Part 136

Hello and welcome back to Mortgage Advisor on FIRE. This week I take aim at the Jubilee celebrations, with another breakdown of the weekly Tory Shambles. Also, some information on our second BTL purchase. Finally, a more detailed look at interest only mortgages. First, the Quote of the Week:

Quote of the Week

There’s a Twitter account I follow, @elsalwilliams, and she posted a tweet that’s been living rent-free inside my head for a while.  The tweet is below:

I can’t remember when or why I started following Elsa but she comes out with some great content, both serious and funny.  I asked if she was cool with my posting this, and she was.

So, why this tweet? Well, why would any sane person have plans for the Jubilee? Why would anyone want to celebrate these unelected parasites?  I don’t know what the royal family are like as people, but I’ve seen enough snippets to form a rough opinion.  I don’t like them.  Also, I hate the institution.  Don’t get me started on the whole tourism thing either.  When people come to the UK as tourists, they will visit the castles, palaces, country houses, museums, and so on.  They don’t rock up for afternoon tea with the Queen.  We could remove the monarchy and keep the palaces, castles, and other historical artefacts.  The two things, the bricks and mortar and the people, are not dependent on each other.  I dare say we’d get more tourism from ejecting the royals from their estates and opening up the properties for extra tourism.

“Oh, but they work hard.”

Do they?  Has any member of the inner circle cleaned their own bathroom on a regular basis? Emptied their rubbish? Vacuumed their home? When everything from your meals to your cleaning is done for you, with drivers, pilots and security all working to get you from one place to another, life becomes much easier.  

If you are from a working-class background, or even middle-class, and you work a full-time job, please explain why you would support the royal family?  I honestly don’t understand.  

Weekly Update

A short week back at work with the Jubilee taking up Thursday and Friday.  I don’t think I’ve ever been less enthused about a bank holiday.  I don’t feel as though I’ve done much this week, and I can’t account for where the time has gone.  I’ve had a few visits to the gym, and just kind of drifted through most of the week.  There was a positive development towards the end of the week, and I’ll come to that later in this post.

I’ve tried something new at the gym, though.  I was doing a 3-day split where I had a day for legs, a day for chest and triceps, and a day for back and biceps.  Due to my history of shoulder problems I have to be very careful with exercises that put a lot of strain on the deltoids, so I tend to let them be exercised through compound movements that hit a few muscles at the same time.

Anyway, I tried shaking things up a bit and incorporating a few new exercises but it didn’t go well.  I have a little pain in my left elbow, and some pain in my left hamstring.  It’s nothing serious but I’m going to take a week or so off the gym to let my body heal up and rest.  Since the end of March, when I picked up my training again, I’ve had 48 sessions of lifting and not missed a scheduled session.  I think a rest is a good idea.  When I come back, I think I’ll adopt a 5-day split, with fewer sets on each session.  I’m thinking; 

Day 1: Chest 

Day 2: Back 

Day 3: Legs

Day 4: Arms

Day 5: Shoulders (with resistance bands)

Day 6: Rest/light cardio

Day 7: Rest/light cardio

Within each lifting day, there will be other muscle groups targeted, such as abs, lower back, neck, and so on.  The days are titled “chest”, “back”, etc because that’s the main focus.  I won’t be ignoring any muscle groups, despite what the titles may suggest.

For a long time, I was so focused on achieving an outcome at the gym, and it took me many years to realise that it’s the process which is more important.  Exercise is the most effective tool I’ve discovered for managing my mental health.

This Week’s Tory Shambles

More of the same this week as the fallout from Partygate rumbles on.  I see that Boris Johnson was heckled and jeered as he attended some of the Jubilee celebrations.  I can’t help but think, had this been going on in another European country, such as France, Romania, or even Ukraine, there would be mass protests on the streets to oust this government.

It wouldn’t be a typical Tory Shambles if Nadine Dorries wasn’t involved, and she hasn’t let me down this week.  According to Dorries, Johnson was cheered more than jeered.

Since the Tories came back into power a decade ago they have run this country into the ground.  I’m not sure what is stronger than a need, but this country needs change.  No nation is perfect but under the rule of this government we have become a laughing stock.  It sucks.

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2022 Goals – to be achieved by 31/12/2022

1 – Reduce weight to 90kg.  (Current weight 118.9kg).

2 – Complete 10 “classic” books (4/10)

1. Crime and Punishment by Fyodor Dostoevsky (1866)
2. Moby-Dick by Herman Melville (1851)
3. Dracula by Bram Stoker (1897) ✅
4. Catch-22 by Joseph Heller (1961)
5. The Iliad by Homer (8th century BC) ✅
6. The Count of Monte Cristo by Alexandre Dumas (1844) ✅
7. War and Peace by Leo Tolstoy (1867)
8. A Tale of Two Cities by Charles Dickens (1859)
9. Les Miserables by Victor Hugo (1862)
10. Don Quixote by Miguel de Cervantes (1605) ✅

3 – Read 10 authors I’ve not read before (6/10)

1. John Birmingham ✅
2. Nicole Perlroth ✅
3. Sabine Durrant ✅
4. Luke Smitherd ✅
5. Max Skittle ✅
6. Harlan Coben ✅

What Am I Doing?

What I’m reading: nothing at the moment, but want to start something.

What I’m listening to: The Boy from the Woods by Harlan Coben.

What I’m watching: The Handmaid’s Tale (Prime).

I listened to Tell No One by Harlan Coben earlier in the week and enjoyed it.  Whilst it’s not the most mentally challenging story, it was entertaining.  I tried A Tale of Two Cities by Dickens, but I don’t think I was in the right mood for it.  So, I went back to Harlan Coben and started The Boy from the Woods.  It’s a fairly by-the-numbers thriller so far, but it’s competently written and is keeping me engaged.  Also, it seems the author has a shared universe going on with some characters from Tell No One appearing in The Boy from the Woods.  Although shared universes are becoming a bit too common right now, I’m still a sucker for them.

We’ve started season four of The Handmaid’s Tale.  It’s one of those shows that you can’t say you enjoy because of how horrific the subject matter is.  The show is very well made, with the acting a particular highlight.  I didn’t like the direction of the first episode of the fourth season though.  I thought some of the shot choices were unusual and detracted from the story.  I felt as though the director was trying a little too hard to be different.

Financial Update

Assets

Premium Bonds: £19,250.00 (no change from last update).

Stocks and Shares ISA: £42,803.72 (down £174.51 from last update).

Fuck It Fund: £100.00 (no change from last update). 

Pensions: £52,692.64 (up £2,067.66 from last update).

Residential Property Value: £218,291.00 (no change from last update).

Buy-to-Let Property Value: £140,863.00 (no change from last update).

Total Assets: £474,000.36 (up £1,893.15 from last update).

Debts

Credit Card: £0.00 (no change from last update).

Residential Mortgage: £163,673.30 (down £393.97 from last update).

Buy-to-Let Mortgage: £105,354.12 (up £15.90 from last update). 

Total Debts: £269,027.42 (down £378.07 from last update).

Total Wealth: £204,972.94 (up £2,271.22 from last update).

Investment Income in 2022: £1,950.18 (target £6,000).

For some reason my pension jumped in value this week.  Other than that, very little change.

Interest-Only Mortgages

You will have noticed that my interest-only balance increased slightly this week.  This is because my payment, as decided by the lender, did not cover the interest for the month.  This can be traced back to initial interest, which is interest charged from the release of funds to the date of the next mortgage payment.  We released funds from a further advance a few weeks ago and the payment at the start of June was the next.  

This is something that people need to understand, as whilst it might seem like a minor point it can snowball if not nipped in the bud immediately.  Like with most things financial, it is better understood through an example.

Existing interest-only mortgage: £100,000 @ 3% interest = monthly payment of £250.

Further advance on interest-only: £25,000 @ 4% interest = £83

Daily interest

Most mortgages have their interest calculated daily, and applied monthly.  3% interest over the year equates to approximately 0.0082% per day.  So, £100,000 will generate roughly £8.20 interest per day.  This means January would have £254.20 of interest.  February would have £229.6.  A 30 day month will have £246 of interest.  

The problem here is that if you pay £250 one month, but interest of £254.20 is applied, then your balance increases by £4.20.  This would mean that when you jump from March to April, where April’s interest should be £246 against a payment of £250, the interest for April would instead be £100,004.20 x 0.0082%, with the result multiplied by 30; this comes out at £246.01.  Again, only a slight difference, but when you then jump from April to May, the interest is calculated against a balance of £100,000.21.  May’s interest is £254.20, with a payment of £250.  The resulting mortgage balance is £100,004.41.

This is just a small snapshot and doesn’t include the compounding factor of initial interest which can further impact the mortgage payment.  Given enough time, a year or two, the balance of the mortgage in this example could start to increase at a fair pace.  If you have locked in to a long-term fixed rate for many years, you could potentially be left with a balance hundreds or thousands higher than expected.

Note: this example is only relevant to interest-only mortgages but with over a million UK interest-only mortgages it stands to reason that some of them are probably falling into this trap without the borrower realising.

Countering this problem is simple; round your payment up slightly.  If your payment should be £250, consider going up to £260.  If your payment is £379, consider going to £400.  Basically, the more you round the payment up, the less risk of seeing your interest-only balance increase.

I’m not against interest-only mortgages.  In fact, I think they are great when used appropriately.  Sadly, too many people use them as a way of getting a cheaper mortgage payment, as they would be unable to afford the same debt on a capital repayment basis.  My golden rule for interest-only is that you should be able to afford the payments on repayment if necessary.  I know, it’s not a massively well thought out rule, but it’s a good “sense check”.  If you can afford a capital repayment on your interest-only mortgage, but the interest rate applied is lower than what you can get on your investments, then it makes sense to invest the amount that would go towards the capital on the mortgage, and let compounding gains work their magic.

This strategy is not for everyone though, and especially not for beginners.  If you are not an experienced investor, seek appropriate advice from a professional before taking an interest-only mortgage.

Buy to Let

I mentioned earlier in the blog that there was a positive development towards the end of the week.  We viewed a property and it was excellent, and we’ve submitted an offer.  With the Jubilee we will probably not hear back until early next week, but we are feeling hopeful that this will be our second investment property.  

We will be taking a mortgage for this one, to try and keep funds in reserve for a further BTL towards the end of the year.  I’m starting to assemble a Power Team at last, with contacts in different management agencies, conveyancing firms, and the latest addition is an independent mortgage broker who is happy to take my business.  I’ll talk more about him in the future as his business develops but it’s great to have a mortgage professional I can turn to who is both knowledgeable and conscientious.

Biolink and other links

You can now find all my social media pages by checking out my Biolink:

bio.link/davidscothern.

Also, check out Darren Scothern’s blog which talks about autism, being autistic, and general mental health:

www.darrenscothern.com