Just so scary!

 Hello everyone,

Thanks so much to the responses on my blog on Tuesday. You make me feel heard, listened to and certainly not alone in my debt repayment journey. As you were so kind then, I thought I would share my massive life shift today, and a guilty secret and how I’m going to put it right.

Dearly Beloved and I each have a debt repayment schedule. I have put some of our individual debts together onto 0% interest credit cards, which we have tarted from one to the next for quite some time. We are both using them to get rid of unsecured loans and interest baring credit cards. On one of DB’s credit cards, the last payment went out on the 10th of this month. It was a snowballed debt payment, of all the payments he was previously paying and he is now personal debt free. I pay the big share of the big debts and I feel that I’ve got them in hand.

In 2009, when we sold this house, and found one we wanted to buy a tiny cottage. We went back to our mortgage provide – Santandarseholes, who wouldn’t give us a mortgage, SMALLER! than the one we had as we had borrowed too much money, on personal and unsecured loans! So, the house sale fell through and we had to really take our debts in hand. If we wanted to downsize, then we had to do something about it. I embarked on a truly, madly, deeply frugal journey that has reshaped my life. By the early few months of 2012, we will have paid back in excess of 45K!

Now if you wonder what all of this meandering is for, now is the time for my guilty secret. When we bought this house is 2007, we mortgaged ourselves to our armpits and could only afford to have an interest only mortgage. Now believe me, I have done some utterly stupid things in my life but taking out a mortgage on a house I could not afford is the most stupid thing I’ve ever done! Today, in a huge leap, we’ve begun to put it right!

After the 10th, we contacted Santander and have made arrangements to change our mortgage to a repayment mortgage. Even though we are tied into a 6.5% interest rate until the 9th of September 2012 (when our tied in mortgage term ends), we would still be able to pay off £9000 of mortgage capital before we move house. The more we pay off, the bigger the equity and the more money we’ll be able to put down. We are aiming to buy a small house and pay for it in five years!

So, today we lept into the abyss and have signed the repayment mortgage agreement that DB will drop into the local branch of the building society in his lunch break tomorrow! We’ll also be able to over pay up to 10% of the outstanding balance of the mortgage every year! Sometimes, admitting you’re wrong and putting it right is scary. My interest only mortgage was the silliest thing I’ve ever done and now is the time to put it right!

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25 thoughts on “Just so scary!

  1. Brave of you Frugal Queen! We all make daft mistakes with money, people,jobs…….life. Just forgive yourself and know that you have now done the right thing.You have a great deal to be proud of and a lot of courage and sheer bloody guts. Well done.

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  2. Good for you.

    One of the best things we did was change to a repayment mortgage a few years ago. First we went part endowment/part repayment and then when we went fully repayement. We cashed in the endowment, put the money in savings and took out a cheap insurance policy that would just pay off the mortgage if either of us died.

    As out mortgage was a tracker so it tracks the Bank of England Base Rate we are currently only paying 1.29% interest at present, but of course if/when the rates go up so do the payments. We have been paying extra off but DH just got made redundant from his teaching post, but we are hoping to pay a lump sum from his redundancy money. It won't clear it, but with some careful money management when he goes supply teaching hopefully we'll be able to clear the rest within 3-5 years, cutting at least 8 years off the term and being mortgage free before I hit 60 in 6 years time, and DH will only be 57.

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  3. You are like a wonderful character in a great novel. You are one person at the beginning and as you live life, go through trials and tribulations, you change for the better. And you are taking us all on the same journey. Now I am not saying I was a debt-ridden, slutty drunk when I started reading your blog, but I must admit, it has helped me changed some of my least desirable characteristics! I am greener and keep my purse closed much more often. I am in the mist of cleaning out my house and using up everything I can. Thank you Froogs.

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  4. You are so brave to admit this! At least you are doing something about it. I know people who still have their heads in the sand, and are still spending and getting further and further into dept. Ironically these are the same people who poo poo my life style and are always telling me that I have to get a real haircut, new clothes, redecorate etc. Keep going it really is liberating when you see all your debts going away.

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  5. It's great that you are so much closer to getting that cottage that you want some day. When you make up your mind about something, you are so determined. I admire you for that.

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  6. You are an amazing woman! You have made major changes and are daily improving your life.I feel encouraged
    and blessed to have found your blog.
    Be assured I will be cheering for
    you as you reach for your goals. I
    thank you for being such an open and caring person, and for all you share
    with each of us.

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  7. Dont feel too bad; you were to some extent the victim of unscrupulous lending practices – we all can learn from our mistakes and frequently have too.
    You are doing absolutely the right thing – here in the States there is no pre-payment penalty on most mortgages – I had a 15 year loan and paid it off in 9 years with no penalty and re-financed twice in that time from 12 1/2 percent down to 8%. I saved $33,000 on the life of the loan doing this.
    As house prices declined you probably have negative equity now – but the market is picking up and you
    are in an excellent location so things should work
    out with time.
    At least you are able to pay your loan – so many people have defautled and that is why we are in the mess we are in.

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  8. I wonder if the original interest only mortgage was mis-sold to you (if there was no vehicle set up to pay it off upon maturity) as a lot of lenders will not offer such things under the new FSA guidelines? 'Responsible Lending' they call it, nearly cost us the house to fall through after Santander (again) took 4 weeks for them to say “computer says no”…

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  9. Hi Les,
    Santander are bonkers! They leant me 200K! (I did put 100K down! as I made a killing on my prvious house in a rising market) but Ihad huge debts when I got the 200K mortgage and as they make you declare them, they knew that. Then, as the recession hit and banks became cautious, they changed the lending equation and I didn't fit and they took over 4 weeks to say no. I felt for the family who almost bought my house. Fortunately Lizzie, we're not in negative equity and house prices are rising again in our area. We suffered a 15% drop and now that has almost rectified itself. I'll take a good deposit with me to my next home.

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  10. Don't beat yourself up over the interest only mortgage. These things were sold to people as the next best thing. When I worked for the bank that almost ruined our country, it was the worst off I had ever been, even though I had the best salary I had ever had. They tried to show me how spending beyond your means was easy and the way to go. It never sat well with me (my upbringing had been based on frugality) but I was seduced by the “stuff” and enjoyed the “live now” but hated the “pay later”. Weve all done some pretty daft things. xxxxx

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  11. Tis hard admitting mistakes but such a weight lifted once you do. You're still my number one inspiration for becoming more frugal Froogs and knowing that your human :o) helps me come to terms with my own cock ups.
    All the very best
    John

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  12. Your guilty secret is one I share, when we needed cash and my house was remortgaged I didn't even realise (duh!!) that I had moved to an 'interest only' mortgage. On finally coming to my senses a year later I decided enough was enough and sold the house immediately in a 'downward market'. I came out of it all with enough to pay off my car loan, a small amount for each of my sons and enough for a bag of crisps for me.

    We have been renting ever since and now we are about to embark of a few years of true self-sufficiency and frugality while we save for a place of our own, which will be have a fully repayment mortgage and which will allow us to pay off lump sums each and every year until it is paid up.

    You may have jumped into the abyss, but you have safety ropes and each other, and when you land at the bottom you can start the exciting ascent to the top, where you can plant your flag and eat your (frugally packed) picnic and drink your Aldi 'Champagne' and toast your freedom and your future.

    We are all on similar journeys it seems.

    Sue xx

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  13. I'm sure I heard on Radio 4 last week that the banks are now selling Interest Only mortgages again. MOH both looked at each other and said ' not a good idea'. I wonder how many people getting a mortgage for the first time will have any idea of the problems with this type of mortgage?
    Sue

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  14. Well done Froogs! I think in your case the bank bears a certain amount of the responsibility in lending it out in the first place. I have friends in similar circumstances and I really worry for them. You definitely have the skills to pay it off, given your huge achievements so far!

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  15. Interest only mortgages are the worst idea full stop.

    The only people who they are suitable for are developers as you would intend selling the property for profit before too much interest is accrued and the resulting equity should more than cover this. I have a friend who does exactly this as it minimises his mortgage outgoings.

    I do think there was a big period where these were miss sold or at least the negatives of them were not explained so well. But ultimately they benefit the Banks who are there for the shareholders at the end of the day.

    Hope you get there soon.

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  16. Just to say some fully flexible mortgages are interest only ie you have to pay a minimum amount each month equal to the interest but you can overpay without limit. Wonderful if you are in a position to overpay as we were because we cleared the mortgage in less time than I would have thought possible. Compound interest working in your favour is great and it gets obsessive.
    But if you can't really afford to overpay then they are a snare.

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  17. Congratulations on having the courage to change things into your favour! Now I am on my own, your blog is more of an inspiration on how to save money and live well and still enjoy life. W ell done again and may it continue!

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  18. Hi
    That's a really good move – you'll soon see a difference with each mortgage statement you receive. I was lucky enough to be able to walk into my building society this week and say “I want to clear my mortgage” – I was only 3 months early paying it off – but after 35 years of paying a mortgage each month – the feeling of liberation and of achievement was really brilliant and to come home and walk through the house and garden and think that it's all ours was quite an emotional moment – so keep going – you do get there in the end – Best Wishes Sandra

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