With lousy interest rates on savings, (mine has been reduced from 1.1% to 0.85% without the building society bothering to tell me), this headline caught my attention this evening.
Are you one of the 2 million homeowners paying £300 a month too much? (source)
I am not a financial expert or advisor, but for anyone in the UK with a mortgage (or even elsewhere if this can apply to you) it is worth reading.
For once the writers mention ‘FEES’, and although not exactly clear how much one would pay, £1000 is mentioned towards the end of the article, and of course this should be considered when trying to save money.
The hidden charges for switching accounts, mortgages or whatever could almost wipe out any overall savings and many people could get caught out, so always ask the question.
Also, the amount of the mortgage debt to save this amount each month isn’t stated.
Hubby and I paid our mortgage off in 2002, having halved it in 2001 following my redundancy and using my entire final paycheck to do it.
The following year, we cashed in our endowment which had had almost all of the profits wiped off it by the company to pay out on policies due to mature that year, used what remaining savings we had, and paid off the rest.
It left us with around £200 in the bank, but it was the best thing we ever did.
When we bought our first house in 1990, we were clobbered by negative equity, and it took 6 years to sell. We’d changed our mortgage from an endowment to repayment (keeping the endowment going as a savings plan), which meant that the longer we had to stay in our house, at least we were nibbling away at the capital debt and not just the interest. When interest rates fell, we maintained our higher payment, and knocked 3 years off the original 25 year mortgage term.
Six years of frugal living enabled us to cover the £15K shortfall, pay all our legal fees and a 5% deposit on the next property and start over with a new mortgage for £56,000.
House prices were sensible then and it was not impossible for young people to get on the property ladder.
Two years later, we moved on, took out another mortgage, and again kept our repayments the same when interest rates started to fall, thus reducing our term further.
What wasn’t explained properly was that we could have paid 10% extra as a lump sum every year without penalty, but it came across as should we want to pay off any lump sum, we would have to pay extra to do so. In fact, the building society charged us £800 to pay off £22,000 in 2001.
Moving debt around, be it mortgages like this, credit card balances, or even loans, is the way to save money these days.
IMO it is pointless saving regularly for a rainy day, as it always pours, and you’ve got nothing to show for your efforts. In fact it is rumoured that it may become policy for banks to charge YOU interest on your savings!
Most of us don’t have large sums of ‘spare cash’ to play the stock market and shares game, and gambling at the dogs or on the horses isn’t really the way to go either.