars will allow you pay the debt off sooner so you can always save the interest, but you can never get back the depreciation!

KJ

AlanP_2 · 21 July 2015 at 3:59PM

Depending on how quick you want to pay that car off don't discount a 0% credit card deal for a 2nd hand car over 18-24 months.

Start As I Mean To Go On [Gorg's MFW]

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