MFi3: Mortgage-free by Christmas 2010 - diary of a MFW Martian

Hi,

I'll start by pasting the post I originally wrote in the welcome thread, as a bit of an introduction.

We bought our place in May 2002, just after I'd cleared my student loans and assorted other debts that had piled up as a result of several misspent years - which whole episode left me with a loathing of borrowing in any shape or form, so I've always looked upon the mortgage as "not our money".

In January 2003 we remortgaged from the 25-year 100% mortgage we'd initially chosen for its lack of a redemption penalty to a fixed-rate product with an overpayment facility (though it was in a sense back to square one, as we borrowed back all the money we'd paid in the first few months to carry out repairs) - and proceeded to overpay by as much as we could afford. In January 2005 we remortgaged to a 9½ year term (3Yr fixed), and at the moment we're paying the maximum overpayments we can without incurring penalties. There's about £59k left on it now (initial value £107,650) - at our current rate, we're on course for paying off the mortgage in March 2011, though it may be sooner if we can remortgage to a shorter term still and their no-fee 2Yr fixed rate next January. My goal is to get the whole lot cleared on or before December 2010 - aside from the nominal £1 so we don't have to look after the deeds.

At the moment, we're making regular payments of £1,056.38, and as we're with Nationwide, we're overpaying by £500 a month, which is the maximum we're allowed to do without incurring penalties. Alas, there were one or two months where I forgot to pay the overpayment on or around the first of the month, which appears to have racked up an extra £10 (not much, but still...!) in interest over the course of this year. (This is now fixed. I now have a standing order for £500 going out to the mortgage on the first of the month.) I'm relying on online banking for these figures, which may or may not be accurate.

Recently I wrote a script to calculate how much we'd need to pay in order to be mortgage-free by Christmas 2010. This is based on Nationwide's currently published mortgage rates (I'm quite keen on Nationwide's offering as they offer a fee-free 2Yr fixed rate, and given that we're aiming to pay off the mortgage quickly, the arrangement fees can matter more than the interest payments), so I've calculated interest based on a rate of 4.95% until 31/1/2008, 6.25% from 1/2/2008 - 31/1/2010, and 7.24% thereafter. So this may change depending on what happens between now and the end of January, when our fixed term runs out. I've built a few assumptions into it based on my observations of what the numbers on my online banking service have been doing over the last few weeks, so the figure may or may not be accurate - but I don't think the margin of error is likely to be that significant.

Of course, I wrote a script to do it because I'm a geek. Anyone else is probably as well using a mortgage calculator.

As a means of getting us towards this goal, we've done a couple of things.

Firstly, we set up a joint account, from which all the household bills (including food bills) are paid, and set up standing orders to pay money into that account as soon as we were paid. It's fairly straightforward to get into the mode of thinking that once money has gone into that account, the only way it gets out is if it's paid out in household bills. So in a sense, the money in our own joint account is also "not our money" - which enforces the discipline that we don't go and raid it if we've overspent on personal luxuries in one month.

A corollary to this is that we each still have our own personal accounts, which is entirely "our own" money, and as such, we are entirely responsible for it. The great thing about this is that it's a lot easier to keep track of one's own personal spending, not to mention that it avoids the kind of difficulties and disagreements that can arise when families pool absolutely everything into a joint account! Our friends thought we were mad for doing things this way. Personally, I can't think of a better way to do it. There's no way I can accidentally spend my wife's money, or vice versa, and we each know exactly how much we've spent.

Secondly, we stopped paying so much for broadband and cable TV. We quickly discovered that we didn't need super-fast broadband or a bunch of channels we hardly ever watched, so over the last five years we've gone from paying Telewest around £65 a month to paying Virgin Media about £29 a month. Given that we seldom make outgoing calls on the landline, we're considering ditching the landline too, now that we have a VoIP service with Sipgate (no monthly charges, and the account's about eight and a half quid in credit).

At the moment we're also trying to hash out some ideas to control personal spending, and see if we can afford to remortgage to a shorter term and overpay some more. The plan we have in mind will bring our total monthly payments from £1,556.38 up to around £1,688 from February; that amounts to an extra £15 a week from each of us, on average, so it's not an insignificant change. It is, however, doable, as what we might call our personal "allowances" are each in the region of £120-130 a week (which includes travel to/from work, lunch and social activities).

We're also looking at other ways we might be able to reduce the bills:

1. We're probably not the most energy-efficient household on the planet, and our gas and electric bills over the last four quarters came to a whopping £800. We can probably bring this down a fraction, by doing all the things we're told we should be doing anyway, like ensuring that the heating/hot water isn't on when it's not needed, and switching appliances off instead of leaving them on standby...
2. Switching energy providers may also be an option. At the time we moved in, SWEB were a better bet than British Gas, but that may not be the case with EDF nowadays. That said, we are not prepared to switch to any old provider, as we've heard some horror stories about the really cheap ones.
3. Better planning of our food budget. At the moment, there is no plan, so we just end up buying whatever we fancy at the time. Sometimes this can result in quite a shocking bill once we get to the checkout. Planning ahead (and probably ordering online, where despite the delivery charge, we might actually save money by not being tempted to buy junk!) would resolve some of this.
4. Do we really need a landline? (See above.)

The plan is to get this hashed out before the end of January, so that we're already in the habit of managing to save an extra £130 a month between us, rather than trying to shoehorn our expenses into an arbitrary box labelled 'this is how much we are allowed to spend'. Besides, if we succeed, we'll have saved a little money in advance.

Anyway, that's my thoughts for now... if you got this far, thank you for remaining awake!