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This is a question Money-saving tips

I'm broke, you're broke, we're all broke. Even the smug guy on the balcony with the croissant hasn't got two AmEx gold cards to rub together these days. Tell everybody your schemes to save cash.

(, Thu 10 Nov 2011, 18:09)
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Save £1000's...
Bit of a long-term one...

You will need:
1) Standard 'repayment' mortgage.
2) Interest bearing 'savings' account.
3) Job that pays more than you usually spend.

At the end of each month, bung as much as you can, of any spare cash you have, into the savings account.
Your mortgage will have an 'anniversary', at which point (Debt + Interest - Repayments = New Debt) will be calculated along with your new repayment rate.
About one month prior to this, empty the savings account (maybe leave £0.01 in it, just to keep it ticking over) and use the money to make a "CAPITAL REPAYMENT" on your mortgage. This reduces the Debt figure in the above calculation and, therefore, reduces the new repayment rate - which means you will have MORE spare cash to bung into the savings account so that, at the end of the next year...

Note that there may be a 'penalty' for doing this in the 'early' part of the mortgage (usually the first four years) - you need to do the maths to see if it's worth it; but once this period is over it DEFINITELY IS worth it.

Over time, you will pay off your mortgage years, perhaps even decades, earlier and will save literally thousands of pounds.

Mortgage companies HATE this.
I've done it, it works and I LOVE it.

(Apologies for lack of teh funneh)
(, Tue 15 Nov 2011, 15:36, 5 replies)
We have friends who save their money in a poxy account paying about 2%, but won't use the money to pay off the mortgage they're paying over 5% on. Doesn't make sense to me.

Also, use credit. Use credit cards to make small regular payments and pay them off before any interest accrues. Do anything you can to improve your credit rating. This way, if you ever do need to use credit properly it will cost you a huge amount less. The system punishes good payers who never use credit. If you have never taken out any credit and pay every bill up front with the money you've earned you'll be dead in the water when you need a mortgage or any opther form of credit.
(, Wed 16 Nov 2011, 7:08, closed)
Out of curiosity
any idea if zero percent credit deals have the same effect?

I'm a whore for those, I see little downside. My bike and car are on zero percent deals.
(, Wed 16 Nov 2011, 9:30, closed)

It's much simpler than that...

Most mortgages allow for overpayments without paying an early redemption penalty anyway; check your mortgage offer. Most mortgages will also have an early redemption penalty, but the period over which it extends depends on the deal you bought e.g. 3 year fixed rate, 2 year discounted rate etc.

With the exception of some fixed rate mortgages which maintain the same repayment throughout the fixed rate period even if you overpay, any overpayment will have an immediate impact on the capital remaining and the interest payable. Unless you can afford to overpay more than the amount allowed without incurring a penalty, or the lender doesn't allow overpayments at all, you'd be better off making the overpayments immediately i.e. on a monthly basis. The production of the annual statement means cock all, it's just a statement of how much you owe - it doesn't in itself trigger a recalculation of the monthly repayment.

Incidentally, this will apply to interest-only as well as repayment mortgages. Considering the 'usual' mortgage term is 25 years, I'd be surprised if anyone could knock decades off their mortgage term by chucking spare cash at their mortgage each month.

There are plenty of offset mortgage calculators online which you can use to estimate the number of years/months you can knock off your mortgage term by offsetting savings, salary or by making overpayments.

Mortgage companies don't give a shit if you repay early. They're still getting their interest and have received their fees.
(, Wed 16 Nov 2011, 8:08, closed)

Well, the way mine worked was that the monthly repayment figure was recalculated annually as I outlined (y.m.m.v.) and the savings account was used just to accrue some interest on the cash you were stashing.
Yes if you can overpay, and if it does take immediate effect, then that's probably better. However, you have to budget for regular overpayments; my way of doing it is a bit more flexible in that, if the excrement impacts the rotary air-moving device, you could use the 'spare' cash for some other purpose - rather than being committed to making overpayments.

Yea, 'decades' was a bit of an overstatement :-D (I think I only managed to knock just over ten years off mine).

Tell you what though: I was surprised at just how quickly my repayments went from "Shit - how much!" to "Shit - that's less than a round of drinks!!!"
(, Wed 16 Nov 2011, 11:24, closed)
Just overpay the mortgage each month by the amount you put into your savings. Most (actually, not sure about that, maybe 'many') finance agreements calculate interest on a daily basis, so the earlier you overpay, the more effect it has.
(, Wed 16 Nov 2011, 13:41, closed)

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