Hurdler's Race to be Mortgage-Free

A question about : Hurdler's Race to be Mortgage-Free

Driving to the track
So... I have posted in the redundancy thread when I decided to take VR, and now I will be starting a new job on 1st August.

Before the VR, I had been overpaying my mortgage by Ј300 a month and dropped it down to what it should be.
I ultimately want to go contracting, so I am viewing this new job as effectively an 18-24 month training and improvement opportunity.
I also have yearnings to become a journalist (currently work in IT) so trying to get onto a part time diploma and have the entrance exam and interview at the end of July.

I decided to give my Mortgage Free diary a bit of a racing twist!
So right now... I'm at home laying out my kit, ready for the race ahead...

here comes the science...
My mortgage is a lifetime tracker with no early repayment/annual limits.
In October, my mortgage provider recalculates the mortgage and sets a new monthly figure. By that time I will have had a couple of months salary and will have an idea of what my monthly income will be. I want to be able to reinstate a couple of things I cut out (HD on my Sky package, for example).
For a long time now, I have been doing something that Martin recommends in having separate accounts for things, so I have a treat account, cash allowance for the week, an account which I use for Oyster Card tops ups - that kind of thing.

I want to have a couple of months of understanding what the extra money will actually equate to. Then I can call up the mortgage provider and overpay by double if possible.
One of the original bank account premier perks I had was a sweepsaver account that chucks a load of money into a savings account at the end of a month. So I am going to use that as my Mortgage piggy bank and will overpay by the monthly amount whenever I have it.

I have noticed that on my online banking I have the previous day's Mortgage balance, so at the moment I am mulling over spreadsheets and how to track this... and that's where my brain runs out!!!

My next post will be around the October timeframe once I know what the recalc and what the real net income is likely to be.

In the mean time, if anyone has any good suggestions for spreadsheet tracking... I'm all ears!

Thanks for reading..

Best answers:

• Welcome and good luck. Respect to you too for following your change of career dreams, that takes guts.
• Hi there - thanks... it's scary as hell as it would mean (eventually) dropping to about a third of what I earn now, hence paying as much off now as is humanly possible.
  But it's what I would ultimately LOVE to do and with experience in IT, I could hopefully supplement with contracting, once I get a lot more breadth to my skills.
• Thanks for the warm welcome, and I'm humbled by the props for wanting to change career!
  I was browsing the Should I Pay Off My Mortgage thread/article - I knew I'd seen somewhere that Martin had suggested squirelling away some emergency money - so I will do that in tandem with the Mortgage Recalculation...
  I think they send the letter out in October, because I normally have to pay one month at the recalculated rate, and then they usually pick up my overpayment starting in December.
  I was debating using some of the capital I have to do the loft extension, because that was the only thing "left" to do - but that depends on the cost.
  I also probably need to sort out the ancient double glazing more than I need to make this a 4 bedroom house...
  So in October I'll start the MFW clock, I'll put away 3 months salary (I'll have been paid a couple of times by then, so I might have a better idea of what my monthly net income is)
  I really hope I can squeeze double the payment - I have a little over 19 and a half years left on the mortgage so paying double will help that down quite considerably.
  I asked this question on the "Should I pay mortgage off thread" but will repeat here. When I was messing about with the Overpayment calculator - I forgot about a couple of ISAs I have which will probably account for 2-3 months towards an emergency fund if pushed. Should I do that and save slightly less of the lump sum, giving me more to throw at the mortgage... or keep it separately and have it as an extra buffer/potential additional lump sums?
• Hi Hurdler, I responded to your question on the other thread. Just one other comment... it's only 3 months salary if you want it to be - the minimum recommended is 3 months of expenses, including mortgage, but not including overpayments.
  It makes no sense to be putting lots of extra money in a low interest savings account when it could be earning more by paying off your mortgage (assuming the mortgage interest is higher than the savings interest). The emergency fund is only intended to cover short term emergencies, so should be as small as you are comfortable with.
  Good luck on your mortgage free journey! What area of IT are you in? I'm a contractor, and there are one or two other contractors on the board, but not many!
• Gah - did I forget to subscribe to that??? Grr I always forget to do that on new threads!
  That is a good point actually re: Expenses/not including overpayments!
  I am a Solutions Architect, mainly in the area of Service Management. I had really REALLY hoped to try and land a contract as I'd set up a limited company just before leaving on the VR - but there was nothing doing at the time, and I really didn't feel I could actually turn down a permanent role - so my approach is to treat it as an 18 month-2 year contract with an opportunity to get some external ticks in boxes (sitting my TOGAF Enterprise Arch exams in a couple of weeks)... they've committed to letting me get some other externally recognised certifications as well, and with a couple of years to demonstrate their application as well, hopefully I can give contracting another crack.
  If nothing else, this role will really help bring down my mortgage at a MINIMUM from 19.6 years to around 9-10 years. The lump sum can probably knock off another year or so.
  I'm just impatiemt now... want to get started on the new job, want to get started on being MFW...
• Looking forward to your positive progress too.. It gets addictive; can I recommend you give some updates between now and October as to how you are progressing? It would be good to get something between now and 3 months time. Well done on such exciting plans though
• Hi Hurdler
  Re you saving up an emergency fund; always a good idea but another aspect of this for you to consider is can you get your overpayments back if you needed to? Each mortgage provider and product has their own terms and conditions but below are some of the variations I've seen on this board:
• can't ever get them back
• can have all of it back
• can have a percentage of it back or those paid over a defined period of time
• can stop making 'normal' monthly payments until all the OP's are used up (this is the kind I've got)

Just something else for you to consider when thinking about savings etc so worth giving your company a call
Regards
ATT

• Hi there all - well thanks to some questions posed by abouttimetoo - I called this morning...
• My interest is calculated Daily, so by my understanding, there is no benefit to timing my lump sum/ad-hoc payments to a particular period... just when I can afford it
• Overpayments are therefore taken off the End of day Balance and I asked him several times to confirm it comes off the capital. I also took his name and made a note of the conversation.
• I ran through the last three months payments with him and established that the balance from Friday COB and the likely balance at the end of today would be in line with the 0.97% rate.
• Thanks to another thread, I discovered that there is an option on my online banking to make payments to the mortgage at any time, from any of my linked accounts at Barclays (including savings) so where I have this Sweepsave function on my current account, I can now use that as my "Ad-Hoc Mortgage Piggy Bank" account.
• I established that my decision NEVER to use the Current Reserve Account thingy attached to my mortgage was the right one!!
• The only fee I have with paying off the mortgage in full (if that day ever comes) is a Ј275 admin fee and the need to buy a strong box for the deeds (well in reality pay for a safety deposit box at the bank, more like!)
• Because I had my payment brought down to what it SHOULD be - it had actually come down by around Ј6 a month because of the overpayments I'd made from December through to April.
  So in reality, it's already BEEN recalculated ahead of October so I should be able to work off double the current amount ... the guy did try and persuade me to go ahead and change it now, but I had to point out to him that I am still living off savings until I actually GET PAID in the new job (duh!)

I have seen mixed reports about Woolwich, and I did ask him what was the catch.. it appears I just managed to get on the right mortgage at the right time with the right terms.
When I consider the hell on earth I was going through around that time, with the recent loss of a parent, an awful time at work that eventually culminated in taking the giant step of applying for Voluntary redundancy, rather than stay where I was all miserable and stressed... well I put it down to karma FINALLY smiling down on me and giving me a small break!
I found an AMAZING SOA calculator so after I have done a bit of revision for some professional certification exams, I am going to fill that in and post here.
Thanks again for all the advice

• I also have one of those fab mortgages with the Woolwich (lifetime tracker +.19% BBR, no limits on overpayments, Ј95 settlement fee) - feel quite smug at the shocked faces when RBS try to sell me a mortgage when I'm in the local branch for work. If only I had a Ј1 for the number of people who tell me that they wish they had my deal!!
  Only downside I've found is that I can't view my mortgage account online, however I notice that you can see your balance. Is that because you have a current or savings account with Barclays? I've even queried it with Woolwich/Barclays on the phone and been told it's not possible, so now I am intrigued! I would love to be able to check my balance daily instead of having to phone or wait on that annual statement popping through the door.
  You seem to be very organised and making plenty of plans and I look forward to following your thread Hurdler. I also wish you all the very best with your plans for your new career.
  A
  xx
• thanks so much for your kind words Ayeshalush - yeah my one not-very-money-saving-expert like thing is I have been with Barlcays since I was about 9 years old (although I DO have piggy banks at pretty much every other bank going as per Uncle Martin's advice!!!)
  So I see my balance only - I can't see into the account, but can pay into it.
  I am toying with the idea of little spreadsheet tables and bar graphs... but then I have to revise for stuff, so BAD hurdler... BAD!!! Step AWAY from the Pivot Tables!
  Edit - I am intrigued - what is the Personal Grocery Challenge?
• Revision has taken a back seat today as I had to go get a filling replace and my face feels like I have done 10 rounds with Mike Tyson!
  So - I've been giving some thought to some account restructuring!
  I reinstated my Sky HD - all in the timing; I won't have to pay the next installment until end of August... when I get paid!
  And then... I finally called time on a now obsolete feature (from when I first had my Premier account) - an automated transfer but sadly to an account that now boasts less interest than a postage stamp!
  In all seriousness... I had a number of savings accounts for varying reasons and I'm now consolidating - using MSE's principle of "Piggy Banking"...
  Savings:
• Share Dividends get automatically sent to this account, and I also used to put expenses paid but not yet due in here to earn a bit of interest - I am now going to top this up to be my "car" account as I bought my company car when I left and paid for it in full, as well as the insurance up front. If I use some of the VR surplus to do this now, then I don't need to start saving until NEXT year after renewing my tax/insurance etc.
• Emergency cash fund/household improvements - at the moment this is booming with leftover inheritance money, and my VR lump sum. Once I get going, I will be making a sizeable payment from this - most likely the tax free part of my lump sum straight into my mortgage. The rest will stay there for any household improvements (new double-glazing for a start).

Other Piggy Banks:

• Barclays Premier Current: Salary account; all major bills/mortgage payments
• HSBC: Every month I put away money to be able to withdraw Ј70 cash each week - between Ј280-Ј350 depending on weeks in the month
• NatWest: Anything left over from the Cash Allowance is thrown here... and this is my treat account. ALL DVDs, BluRays, CDs, iTunes, Dinners out, Takeaways in etc come from here. No money... no treats - it's as simple as that, AND it means I am not tempted to pull out the Barclaycard.
• Halifax: I also put away an extra Ј100 a month to be either weekend party money, or top ups for my Oyster card
• LTSB: Rent received from letting my old flat out; all costs for the flat come out of my main account, so I transfer money from here to my salary account to cancel those out.
• Tesco Clubcard Plus - they don't open these anymore but it's basically a savings account with Tesco, but you get muchos points AND you can use it to pay for your groceries... so I shop there every 2 weeks and use cash for any incidentals in between (milk/bread mainly).... Ј75 per month and earns a little interest too!

I put some of these in place after I got myself into quite a bit of debt when I bought my first flat - I was working in the city and money was just going and I had no idea where! The treat account early days were hard... many a time I couldn't afford to go out as I had no dosh while I was getting myself out of financial trouble - but it was worth developing that discipline.
I want to now get into a habit, over the next two months while prepping to start the MFW race, in rounding up my accounts at the end of the month (when I do my finances) of hoovering up any excess, and once I have enough to match at least half a monthly mortgage payment, then it will be dispatched to overpay!
My aim during 2012 will be to pay double through salary alone, and at least a half, if not a full payment extra (so 2.5-3 times the amount a month).
One last thing... I will throw the VR lump sum in to the mortgage in Sept, once I start getting a salary again. That way the recalculation at the end of September should result in a reduction which may make it a little easier to reach my overpay targets. The downside is that once the recalculation is done, that overpayment is lost... if I waited until after, and for whatever reason left my job, I could at least have some of it back. But on the flip side... IF I left my job/got a journalism job - a drop of Ј123 a month on the minimum payment would be easier to swallow!
Now... after all that I think I will sideways drool while having my afternoon coffee (damn local anaesthetic!)

• OMG - I have to share this - what a total clutz!!!
  I didn't get round to much revision yesterday because of the dentist - so I started making a.... SPREADSHEET (seriously - we should start a drinking game and everytime anyone mentions the S-word we take a shot of whatever is in the house)!
  I had an calculation that took the end balance, added any payments and then worked out the interest. And to my horror I was going to end up owing more than when the recalculation had been done a year or so back! I checked the sums over and over and finally decided to ring the Woolwich and ask them what was going on...
  ... would have helped if I had DIVIDED BY 365 - to get the daily increment!!!
  What a dufus!!!
  Now I have re-adjusted my.... calculating device... and now I am paying just under Ј5 a day in interest - MUCH more palatable than seemingly Ј1500 or so!!!
• Hi Hurdler,
  I am enjoying your diary so far - I haven't been going very long, but agree that it is very addictive!
  You seem very organised and sorted, and have given me a few ideas on how to manage money week by week....
  Good luck with the journey!
  Dragonrider
• Hi dragonrider - it's great if I am able to give you some ideas! I am enjoying reading people's diaries too and have been mulling over a few other ideas.
  My gut instinct for my personal spend is to focus on living as much as possible on the cycle of cash allowance and treat account and avoid using the credit card at all.
  In my old job we had corporate charge cards and we had to use them for flights/hotels etc. I am pretty sure my new company doesn't have anything like that but I guess I will find out on Aug 1st!
  If I am working primarily in the city, I will not bother and just stick with my Barclaycard for emergencies but will focus on using debit cards only where possible.
  If I am doing a lot of travel, I think I will try and apply for the Amex Platinum card and may use it for petrol as well. Not sure yet... Last week of freedom before starting work!!!
  edit: I got a nasty shock to see that the useless hotel I was staying in while up in Glasgow charged me for my pre-paid room and Barclaycard were initially saying that it had been PIN-Verified - well yes for Ј20 of two breakfasts (for which I had the receipt)... not for Ј172.50. So after yelling at them, Expedia (who STILL haven't tracked properly for almost Ј500 with Quidco) and Crowne Plaza Glasgow, I went ahead and applied (and was approved for) an Amex Platinum Credit Card with the cash back elements that have been advertised here.
  As I've decided to try and live within my means wherever possible, I will be mainly using it for Petrol, Oyster Top-ups (if poss) and all travel... seeing as Barclaycard "Rewards" were woeful anyway, it's no loss.
  Most of my petrol should be chargeable back to the company from August and most of my Oyster travel certainly will be, not to mention hotels and flights etc. So hopefully happy days!
  Sorry Barclaycard - I vote with my feet when I have poor service. NO second chances. EVER.
• Oh my. Since joining this sub-forum, I am spending so much more time on elements of MSE than I ever have done since joining. I've normally dipped in and out but this MFW trek has really sharpened my spidey-financial senses!!!
  I happened upon the Income Tax ready reckoner on browsing and armed with my tax code from my P45 I put the numbers in. I had estimated some Ј500 LESS than the ready-reckoner!!! Now of course I have pension schemes to join, and I will be chatting to my accountant as I need to make my Ltd Co that I created initially for contracting dormant and I'm sure that there are some tax hurdles to trip over with respect to having a buy-to-let property too. But anything over what I calculated will be a massive bonus to my MFW plans.
  But I am still erring on the side of caution - SOA will come based on first month's salary and I have finally settled on transferring my tax free VR lump sum to my mortgage at the start of Sept so that it will be taken into account in the recalculation.
  [/but keeping fingers crossed that the ready reckoner is nearer the truth, than not]