My Family and Me's diary to mortgage freedom

My_family_and_Me · 13 December 2017 at 10:59PM

Okay, so we have a bigger mortgage than any I’ve seen while I’ve been lurking here but although this will be a long journey to freedom, I have big dreams and they’ve got to start somewhere!

At the moment we are fixed into our mortgage at a rate of 3.69% which is really high and we can’t get out of it without paying a hefty penalty for another 13 months. (Trying hard not to regret fixing when we did but I was pregnant with baby number two and we needed to know we could meet the repayments).

In terms of the house we recently had it valued at approximately 340,000 and our current debt is £131,580.57. We are allowed to overpay by up to 10% per year Jan-Dec. We have made some overpayments recently but would like to challenge ourselves to do more.

We have a small pot of savings currently £1500 and shares approximately £3000 that make up our emergency fund.

Looking for motivation and tips from others especially since it’ll be a while till we even get under the 100K mark!

Here’s our current details:

Income
Main Salary £1,744.00
Second Salary £1,600.00
Child Benefit £137.60

£3,481.60

Outgoings
Mortgage Payment £911.19
Council Tax £120
Term Assurance £20.22
Gas/Electricity - £40.00
Car Tax – DVLA £19.68
Water (metered) £22.00
TV License £29.10
Union Subscription £8.74
Broadband and Telephone line rental £22.40
Savings for Child 1 £20.00
Savings for Child 2 £20.00
Mobile Contract ID (DH) £5.00
RSPB Membership £15.00
Mobile Contract ID (Me) £5.00
Extra mortgage payment £500.00
Credit Card £1874 - 0% ends 5th December 2018 – used to finish paying for an extension when we didn’t quite have the funds £150

Total predictable outgoings £1,908.33

Budget for Food Bill + petrol – Amex cashback card paid off in full each month £500

Approximate Total Outgoings £2,408.33

Amount left over for saving/further overpayments and everyday spending. £1,073.27

I would dearly love to be able to be debt free by the time my eldest starts secondary school, but it simply isn’t going to be possible. I would like to be as close to that as possible though. That gives me 4 ½ years to have some impact on the amount we owe whilst still being able to do things with my children and enjoy them growing up.

I've done a mortgage overpayment calculator that says if we can afford to pay of £1000 extra a month then we will cut our mortgage down to 6 1/2 years. So this is what I'm going to aim for from January onwards. Anything I can make over that amount I'm going to put in the savings account and try to reduce the amount we owe when we re-mortgage in just over a years time.

Anyone have any tips on paying off a mortgage when your starting with an amount over 100K. I'm also interested in any tips of when to start the re-mortgaging process (knowing our luck the best deals will have gone back up to similar to what we are paying now by that time!)

Many thanks for reading. I'm looking forward to getting to know you all.

My Family and Me

newgirly · 13 December 2017 at 11:40PM

Hi, welcome to the mfw board

There are many on here with big mortgages like yours (and much bigger) but the same applies whatever figure you start at really. The best advice is to keep a diary, read other diaries and keep at it. Motivation is always high at the start, the trick is keeping going a few years down the line. Setting small mini challenges helped me along the way when the boredom set in!

All the best

shangaijimmy · 14 December 2017 at 8:39AM

Welcome aboard. We started our journey a little under 3 yrs ago at £136,000. Now we'll be in the £99,000's by New Year. The first 6-12 months are tough as progress seems slow, but you soon pick up momentum.

enjoyyourshoes · 14 December 2017 at 8:54AM

I would suggest you work out what you can afford to repay every month, then set up a SO/DD including the overpayment.(ensure its below the 10% threshold)

You will then get used to living off the lower amount each month and 'forget' about the overpayments.

Could you not calculate savings (less the ERP) if you switched mortgage to much lower rate?

getmore4less · 14 December 2017 at 9:48AM

You need a better budget, loads missing when there are 4 in the household.

no clothes or cars or holidays, or presents?

Try the SOA format it helps get started and then you need a spending diary to track what you are really spending and keep the SOA upto data

http://www.stoozing.com/calculator/soa.php

if you try to balance 2017 to where all your money went that will be a good start to populate the SOA for 2018 then you can look for the adjustments.

Which lender and what's the ERC% with <50% LTV you should be well under 2% with 13 month left may be too late to change but you can start thinking about it but look properly at the end of next year.

My_family_and_Me · 14 December 2017 at 12:34PM

Thank you for the replies everyone. I'm glad I'm not the only one with a 100K+ mortgage hoping to reduce it (for me it's that 6 figure thing that scares me!)

I will look into the SOA's again following your advice. All the car stuff is paid for out of OH bonus every year (we only have one) with the rest going towards a holiday so we don't normally budget for that over the course of the year. (Will update it for you)

We have already set up a DD for a £500 overpayment every month and I'm looking to do increase that to £1000 once I know my work have processed my increase in hours and therefore my pay rise comes through.

The mortgage lender is Santander.

The ERC is a fixed amount of £6968.88 (I'm assuming that was worked out as a percentage some when but it doesn't decrease over time)

We've looked into switching several times over the past few years but with the ERC being so high it doesn't seem worth it (Happy for someone to prove me wrong though!) We were young and naive when we took out the mortgage and wanted to fix for the security of no rate rises (no one had warned us to check how high the ERC was though) You live and learn.

Many thanks for the support again.

My family and Me

getmore4less · 14 December 2017 at 12:58PM

My_family_and_Me wrote: »

I will look into the SOA's again following your advice. All the car stuff is paid for out of OH bonus every year (we only have one) with the rest going towards a holiday so we don't normally budget for that over the course of the year. (Will update it for you)

Don't update it for me update it for yourself.

the problem with income and expenses off plan is they don't give YOU the full picture.

if the bonus stops/smaller one year do you stop using the car or not go on holiday.

in practice you may adjust them but the real discretionary spend is the savings/overpaying

The budget/plan really needs to be a full years worth of income/spending/saving planned out, with kids a house and a car looking ahead 5y-10y should really happen.

the timing of income may decide when some spends/overpayments can happen but that is about cashflow not the budget.

My_family_and_Me · 14 December 2017 at 3:14PM

I do get what you are saying and have worked out that the yearly total divided by 12 makes £97 per month.

I suppose it's quite hard to take as we've been living off this budget for 5 years + and never been more than £20 out at the end of the month.

I think in terms of what stops if the bonus stops, that depends on your personal priorities. For me it's far more important to pay off this mortgage than to go on a holiday so that would be my priority. I already walk to work on the days my OH has the car and he cycles on days I do, so if we had to be without a car for a few months it wouldn't be the end of the world.

So I'm going to plough on with my plans and start making the overpayments as soon as we get our next pay packet on the 20th I'll be paying what even I have left in the bank off the mortgage.

My family and Me

My_family_and_Me · 14 December 2017 at 3:41PM

looking ahead 5-10 years should really happen

Can I ask you to clarify that please. What exactly do you think I haven't done?

We need a new car in approx 1 1/2 years so we have 700 shares with approx a 7000 post tax value coming into fruition at that point. I'm looking ahead to being mortgage free in 6 -7 years.

getmore4less · 14 December 2017 at 4:26PM

If you want people to make suggestion they need to know what's been covered, how can any know what you have included if you don't mention them?

getmore4less · 14 December 2017 at 6:55PM

My_family_and_Me wrote: »

We need a new car in approx 1 1/2 years so we have 700 shares with approx a 7000 post tax value coming into fruition at that point. I'm looking ahead to being mortgage free in 6 -7 years.

That makes 10 years the forward looking a good goal just in case there are any spends that need saving for

A lot of things are variable but you can make good guesses.

Income is usually easy stick a few pay rises in, career goals any more babies etc.

spends, a bit of inflation on the regular stuff, house maintenance things the kids need, new cars, running cars, clothes, white goods...

maybe factor in a rate rise or 2 for the mortgage after the initial drop to a decent rate.

it only takes a few extra things to throw it out

current £911+£500pm gets you nearly to 9 years from the current 16y which is great start

these are the monthly and extra per year and total to get to new goals.

£131,580.57 @ 3.69%
9. £1,434, £278, £2,484
8. £1,585, £2,088, £16,704
7. £1,780, £4,428, £30,996
6. £2,040, £7,548, £45,228

some of those should come from lower rates

you should be able to get a rate around 1.5% that changes the 7y,6y numbers
7. £1,651, £2,880, £20,160
6. £1,912, £6,012, £36,072

As for a switch over 13 months with an ERC of nearly £7k not possible to get the money back.

I suspect the rate rises needed over the next 13 months to make taking a longer term fix now worth while with a target full term of well under 9 years, to be quite(very) high.

My Family and Me's diary to mortgage freedom

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