Can someone help me with some numbers? (mortgage payoff..)

[skip207]

Mrs Skip wants to pay off the mortgage.  Can anyone help me crunch the numbers?

FIRE date, Q4 2022 (FWIW)

Rate 2.79%
Balance 199,000
Payment 1150 PCM
Overpayment 500PCM
Total payment 1650 PCM
Max allowed overpayment 20% balance
Rate set till Dec 2020 when we have to remortgage lets say at 3.5% for round numbers.

Mrs Skip wants to pay c.34000 off now and then c.32,000 in 2019 and c.30,000 in 2020.  Leaving roughly a balance of just under 90k (if my maths are correct) at renewal time (vs 170k if we just carry on with the basic 500 pcm overpayment).  Then pay 90,000 lump sum rather than renew for another say 20 years.

Assuming 4% return at minimum what is best?  I am not quite sure the best way to calculate.

The basic numbers I see is the mortgage rate never goes over 4% (in this example) so it must be best to invest but I also need to consider my FIRE date is quite close so would be nice to have much lower payments, although I factor in a payment of 1k into my FIRE budget so ????!!

[skip207]

From my POV I am also mindful of being able to buy the dip, so having some spare cash is a good thing IMHO but ploughing it all into bricks might be a problem if there is a big dip we wont have the cash - pretty sure my broker does not accept bricks..

[EnjoyIt]

Sorry to not answer your question, but just curious.  Do I have that right that you can only overpay your mortgage by 20%?  Is that 20% per year or per mortgage/refinance?  How often are you forced to refinance?  Can I assume these types of mortgages are common in the UK?

Historically investing should beat out a low interest rate mortgage of 2.79%, 3.5% and even 4%.  Though I fully understand wanting a lower fixed expense in FIRE.  Is there a way to judge your mortgage payments so that it is payed off around the time you FIRE?

[skip207]

Allowed to pay up to 20% overpayments per year so for me that kicks in on 1st Dec each year.  Currently we only overpay around 3%.

In the UK discounted rates are common, either fixed or variable rate.  2,3 and 5 years being the most common.
We took out a 5 yr fixed rate of 2.79% coming up for 3 years ago.  Most lenders have a "standard bank rate" of around 4-5%.  You default to this rate at the end of the discount term, so the majority of borrowers take out another discounted agreement at the end of their current agreement.

[skip207]

Well just an update, we paid it off - all of it. 

The bank made a small surcharge but it was just the right time for us.  Was quite surreal going into the bank and putting our debit card in the machine and pressing the green button to send the money. 

I don't think its quite sunk in yet, today we had a letter from the land office telling us the charge on the property has been removed.  Started to get a bit more real.

We can really now get our heads down and start to plan for FIRE in a few years.  Knowing that the mortgage is gone means we just have to get the pot to a point where we are happy as there are no other demands on our finances.

[Adam Zapple]

Congratulations!  Must be a great feeling.  I dream of putting my head down and plowing through the remainder of our mortgage balance almost daily.  I really think I'd be happier for it.

[MrThatsDifferent]

Well just an update, we paid it off - all of it. 

The bank made a small surcharge but it was just the right time for us.  Was quite surreal going into the bank and putting our debit card in the machine and pressing the green button to send the money. 

I don't think its quite sunk in yet, today we had a letter from the land office telling us the charge on the property has been removed.  Started to get a bit more real.

We can really now get our heads down and start to plan for FIRE in a few years.  Knowing that the mortgage is gone means we just have to get the pot to a point where we are happy as there are no other demands on our finances.

Congratulations on achieving what you want. Obviously that’s a big expense removed, although I’m always surprised when people at like there are no more expenses at all with home ownership. I’m not sure what’s in the UK, but there’s still generally: insurance, repairs and taxes, which are all ongoing expenses.

So you just depleted your FIRE savings by $200k, how will this impact your FIRE goal date of 2022?

[skip207]

Yes there are still outgoings, around 500 a month.  Still aim for late 2022... maybe end up in OMY but push hard for 2022 and see how that goes.  Our number was 850k to give FIRE budget of 30-35k.  However we can now FIRE on 20-25k so we can in theory reduce to 500k but we still push for 850 and will see how that goes.