New Mortgage - WWYD

[FollowYourOwnNorthStar]

I have just become a home owner (yea), and it’s slightly daunting to think I now have a mortgage until I am almost 70.

I feel a mix between wanting to eat noodles and throw every last cent at the mortgage to try and reduce it, vs realising that this is a marathon, not a sprint and I need to pace myself in terms of extra repayments etc....especially as I still need to buy furniture and fix some essential broken things in the property etc.

Does anyone have any tips as to how to strike the balance? I’m just feeling a bit overwhelmed at present.

I know it's exciting / scary at first but you'll get used to it. At the moment, since you have other expenses coming up, I'd just make the required payment and no more. Use your money to do those essential maintenance jobs and to buy what furniture you need. As time goes on and you've got everything fine and dandy again, then you can make a budget and think about putting some extra money on the mortgage.

For the foreseeable future, you should make your standard monthly payment and work diligently to build up your savings. Having substantial savings is critical to cover emergencies, sickness, home repairs, and the possibility of losing your job. Don't even bother thinking about how long the term of your mortgage is right now. It really doesn't matter. There is no reason to be overwhelmed.

At the early stages even a small overpayment has a big effect on the mortgage term.

Try and pay a little more per month, there's loads of overpayment calculators online to illustrate the benefit.

I think its sensible to over pay, as having a mortgage to 70 does sound grim, and if the mortgage is over a long period you do pay a large % in interest.
Why not check out one of those calculators online to see how much extra a month it would take to bring it down to 60?
Theres a balance of living in the now and making a few sensible decisions to aid retirement, even if it sounds way off.
Last week a lady at my workplace was made redundant at 60, got a nice little package. Youd imagine she'd take the opportunity to retire, but unfortunately she's still got her mortgage and needs a full time job on 25k plus to support herself. I'd hate to be in that position.

Money saving expert has a great over payment calculator which shows how much interest you'd save and how many years early you'll repay it if you over pay varying amounts.

The more you over pay in the early years the better. I would (and we did) set up a direct debit over payment for what you can afford (£62 for us, made it up to a nice round number). When we remortgaged we shaved 4 years off the term. We then bought our 2nd home and were able to extend the term again allowing us to borrow more. We now pay off £50 more.

Buy your furniture, get a few savings under your belt then set up a direct debit for over payment. Set a reminder in your phone for 6 months so you don't forget.

And congratulations on your first home.

Can you take on lodger or do air b n b and use money to over pay?

For the foreseeable future, you should make your standard monthly payment and work diligently to build up your savings. Having substantial savings is critical to cover emergencies, sickness, home repairs, and the possibility of losing your job. Don't even bother thinking about how long the term of your mortgage is right now. It really doesn't matter. There is no reason to be overwhelmed.

Great post. Agree with every word.

I also agree with that post about not worrying about it for now. Sort out furnishing the place, having some savings put by and worry about overpaying later. Maybe pledge to try and live on your current income and put any pay rises, bonuses etc into overpayments once you have a decent emergency fund.

Anyway, with interest rates being so low, the savings are nowhere near what they were, and you could even get better rates in savings. I know I can.

If I doubled my mortgage payment, I would apparently save a grand total of £1270 in interest. Only I wouldn't because that money would earn £1400 if I just left it in my current account for the same period, so overpaying would cost me money.

Will early overpayments bring your loan to value down below 80, 70, or 60% by the time you next re-mortgage? If so it might be worth doing what you can.

When I first got a mortgage I continued paying what I have been paying in rent so it didn't really feel like 'extra'. It made a big difference in the first couple of years of the mortgage and allowed a re-mortgage to a better rate quite quickly.

Thanks for the advice everyone. To answer some questions:

• this is my ‘forever’ house. Short of a major life event (marriage and kids, or getting a job in another city), I will be here along time. Even if either of this things happened, I would still probably keep the house as it could be used as a family house or a rental.
• I have a very good mortgage and a low rate. I can’t see myself remortgaging anytime soon as what I have is very good.
• I have rounded up my direct debit to the nearest hundred each fortnight, so I am already overpaying slightly and I could probably stretch and overpay an additonal 300 pounds/fortnight. This is the bit I am unsure about. I don’t know whether to build up savings, furnish my house, do some necessary home improvements, or overpay the mortgage. Or , divide the money and do all four? I feel like all the online calculators and books saying “pay more now! Pay less compound interest!” Is skewing my thinking.

Ideally I would like to get the mortgage down to be paid off at 60, butI also feel like I need furniture and this work done!

I feel like all the online calculators and books saying “pay more now! Pay less compound interest!” Is skewing my thinking

They're outdated. You know like recipe books still have 'turn on the oven' as the first step because ovens used to take ages to heat up, but they don't any more so all you're doing is heating an empty oven while you find ingredients, chop, mix etc.

If your mortgage rate really is very good and low, the amount of interest will be relatively small, and it's likely you can get more in savings anyway, or at least a similar amount. So it won't cost any extra to put the money in savings instead.

Or the amount of interest charged while you buy furniture will be tiny and a small price to pay to have a nice, properly furnished home instead of sitting on orange boxes while you rush to pay off your mortgage.

You've done the right thing. I'm sure you know that. Just think of the alternative - you'd still have to pay out every month but rent never stops. It carries on after age 60, 70 and forever. At least eventually the mortgage will be paid off and you'll have something to show for it.

In your position, I would (and did) do the essential work you need to do to your house first and then buy your furniture. Make your house lovely to live in and make sure it all works. Then build up some savings so you have something to fall back on should something go wrong with your house or for whatever reason. Then start over paying the mortgage. We are now in the positive to overpay and it’s great, but I’m glad we did some of the big things that needed doing first (like the kitchen).

I worked on the basis that I would make my home lovely, buy nice bedding, furniture (very very expensive lovely furniture that will last longer than I will, but second hand so cheaper-expensive), big TVs, robot Hoover, robot lawn mower etc etc and make my home into a blissful low maintainence retreat. Then I could overpay my mortgage and live a life of luxury while being broke! It worked brilliantly and I didnt really feel skint while I overpaid my mortgage by about 4 x the monthly minimum.

I would be inclined to put my "overpayment" in a savings account and take out a lump sum at the end of the year leaving an emergency fund. Once you put the money into the mortgage you can't use it for those things that crop up during the joyous moments of homeownership leaky roof/bolier on blink etc. Have fun though having your own home is something to enjoy x

Thank you Pjandbaileys I am so excited and proud to own a home (I felt so proud to sign the property contract, as a single person it took quite awhile to build up a deposit, and then to find this house I love....it felt like such a monumental achievement signing on that dotted line!)

I just feel like a buzzing trying to unpack all different rooms, leaving them half done when I don’t have the furniture for them, making lists of all the things I don’t have, calling workmen to fix some essentials straight away (washing machine??)

I just want to make sensible financial decisions and not look back and not remember what I spent mine on and wish it was on making the mortgage a bit easier.

But what BarbaraofSevillle and Peacocking said has struck me - I don’t want to spend a year on orange crates! It seems to be better to buy good quality things, then have a nice place to call home and to spend nights at home in, when I tighten my belt and overpay the mortgage, rather than the opposite of sitting on orange crates and bean bags for a year being miserable and doing it in reverse. If I aim to have the furniture within a year, the interest savings between the first or second year are minor.

Thanks everyone! This is secretly what I wanted to do, but I was worried I was thinking with my heart and not my head.