MFW newbie....

[Deleted User]

wow- have been reading through some of the stories here, pretty inspiring!! ;o)

I would really like to be MF in the next 10to 15 years or so.... it would be a big stretch I think , but possibly not totally undoable...

My outstanding mortgage at the moment is 130K with 32 years left on it. from looking at the calculator thing if I overpaid 10K a year i could clear it in 10 years (??) but finding an extra 10K every year is easier said than done! (ok its almost impossible...!)

I think I am going to plan to try and put money into savings and then try and pay off in a lump sum every few months or so .,....that way if an emergency comes up (new boiler, new car etc..) I am not left with nothing....

what have others found the best way of doing it? I have done a budget and am gonna go thru all my outgoings to try and see where I can make some savings!

tyo

delmar39

Do something would be my advice. Set up a monthly transfer / direct debit to your mortgage for as little or as much as you can afford for now and then review as you go along. It's great having a target of £10k per year, but like you say actually finding this amount of money is easier said than done. You could join the MFW list via this forum http://forums.moneysavingexpert.com/showthread.html?t=2062237, set a target and then provide monthly updates. I don't overpay a huge amount, but it's a start. Looking down the list of MFWs is inspiring in that it shows you what others are doing - some have a small annual target and some have a huge one £10k plus. So, just do something for now and see how you go.

Baby_steps_2

Have you ever lived in the property? If you have this will affect the amount of CGT payable due to PPR relief available on your home.

[Deleted User]

delmar
you are right- doing something is better than doing nothing!! I need to sort out my financing and also some savings ("just in case money") and then I think will set up a direct debit after that, you are right- it can always be put up as needed

babysteps
yep I and lived there for a couple of yrs so Im not sure at what point or what rate I would have to pay CGT , I will have a look around to see if I can find out?...

dimbo61

If you sell within three years of moving out of the property you have no CGT to pay ( at the moment!)

Baby_steps_2

As dimbo saiid if you sell within three years at the moment you qualify for principal private resident relief. This means you pay no capital gains tax on any gain arising in the last 36 months of ownership as long as it has been your main residence at some point. CGT chnages are almost certainly going to happen in the next year, I would expect this relief to be scrapped especially with all the fuss sound second homes. I would also expect the CGT rate to increase significantly with the change over government at present I think the rate is 18%. These are both things you should consider if you are planning on selling in the short term as you could be paying a lot more CGT if you wait for a couple of years. Although no one has a crystal ball so these changes may never happen!

[Deleted User]

thanks guys that is good to know!!! also am I right in thinking CGT applies only on the profit (ie. if it has gone up 10K since I bought it I would need to pay 18% of that 10K as tax???) or would they tax me on all the money I get out of it (ie, with the fact I have paid a good 30K off the mortgage)
I pay income tax on the money from the rent but assume if I sold (after 3 years as per current rules) CGT would still apply despite this?

cheers

Baby_steps_2

Yep, you will only pay capital gains tax on any PROFIT, not on the proceeds from the sale ie the 10K not the 30K.

Yep unfortuantly you would stil pay CGT on any gains made if you sold after owning for more than 3 years, depite paying income tax on any rental profits (i'm assuming your deducting your expense eg mortgage interest, letting feess etc) from any income before declaring it as profit.

If you sold after mmore than three years of moving out the calculations get much more complicated. For example if you sold it after five years after moving out (so owning for a total of 7 years), you would pay no CGT on the two years you lived there or the last three years (so no CGT 5 years in total) and therefore pay CGT on 2 years of gain. You would then multiple any gain by 2/7 to establish the amount you pay CGT on. Hope this helps!!

Only you can decide what is best for you to do in your situation.

[Deleted User]

thanks BabySteps
thanks for the info...
CGT wont apply till next year so I think I will rent it until then in order to also sort my finances out a bit I want to sort the savings first as my first priority by Jan 2011 then I can focus more on the mortgage side of things...

[Deleted User]

Okay
have decided that I am gonna post some updates to keep myself motivated with this!


So far my aims by New Year 2011 are:
1) Build up savings to have 6 months living costs in ISA/savings (approx £)
2) pay any extra savings off the mortgage (I am doubtful at this stage there will be any!)
3)set up a direct debit for overpayments to the mortgage from Jan 2011

So far to achieve this I have...

done a budget and looked at ways to reduce costs
sorted stuff for a car boot sale or selling on ebay
sought out cheaper phone contracts when mine ends in July (saving possible £20 p/m)
commited to trying to keep grocery shopping down to £200 p/m
trying to save up clubcard points and credit card points (get amazon vouchers!) for use at xmas

ok thats all for now- will update as I go!

Baby_steps_2

Good luck with it all. You can find loads of hints an tips on here to help build up your saving etc. I find that by posting regular updates (and being honest even when I've not been very mse) really helps keep me on track.

If you have the time I would also look into some survey sites to try and build up some extra money and gift vouchers. I find toluna and one poll are going quite well for me. I'm also signed up on valued opinions but don't get so many from them but I do know some people do well with them.

Hope it all goes well and well done on your first steps.:j:j