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Savings:Mortgage (Read 6081 times)

Oldmanmatt

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#25 Re: Savings:Mortgage
February 22, 2020, 01:05:40 pm
No one has championed the overpaying option so here goes.
Housing costs are the biggest the expense that most people have.  Paying it off early will give a massive amount of freedom as your monthly outgoings will be drastically reduced.  It provides a huge sense of security knowing that no matter what happens your house is yours.   

I overpayed - I paid off my mortgage around 5 years after taking it out.  With interest rates as low as they were, I know it wasn't the most fiscally profitable option.  But I reckon I gained substantial peace of mind from feeling that even if I lost my job, I would have a roof over my head (and one with a woodie and fingerboards installed to keep me occupied).  I know the same money invested elsewhere could have been withdrawn, if required, and used to pay-off the mortgage in a lump sum - but I wouldn't have had that same comfort in the interim.  [I feel it's that slither of freedom to quit that has helped me cope with pronged bad patches at work - I could convince myself that work was somewhat optional - a tiny exercise of volition made me feel less like a wage slave and kept me going!].

Both of these.

Being mortgage free has enabled us to live reasonably well and have the versatility to recover from various traumas ect without also worrying about losing the roof over out heads too. This wasnít always  the case for either of us and we both went from comfortably middle class to almost homeless overnight due to the death of a partner. Make sure your insurance is tight and will pay out.

We have recently taken some equity release though. Got rid of car loans and weíre both retraining/re-qualifying with a view to increasing earnings, now the kids are older and more independent.
I know this isnít a direct response to the OP, however I canít emphasise enough how important this can become, quite unexpectedly. Those with kids, managing traumatised children is more difficult than you expect, take longer and will severely impact career and earning potential.

Sasquatch

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#26 Re: Savings:Mortgage
February 24, 2020, 10:43:22 pm
Does the UK have mortgage insurance? 

shark

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#27 Re: Savings:Mortgage
February 25, 2020, 09:15:44 am
Does the UK have mortgage insurance? 

Yes - there are various policies available to cover repayments due to illness/redundancy etc but itís not mandatory

Bradders

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#28 Re: Savings:Mortgage
February 25, 2020, 09:16:09 am
Does the UK have mortgage insurance?

Not by that name, no.

There has been a huge scandal in the UK over the last decade or so in relation to Payment Protection Insurance, which is similar to US mortgage insurance

PPI was systemically mis-sold by UK banks and building societies, often without people being aware they'd been sold it. Unfortunately that's essentially stopped that sort of product being sold anymore, even where it would actually be beneficial for certain individuals.

Otherwise we have life insurance and critical illness / personal accident based insurance schemes but none of them are mandatory in order to take out a mortgage.

tomtom

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#29 Re: Savings:Mortgage
February 25, 2020, 10:22:05 am
RE: the OP.

Martin Lewis was on the Radio yesterday talking about this - and his advice was keep enough in an account you can access easily in case there is an unexpected need to spend something - otherwise pay off your debts before starting saving.

tommytwotone

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#30 Re: Savings:Mortgage
February 25, 2020, 11:25:54 am
Good thread this - all I can add is that the 3 x salary contingency fund is one of those seemingly age-old figures that's been around for as long as I can recall, so may well be out of date given rises in living costs etc.


Savings accounts at the moment are a case of diminishing returns unless you're willing to be very careful about following the rules to get that elusive good rate, and even then you're unlikely to "make" more than a couple of hundred quid.


If you're happy looking mid-to-long term then some kind of unit trust / fund would be an option and (I think, my knowledge is well out of date on this though) be eligible to be ISA-ed.


Failing that (and this is what we do), stick it all in Premium Bonds and cross your fingers. Still waiting for ERNIE to come up with the goods though.




dunnyg

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#31 Re: Savings:Mortgage
February 25, 2020, 11:28:27 am
Allez ERNIE

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#32 Re: Savings:Mortgage
February 25, 2020, 11:37:29 am
Good thread this - all I can add is that the 3 x salary contingency fund is one of those seemingly age-old figures that's been around for as long as I can recall, so may well be out of date given rises in living costs etc.

Monthly salary? I hope....

tommytwotone

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#33 Re: Savings:Mortgage
February 25, 2020, 12:10:16 pm
Ha ha - yes - 3 x monthly take-home isn't it?

That's certainly been the received wisdom since I did my FPC (HALAM etc) back in 2004, I'd argue it's probably worth revisiting.

The flipside to this is that in terms of emergency fund / situations - and I discovered this when I got made redundant years ago, is that you quickly find out that actually going to work is pretty costly, so your day-to-day expenditure goes down a fair bit when you're not forking out for travel to work / parking / lunchtime sarnie / coffee etc.

And yes - ERNIE hasn't been totally unkind to us, we've had a couple of 10 fuckall payouts. Always quite exciting / bittersweet when the National Savings envelope turns up, only to find out it's only a low value prize!





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#34 Re: Savings:Mortgage
February 25, 2020, 12:25:36 pm
Yeah, i was between jobs for 7 weeks last week. No commute, plus getting the stove top coffee pot out every morning after dropping the kids at school vs a Costa soon adds up.

We're looking at doing a minor extension / conversion this year, so have redundancy in savings vs paying off mortgage, as I know it will always overrun budget..

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#35 Re: Savings:Mortgage
February 25, 2020, 12:39:25 pm
Hasnt the return on premium bonds just gone down the shitter?

Fultonius

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#36 Re: Savings:Mortgage
May 12, 2022, 09:05:05 am
Crystal ball time....

Rates on the the rise. 2yr fixed deal ending soon. Nationwide offering 2,3 or 5yr fixed at 2.59%, or 10yr at 2.29% (plus £1k fee) - most likely won't go for that one!

Seem like the balance of probability is that rates are more likely to go up than down. Upside gain is max 1%, downside risk could be a few %. Not likely to move / remortgage in next 2-3 and probably 5 years....

I've talked myself into the 5yr fixed haven't I! 

petejh

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#37 Re: Savings:Mortgage
May 12, 2022, 09:37:19 am
In higher rates environment, if you're able to pay any extra money off your mortgage to get yourself on the next level up the LTV % then it could be worthwhile to secure a better rate to lock in. More so now we're in a market environment that suggests low returns for a typical investment PF. Always going to be a trade-off though between putting money to work elsewhere, versus paying down mortgage, versus renting even for some people. And everyone's circumstances are unique.
« Last Edit: May 12, 2022, 09:47:42 am by petejh »

Fultonius

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#38 Re: Savings:Mortgage
May 12, 2022, 09:51:51 am
Cheers Pete. We're already on the lowest LTV (should probably borrow more and throw it all on Alphamin!)....

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#39 Re: Savings:Mortgage
May 12, 2022, 10:00:49 am
Market's throwing up some good value currently. Likely to be plenty more bargains ahead to be had for those with cash on the side-lines.

shark

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#40 Re: Savings:Mortgage
May 12, 2022, 10:56:58 am
Crystal ball time....

Rates on the the rise. 2yr fixed deal ending soon. Nationwide offering 2,3 or 5yr fixed at 2.59%, or 10yr at 2.29% (plus £1k fee) - most likely won't go for that one!

Seem like the balance of probability is that rates are more likely to go up than down. Upside gain is max 1%, downside risk could be a few %. Not likely to move / remortgage in next 2-3 and probably 5 years....

I've talked myself into the 5yr fixed haven't I!

What an opportunity. 2.29% over 10 years is likely to be Nationwide paying you to borrow their money in real terms given (RPI) inflation % likely to be above that. Borrow as much you can and invest the surplus. Less risky than soloing.

spidermonkey09

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#41 Re: Savings:Mortgage
September 26, 2022, 11:03:00 am
Reading this again, hopefully you went for the 5 or 10 year fix Fultonius...

We're on a 2Y fix ending next December, so basically not a great spot. I'm planning on looking at sucking up an early repayment charge and remortgaging asap next year in an effort to head off the worst of the rate rises for a few years. To do so any earlier than January '23 would incur double the repayment fee, but it might be worth it anyway. We have some additional cash which we may be able to sink into the mortgage so the LTV won't be as high.

I imagine there are a lot of people in a similar situation, so am I missing anything here that it might be worth looking at?

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#42 Re: Savings:Mortgage
September 26, 2022, 11:08:58 am
I imagine there are a lot of people in a similar situation, so am I missing anything here that it might be worth looking at?

Over 2 million mortgages up for renewal in 2023.....

petejh

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#43 Re: Savings:Mortgage
September 26, 2022, 12:09:04 pm
Crystal ball time....

Rates on the the rise. 2yr fixed deal ending soon. Nationwide offering 2,3 or 5yr fixed at 2.59%, or 10yr at 2.29% (plus £1k fee) - most likely won't go for that one!

Seem like the balance of probability is that rates are more likely to go up than down. Upside gain is max 1%, downside risk could be a few %. Not likely to move / remortgage in next 2-3 and probably 5 years....

I've talked myself into the 5yr fixed haven't I!

What an opportunity. 2.29% over 10 years is likely to be Nationwide paying you to borrow their money in real terms given (RPI) inflation % likely to be above that. Borrow as much you can and invest the surplus. Less risky than soloing.


Just goes to show how short-term our thinking can be.

Also, anyone who took out a 5 year interest-only offset mortgage late last year at below 3%, and who's able to offset it with savings is today able to arbitrage potentially £100s of thousands against their house at 2 - 3% cost and make a near zero risk return of 4 - 5%.

I'm not in that boat unfortunately, got an offset interest only mortgage this summer as rates were rising (literally missed a lower rate by one day) and got 4.2% fixed for 5 years, offset by savings. If savings rates or fixed interest continues rising I may start considering the above.

Fultonius

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#44 Re: Savings:Mortgage
September 26, 2022, 12:28:15 pm
Reading this again, hopefully you went for the 5 or 10 year fix Fultonius...

Yeah, just went for 5yr fixed and feel fortunate with timing. Didn't take out any extra as I'm currently in the process of starting up a solo consultancy and didn't want the extra burden of higher monthly repayments, despite the fact I probably could have made a few % on it somehow. If my current track record with investments is anything to go by, I could also have lost ten times as much*....

Really should get round to writing a summary of my first forays into that world over on Pete's other thread, cautionary tales or whatever it's called  :lol:


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#45 Re: Savings:Mortgage
September 26, 2022, 12:45:22 pm
We're on a 2Y fix ending next December, so basically not a great spot. I'm planning on looking at sucking up an early repayment charge and remortgaging asap next year in an effort to head off the worst of the rate rises for a few years. To do so any earlier than January '23 would incur double the repayment fee, but it might be worth it anyway. We have some additional cash which we may be able to sink into the mortgage so the LTV won't be as high.

I imagine there are a lot of people in a similar situation, so am I missing anything here that it might be worth looking at?

At a guess (no expert etc etc, and ignoring the point around LTV), this depends how fast you can move.

There's  presumably some sort of lag before mortgage fix rates catch up with what banks are now expecting to happen to base rate, but once it does then you'll just end up on something that reflects the expected average rate over the fix period - which means you're protected if it worsens further from the point your deal was priced obviously but you'll also lose out if things fall back.

spidermonkey09

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#46 Re: Savings:Mortgage
September 26, 2022, 02:40:24 pm

At a guess (no expert etc etc, and ignoring the point around LTV), this depends how fast you can move.

There's  presumably some sort of lag before mortgage fix rates catch up with what banks are now expecting to happen to base rate, but once it does then you'll just end up on something that reflects the expected average rate over the fix period - which means you're protected if it worsens further from the point your deal was priced obviously but you'll also lose out if things fall back.

Yeah, I guess this is the crystal ball territory really isn't it. Am I better just taking the next year at 2.19% then fixing again for another 2 years at whatever the fuck the rate will be then...definitely possible things stabilise at least a bit, perhaps even probable.

I can move reasonably quick but I'm reluctant to do anything in the next few months I think as the repayment is a lot bigger; its much more reasonable from Jan '23 onwards. 


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#47 Re: Savings:Mortgage
September 26, 2022, 02:48:24 pm
I think you can lock in a rate 6 months in advance, so you could agree a rate now for early next year and then decide if youíll take it up or not later down the line.

Whether or not itís worth paying the ERC is another matter though.

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#48 Re: Savings:Mortgage
September 26, 2022, 05:02:34 pm
For the early repayment charge it's worth looking at what the rate would be if you fixed it for a longer term (7 or 10 years) and put the money into savings. Does the offset of the interest rates outweigh the charge cost.

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#49 Re: Savings:Mortgage
September 26, 2022, 07:03:22 pm
There's  presumably some sort of lag before mortgage fix rates catch up with what banks are now expecting to happen to base rate.....

Or perhaps not. Judging by what I've seen on the BBC just now there's a few people closing off new deals already until things stabilise and they have some idea what to price at.

 

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