How to be mortgage free after 8 years
Thefunkygibbons
Posts: 1,381 Forumite
I have a little note in my signature that I will be mortgage free after 8 years, and as a result I had some private messages asking me how I did it.
None of this is rocket science, but since I have been asked, I thought I would set out how I achieved this. Hopefully others can then add further tips.
Background
We bought the house in 2000, with a mortgage of £175k and in 2003, borrowed a further £45k for an extension.
How we paid it off
1. Choose the right product. I have always made capital repayments so I knew what I wanted when I got the mortgage. We have a mortgage with the Skipton building society that has interest calculated daily. It allows overpayments without penalty, and in addition it is a base rate tracker at base plus 75bp. I know I could get a lower rate, but I would then be restricted to 10% redemption each year and the new rate would only be for 2 years whereas mine is for the life of the mortgage.
2. Salary: I recognise that I am very fortunate in that I earn a high salary. Most people cannot do anything about this. However, I started as the eldest child of six and my mum was a single mother living on benefits. By study and hard work I qualified as a Chartered Accountant. Many people try to gain this qualification but many fail because they do not put in the hard work required. I guess that I believe that investment in your skills and training is always worth while and it is sometimes much easier to grow your salary by £1k having skills your boss will pay for, than cutting the same amount from your living expenses.
3. Priorisation: I am not a classic tightwad, and spend quite freely on the children and on my collection of Dream Theater rarities. I know that I could shave money off my outgoings. However, I am not one for spending money by big ticket items. I do not have sky, I don't pay for expensive foreign holidays. I don't have lots of electronic toys in the house. It would not be hard to look at the Jones and say lets keep up, but for me, being debt free is more important. Lets be clear, I invest my time to make sure that there is joy in the house, rather than spending money on the kids as a substitute.
4. Make mortgage overpayments first. As a result of the above, I have spare cash. My monthly mortgage should be about £500 (I don't know for sure because I ignore that figure). However, I have an arrangement with the Skipton that they take £2,650 a month (which is a massive overpayment) and that they do not reduce the monthly payments to reflect the overpayment. This money goes out of the bank on the first of the month. Therefore, in my mind, what remains is what we live on. I regular look at whether there is extra and if so whether the monthly payment can be pushed further. I always look at the payment following pay review in January and any extra goes to the mortgage. If I did not do this, I would have shed loads of money in the account, and the temptation to splash out on a sports car or fancy holidays would be too great.
5. Know how to make repayments: I use internet banking and in my address book I have the account details for the Skipton, so if I get any spare money (such as a bonus or a SAYE maturing) it is easy to send it to them. Making the admin easy removes the barriers to doing it.
6. Don't withdraw the equity: I know have nearly £700k of equity in the house, but there is no way I would withdraw that for spending on... (fill in the gaps). If you keep moving the goalposts how do you ever finish paying it off. It is there for the Grand purpose.
7. The grand purpose: Having a big reason for doing this helps. In my case, I have 5 kids and in a few years, they will need help with college or University costs or a house deposit and by being debt free, I will be in the best possible place to help them.
So, if anyone wants to follow suit, my advice would be to see what they can budget to have spare every month and add that to the monthly mortgage payment. Even if it is only £50. Then see how it can be turned into £100 and then £150. Regular amounts off the mortgage really kick a hole in its life.
Hope this helps some, and feel free to add any more.
EDIT: http://forums.moneysavingexpert.com/showthread.html?t=239210
Due to some good fortune, I cleared it after 5 years and 8 months, although the foundation had been in place because of earlier repayments
None of this is rocket science, but since I have been asked, I thought I would set out how I achieved this. Hopefully others can then add further tips.
Background
We bought the house in 2000, with a mortgage of £175k and in 2003, borrowed a further £45k for an extension.
How we paid it off
1. Choose the right product. I have always made capital repayments so I knew what I wanted when I got the mortgage. We have a mortgage with the Skipton building society that has interest calculated daily. It allows overpayments without penalty, and in addition it is a base rate tracker at base plus 75bp. I know I could get a lower rate, but I would then be restricted to 10% redemption each year and the new rate would only be for 2 years whereas mine is for the life of the mortgage.
2. Salary: I recognise that I am very fortunate in that I earn a high salary. Most people cannot do anything about this. However, I started as the eldest child of six and my mum was a single mother living on benefits. By study and hard work I qualified as a Chartered Accountant. Many people try to gain this qualification but many fail because they do not put in the hard work required. I guess that I believe that investment in your skills and training is always worth while and it is sometimes much easier to grow your salary by £1k having skills your boss will pay for, than cutting the same amount from your living expenses.
3. Priorisation: I am not a classic tightwad, and spend quite freely on the children and on my collection of Dream Theater rarities. I know that I could shave money off my outgoings. However, I am not one for spending money by big ticket items. I do not have sky, I don't pay for expensive foreign holidays. I don't have lots of electronic toys in the house. It would not be hard to look at the Jones and say lets keep up, but for me, being debt free is more important. Lets be clear, I invest my time to make sure that there is joy in the house, rather than spending money on the kids as a substitute.
4. Make mortgage overpayments first. As a result of the above, I have spare cash. My monthly mortgage should be about £500 (I don't know for sure because I ignore that figure). However, I have an arrangement with the Skipton that they take £2,650 a month (which is a massive overpayment) and that they do not reduce the monthly payments to reflect the overpayment. This money goes out of the bank on the first of the month. Therefore, in my mind, what remains is what we live on. I regular look at whether there is extra and if so whether the monthly payment can be pushed further. I always look at the payment following pay review in January and any extra goes to the mortgage. If I did not do this, I would have shed loads of money in the account, and the temptation to splash out on a sports car or fancy holidays would be too great.
5. Know how to make repayments: I use internet banking and in my address book I have the account details for the Skipton, so if I get any spare money (such as a bonus or a SAYE maturing) it is easy to send it to them. Making the admin easy removes the barriers to doing it.
6. Don't withdraw the equity: I know have nearly £700k of equity in the house, but there is no way I would withdraw that for spending on... (fill in the gaps). If you keep moving the goalposts how do you ever finish paying it off. It is there for the Grand purpose.
7. The grand purpose: Having a big reason for doing this helps. In my case, I have 5 kids and in a few years, they will need help with college or University costs or a house deposit and by being debt free, I will be in the best possible place to help them.
So, if anyone wants to follow suit, my advice would be to see what they can budget to have spare every month and add that to the monthly mortgage payment. Even if it is only £50. Then see how it can be turned into £100 and then £150. Regular amounts off the mortgage really kick a hole in its life.
Hope this helps some, and feel free to add any more.
EDIT: http://forums.moneysavingexpert.com/showthread.html?t=239210
Due to some good fortune, I cleared it after 5 years and 8 months, although the foundation had been in place because of earlier repayments
0
Comments
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whilst all good advice pretty much the main crux of paying a mortgage off in 8 years is a) get a good job and b) be able to overpay by £2k(or 4x normal payment)!
*goes to rob bank*0 -
Thefunkygibbons, Well done on your perseverence. I suppose not all will agree with what you do but your resolution is definitely inspiring.
I like that you have focussed on your career and have good arrangement with your bank.0 -
Woby_Tide wrote:whilst all good advice pretty much the main crux of paying a mortgage off in 8 years is a) get a good job and b) be able to overpay by £2k(or 4x normal payment)!
*goes to rob bank*
Yeah exactly.
"Overpay like me because I'm rolling in it, and you'll be able to do what I've done."
Genuis (sic)!
Or you could take out a better mortgage rate, witha 10% overpayment cap, and invest the rest each month in the stock market. Over the last few years you'd have had a return of 10% plus.
Do I win a prize?0 -
Thanks for that, its nice to know how people get to where they are in life.
Vxx
(currently under going a mid-life crisis and trying to work on a new life plan for the family....)Debt free and plan on staying that way!!!!0 -
I think the benefits of having no more mortgage after only 8 years far outweighs any (potential) gain that could be made on stocks and shares. As 'The Funky Gibbons' states, any extra payment however small can make a big difference."It is far better I say nothing and let people think I am an idiot than to open my mouth and confirm it beyond any doubt."0
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Yes he earns a lot of money so can afford to pay more, but he worked hard to get a job with extra money.
I've seen funkygibbons advice on other threads and he also knows where to get good deals so he looks after his money and spends it wisely.
I haven't been so wise with my money but am happy to learn from others.0 -
I could get upset about the spin, but I won't
I suppose in the back ground, I could have added
The mortgage was only £175k on this house because I had the same approach to my first house, I made overpayments on my first house when I could even though the mortgage was over 50% of our joint take home monthly pay
If you want a one line summary
Those who have money have it because they kept more of what they earned rather than spent it0 -
Sounds to me like he has found the perfect balance for his family between enjoying life and being prudent.
Sure, he's fortunate to earn well, and he acknowledges that not everyone can do as much as him and as quickly as him. But the principles apply to most people. I know lots of people who 'struggle' to make ends meet, yet they variously drink, smoke, have Sky, follow fashion slavishly, go clubbing, have a fancy car, can't cook etc.
I don't have a problem with any of that, until they start moaning or being envious!
Edited to add - a great quote "The best things in life aren't things".0 -
meanmachine wrote:Do I win a prize?
Win a prize? No. You ARE a prize.............0 -
Thefunkygibbons wrote:So, if anyone wants to follow suit, my advice would be to see what they can budget to have spare every month and add that to the monthly mortgage payment. Even if it is only £50. Then see how it can be turned into £100 and then £150. Regular amounts off the mortgage really kick a hole in its life.
Hope this helps some, and feel free to add any more.
But surely this was the advice, not get a job paying £x etc ?
Sounds like good advice to me - or maybe some of you didn't read that far ?Not even wrong0
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