Mortgage Free by 40?

jezebel

Hi,

This is my first MFW post so be gentle !

I bought a house last year (jointly with the nice people at Nationwide BS) My original plan was to be Mortgage Free at 50 so I could start to think about winding down early and working part-time before retirement.

I borrowed £90k on a £140K property. Currently paying just under £500 per month on a 4.28% fixed rate (fixed to June 2012). I'm also overpaying approx £300 per month.

I've done some rough calculations and this works out at being 11-12 years to pay it off - so, at 29 I could theoretically be mortgage free by 40, or at least the very early years of my 40s. The real question is does this seem likely? I mean, I have no crystal ball but I know that mortgage rates might go up, so should I be overpaying more now to cushion the likely rise later? I have a bit of a "cushion" for the emergencies that is slowly gaining interest but am not sure if I should put the spare £50 or so I have each month into my mortgage or into savings.

mummyofonechild

Once you have an emergency fund of at least 6 months, you could then consider either paying the extra £50 towards your mortgage or putting it in an ISA. Good Luck with your journey to be MF :T

jezebel

Thanks, my emergency fund would cover boiler breakdown, electrical repair, or 6 months of living (including mortgage and all other bills) - Thanks for the support.

ETA:"boiler breakdown, electrical repair/rewire" are both things friends had happen in first 1-3 years of owning and advised me to save for

Sugarhunny1

Hi Jezebel,

I'm no expert on this but your story is very similar to mine so wanted to share mine with you.

18 months ago we took out a mortgage with Nationwide for 90k on a 130k property and we done this over 22years with a 4.58% fixed (till April 2012).

We started making overpayments of £500 a month and managed to afford this comfortably so we decided to move the goal posts and increased our mortgage payments to £800 and (with fingers and toes crossed) hoped to make the £500 overpayment also.

We have reduced our mortgage term time to now 6yrs, if we continue to manage the extra £500, if we fail to continue making these then the mortgage term will remain at 10yrs. I would really love to be mortgage free by 40 (7 years away) but whatever happens then I'll be happy.

Before we got this house we rented a LA flat and paid £200 a month and I panicked so much about getting a mortgage but with determination and focus we have gained so much.

Good luck with your quest :-)

Sugar xxx

"so should I be overpaying more now to cushion the likely rise later?"

Yes if you can afford it :-)

abouttimetoo

jezebel wrote: »

I have a bit of a "cushion" for the emergencies that is slowly gaining interest but am not sure if I should put the spare £50 or so I have each month into my mortgage or into savings.

Hi Jezebel and welcome to the MFW board.

Once you have your emergency savings then unless you can get a better savings interest rate (after tax) than you are paying on the mortgage then yes, you will probably be better off paying any little extra's off the mortgage; I'm guessing you have already looked at the mortgage overpayment calculators but I would keep checking back in with them to see the effects of the smaller ad-hoc payments you might make.

The other thing you could perhaps look into is what access do you have to the OP's you have already made, e.g. some people can get all or some of their OP's back in an emergency; with my mortgage I can't get the money back but, I can suspend all 'normal' payments until the amount I've OP'd by gets used up - hope that makes sense. It just might give you a different perspective on how much you keep saved up for emergencies if you know you can access it should you need to.

Good luck with your plans

jezebel

Thanks Sugar, sounds like a similar story to me and well done on getting your mortgage down so much - I hope I have your staying power - it's so good to hear that I'm not the only one that wants to be Mortgage free by 40 too

ATT - I can either underpay (eg reduce payments) or take a "payment holiday" (ie not make payments) from my mortgage, but don't think I can get the money out - the plan is that should i get made redundant, lose my job or have to take ill health I'll be able to do one of these two options (or reap the benefits at the end should nothing bad happen)

I'm actually looking forward to the challenge of making up the overpayment to as much as I can - the best thing is everytime I log on to my online bank it shows me how much I have left to go...that's a real incentive, so thanks Nationwide

greent

Welcome and good luck! And well done on thinking of becoming MF so soon after getting a mtge - I wish we'd taken OPing seriously sooner. We're already 40 - but hoping to be MF in 6 years, which is when our original mtge (taken July 1991) would have been due to be repaid (we've since moved twice and increased the term to cope with the increased mtge balances!)

Jock_Tight

jezebel wrote: »

it's so good to hear that I'm not the only one that wants to be Mortgage free by 40 too

My target is also to be MF by 40 as well

Congrats on your OP's so far! As others have said once your emergency fund is set up then hit those overpayments and enjoy watching your mortgage amount drop!

There are plenty of tips on these boards as to how you can cut down on spending, save on items and even make a bit of money playing with the banks

2 and half years left for us.

Cheers,
Jock

jezebel

UPDATE: Not sure I'll be keeping a regular diary but since the last time I posted I've put the extra £50 toward my overpayments - now paying back just over £300 per month and looking at ways to improve the house (partly as investment but partly to make it look nicer/more modern) and paying for this out of an extra £20 or so a month.

I just did a rough calculation and am still on track for 40, although I'm aiming for 45 as since retirement has gone up I've also got to consider pensions etc.

My next target is to get up to 50% LTV as I really want to be able to say that I own half my house, doesn't fully feel like mine at the moment because Nationwide own more of it

jezebel

Wow. Just found this thread in my older posts - can't believe I was struggling to overpay £300 back then!

As of next month I'll have payed off a third of the original mortgage in just under 5 years!

I came to the end of my fixed term and now paying just over £300 on the mortgage with £480 overpayments.

Still on track for under 40

chirpchirp

jezebel wrote: »

Wow. Just found this thread in my older posts - can't believe I was struggling to overpay £300 back then!

As of next month I'll have payed off a third of the original mortgage in just under 5 years!

I came to the end of my fixed term and now paying just over £300 on the mortgage with £480 overpayments.

Still on track for under 40

That's great progress, I see you have shaved six years off the expected date of being mortgage free. I need to pay all of mine before the weekend if I want to be mortgage free by 40. I think I will aim for 45!