Pay Off Your Mortgage in Two Years

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Pay Off Your Mortgage in Two Years
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dpack

Joined: 02 Jul 2005
Posts: 46211
Location: yes

Posted: Thu Jan 05, 06 12:58 am Post subject:
ummm :cyclops:

Treacodactyl
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 25795
Location: Jumping on the bandwagon of opportunism

Posted: Fri Jan 06, 06 7:56 am Post subject:

I saw the first half of the programme and it didn't seem that useful to me. Just the usual don't spend tons of money on gadgets, save money by making your own pack lunch and stop smoking. As I often find with thse programmes they pick the easy cases and it would be good to pick a family who don't chuck their money away as easily. It also anoyed me when the bloke made his own pack lunch but used packaged ready-sliced corned beef.

I suppose we could write our own simple guide if anyone is interested?

Will

Joined: 30 Jun 2005
Posts: 571
Location: Grenoside, Sheffield

Posted: Fri Jan 06, 06 9:17 am Post subject:

I think I endured a bit longer than TD - enough to see the slimming club and the NLP home study.

What intrigued me was that the emphasis seemed to be on banking cash rather than actually paying off the mortgage...

...and a vague worry that the children didn't seem to feature that much in the plans - somebody must have been looking after them while the parents were off doing caberet...

Faith in BBC2 was restored by Three Men in a Boat afterwards though.

Northern_Lad

Joined: 13 Dec 2004
Posts: 14210
Location: Somewhere

Posted: Fri Jan 06, 06 9:20 am Post subject:

Treacodactyl wrote:

I suppose we could write our own simple guide if anyone is interested?

Step 1: Make things yourself
Step 2: Don't spend your money on carp
Step 3: Gerroff yer arse and do stuff!

Behemoth

Joined: 01 Dec 2004
Posts: 19023
Location: Leeds

Posted: Fri Jan 06, 06 9:23 am Post subject:
Yes - those fish are expensive.

Northern_Lad

Joined: 13 Dec 2004
Posts: 14210
Location: Somewhere

Posted: Fri Jan 06, 06 9:24 am Post subject:

Will wrote:

I think I endured a bit longer than TD - enough to see the slimming club and the NLP home study.

I watched most of it, and it seamed to have good bits and bad bits.
I really don't like people who say there's no such thing as "if" and "can't". An old boss went on a course and just picked up the buzz words and started saying "There's no such word as can't": to which I asked he "Can you jump over this building?" Confused the heck out of her for and hour until she admitted that she couldn't.

Will wrote:

What intrigued me was that the emphasis seemed to be on banking cash rather than actually paying off the mortgage...

Was rather an odd one - they may have a penalty clause preventing overpayment though.

jema
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 28234
Location: escaped from Swindon

Posted: Fri Jan 06, 06 9:44 am Post subject:

Northern_Lad wrote:

Will wrote:

What intrigued me was that the emphasis seemed to be on banking cash rather than actually paying off the mortgage...

Was rather an odd one - they may have a penalty clause preventing overpayment though.

Quite likely, the mortgage is our priority and we are now at the stage where we need to bank rather than pay.

Got this programme recorded, but it don't sound like it is going to say much useful.
My money saving attempt of the week/year is to try and reduce food waste more (though we are already pretty good these days) by trying to buy for our actual daily needs apart from meat for the freezer, and a few handy tins.

Treacodactyl
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 25795
Location: Jumping on the bandwagon of opportunism

Posted: Fri Jan 06, 06 10:08 am Post subject:

Northern_Lad wrote:

Will wrote:

What intrigued me was that the emphasis seemed to be on banking cash rather than actually paying off the mortgage...

Was rather an odd one - they may have a penalty clause preventing overpayment though.

This is the sort of thing I was thinking about. What would be useful would be to explain to people the differences in mortgages. Some you can pay money into right away and it will make a difference, some have the interest calculated once a year so pay into a high interest savings account until the money is needed etc...

Getting the slimming windfall and trying to get second jobs is something I feel wasn't much use, but then the title of the programme is misleading IMHO. Take someone who has just bought a house. Often the mortgage would be something like 3x gross salary so paying off in 2 years wouldn't be possible. A more reasonable programme would be why take 25yrs when you can do it in 5-10?

Will

Joined: 30 Jun 2005
Posts: 571
Location: Grenoside, Sheffield

Posted: Fri Jan 06, 06 10:33 am Post subject:

Treacodactyl wrote:

Northern_Lad wrote:

Will wrote:

What intrigued me was that the emphasis seemed to be on banking cash rather than actually paying off the mortgage...

Was rather an odd one - they may have a penalty clause preventing overpayment though.

Exactly - our household income is lower than theirs, and our mortgage higher despite having less years left. We've cleared the student loans and will pay off the car in the next few months. However we've put the money saved into increased expenditure rather than paying off the mortgage - and probably will continue to have to do so if we start a family - but that doesn't mean that you can't make prudent decisions about the rest, and probably pay off more of the mortgage if we wanted to.

The second job thing comes down to work life balance - they had obviously convinced themselves that evenings (and child-time) were worth sacrificing for a couple of years for the sake of being mortgage free. Not many second jobs pay as well as entertaining.

How do you spend �5 on lunch every day, incidentally? My old firm offered that as daily expenses when working away, and I never managed to spend it. The cod calculations p*ssed me off as well - almost nobody in employment (rather than self-employed) works 52 weeks a year.

The novelty factor of being a stage hypnotist seemed to be more the point of the programme than anything about financial management.

barefoot_boo

Joined: 06 Aug 2005
Posts: 399
Location: Wiltshire

Posted: Fri Jan 06, 06 10:52 am Post subject:
I watched it too and thought it was a pile of pap. As someone else said it's easy to economise if you're fairly frivilous to start with. I'd would have liked some tips on how to shift a mortage more quickly if you're already thrifty in terms of your disposable income.

camper

Joined: 30 Dec 2005
Posts: 10
Location: SE London

Posted: Fri Jan 06, 06 11:39 am Post subject:

I agree with the comments posted above. I watched the programme too, but didn't really get that much out of it with regards to how to stretch my own income in order to pay off many thousands of pounds of mortgage debt by the end of the next two years. The family had only made an extra �10,000 by the end of the first year so they have a VERY long way to go to meet the other 60 odd thousand.

Maybe the other programmes in the series might be serve to balance it out as we were only seeing the circumstances of that particular family. In the coming weeks they'll be featuring different families with different circumstances, so we may get a different slant on things.

I will watch it again, but wasn't too impressed with last night's show and got a bit bored halfway through.

I do think that the claim the presenter makes that anyone can pay off their mortgage in two years is completely ridiculous though, as everyone is an individual case and not all have the ability to earn any extra income or cut back on their own outgoings if they're living quite frugally to begin with. I wonder whether he has ever been able to help anyone accomplish it (without a large lottery win!)

tawny owl

Joined: 29 Apr 2005
Posts: 563
Location: Hampshire

Posted: Fri Jan 06, 06 3:09 pm Post subject:

JB wrote:

That's what I use at present and it works very well. By the time the overheads of having a mortgage and paying off the capital are considered you can almost treat it as a deposit account paying 7% net (try getting that from a normal deposit account!). You may also want to check just how one goes about drawing down funds from the mortgage. In my case it can take a fortnight which is not a problem as long as you know that it can take that long.

And me. It does cost more, but if you're treating it as a means to an end and intending to pay off early, then I reckon the money saved by paying off early more than makes up for the slightly higher interest rate. Having said that, 7% sounds a lot to be paying on a mortgage - the three current account ones I've investigated are 5.6-5.8%; might be worth checking them out, unless your savings add up to more than 50% of your mortgage.

tawny owl

Joined: 29 Apr 2005
Posts: 563
Location: Hampshire

Posted: Fri Jan 06, 06 3:27 pm Post subject:

I found it rather disappointing. Having watched Make Me Rich, I saw a big gap in their advice. Martyn Lewis (off MMR) advises two types of savings. The first is the 'pain-free', which simply means moving bank accounts, credit cards, insurance, utilities, etc to get the best deal, but there was none of that, and as Will points out:

Will wrote:

What intrigued me was that the emphasis seemed to be on banking cash rather than actually paying off the mortgage.

Indeed, and furthermore, they seemed to be paying it into the HSBC, which does not, at all, have a good rate for savings, no more than the other ones. Plus they're still paying tax on it, whereas they should have taken out a flexible mortgage and started shoving the extra money in there. Considering ML has generally saved families 2000-4000 per year with his 'pain-free' savings, this seemed like a serious missed opportunity.

Moving on from there, they did at least suggest the packed lunch, train etc, which would come under ML's category of 'painful' savings.

Treacodactyl wrote:

Very true, and it can make a heck of a lot of difference whether interest is calculated daily, monthly or annually, particularly if you're making overpayments.

Treacodactyl wrote:

Often the mortgage would be something like 3x gross salary so paying off in 2 years wouldn't be possible.
A more reasonable programme would be why take 25yrs when you can do it in 5-10?

Well, yes, that was odd. I mean, that couple had a relatively low mortgage of �85K; in 1 year they'd saved �15K, which was excellent, but that leaves them �70K to pay in 1 year. How does that work? As for mortgage terms, people are duped into thinking that they have to take out a 25-year one, but usually the increase in monthly payments for knocking off 5 years or so isn't that great. Better still, if you have a flexible mortgage, just increasing the payments each year is usually fairly painless and can make a big difference.

All in all, I agree with everyone else - most disappointing. I've learned (and saved!) a lot more by subscribing to ML's website (moneysavingexpert.com); some of his tips are a bit dopey, but most of them are really good.

Jb

Joined: 08 Jun 2005
Posts: 7761
Location: 91� N

Posted: Fri Jan 06, 06 3:46 pm Post subject:

tawny owl wrote:

JB wrote:

It works out as about 7% although the interest rate is considerably less (I'd have to dig out the paperwork to find out what it is right now). The difference is because one has to pay the interest _and_ repay the capital.

(edit because I just ran some numbers through a mortgage calculator on Halifax.co.uk

For sake of example, borrowing 40k against a 350k property over 18 years at 5.6% gives a repayment of �293 pm, or interest only of �185 pm

�293 pm over a year on 40K works out as about 8.8%!

end edit)

Having said that I probably could get a better deal now but I've got used to the fact that in exchange for total flexibility I get a worse interest rate so it's meaningless to compare to the headline rates that the various lenders quote. (I shall add shopping around for a new mortgage to my to do list for the weekend!)

tawny owl

Joined: 29 Apr 2005
Posts: 563
Location: Hampshire

Posted: Fri Jan 06, 06 5:21 pm Post subject:

JB wrote:

Having said that I probably could get a better deal now but I've got used to the fact that in exchange for total flexibility I get a worse interest rate so it's meaningless to compare to the headline rates that the various lenders quote. (

OK, right, got you now. You probably should still be able to compare them using the APR if you can dig out what it is on yours - that's supposed to be a standard calculation.

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