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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: cartman1973 on February 04, 2017, 02:48:02 AM

Title: Remortgage Advice Please
Post by: cartman1973 on February 04, 2017, 02:48:02 AM
Hi everyone
I have an important choice to make and I really need some perspectives from you fine folks please to ensure I haven't missed anything important about changing my impending re-mortgage (re-financing I believe it is called in the States).
I found MMM a couple of months ago and it has transformed my outlook on life. I've already made significant savings each month without feeling any hardship - in fact it feels great. The biggest change however was already underway before I learned about FIRE and how to make it happen - and that is my remortgage.
I own a property worth ~145,000, and I owe ~86,000 on my current mortgage. My mortgage is with one of the successors of Northern Rock (for those outside the UK this was a bank that lent things like 125% mortgages and went bust and had to be bailed out by the government a few years back) and I pay 833 per month with 12 years left to run. I've been keen to re-mortgage for years but because of previous bad credit (stupid, stupid decisions on my part) that wasn't an option until recently, when my stupid mistakes disappeared from my credit file.
So anyway, I am approved for a new mortgage with a better company at a significantly lower rate of 2.75% fixed for 5 years (in my view rates can only go up in the next few years given the Brexit situation and associated uncertainty - they certainly aren't going any lower I don't think...) and before finding MMM and realising FIRE could actually still be an option for me (in about 10 years) I decided to pay the mortgage off as quickly as possible. So I left the term at 12 years which gave a new payment of 709 per month rising by 20 per month after the 5 year fix ends. I intended to overpay to reduce the term to 6 years and be mortgage free as soon as possible.
Now, post MMM (and reading all the pay off mortgage or not threads), I am thinking this might be a mistake. If I change the term to as long as they will lend to me, i.e. 22 years instead of 12, the payment should drop from 709 to ~424 per month. Clearly I'll be paying several thousand more in interest over the full life of the mortgage - but the idea is that this change would allow me to save and invest almost 75% of my income each month - meaning I would hit FI in less than 10 years and still be able to afford the mortgage from passive income. The realisation that being FI didn't necessarily mean owning your home mortgage free if your passive income covered the cost was a big one. In this scenario I could retire at 52 or 53, then at 60 I get part of my teachers pension and a lump sum of 30k, at 65 my pension will triple and there will be a 150k lump sum so it seems to me that maximising my time in retirement is the best goal for me (my health is fine but I've always been obese and statistically can't see myself making it to my 80s).
Given my age at 43, and my desire to retire as soon as possible (my job is great, but I can be happily doing plenty of other stuff instead) this now seems the more sensible course of action to me - but I'm still new to this and don't want to screw up this decision. So my rationale is that I want to FIRE as soon as possible. Compounding will help a bit but the savings rate is the more important factor as I understand it, so the plan is to invest the 75% of income saved in Vanguard index funds with the aim of retiring in about 10 years.
Any thoughts/criticisms/suggestions welcome. Thanks in anticipation.
Title: Re: Remortgage Advice Please
Post by: cartman1973 on February 05, 2017, 06:00:00 AM
Okay, nobody is biting...

I think you are way overthinking this, because the difference in interest will likely only be $5-10k. No matter which you choose, mortgage prepayment, stocks, bonds, whatever, you will be better off than if you had blown the money on fast food or booze. Do what you feel comfortable with, and in 30 years, if you chose the less optimal choice, have the intellectual honesty to admit it was impossible to know for sure and pat yourself on the back for not wasting the money on McD's or Budweiser, and realize that you are in a better situation than most of your peers.

That is how I look at it.  It is being saved somewhere.

I think this is a good way to look at it so I am going to minimise the payment, maximise savings/investments and not worry too much - hopefully the savings/investments will enable me to have choices in the future.