Starting the mortgage free path

bownyboy

Like many people I've been a lurker on these boards for a while now and after reading some other diaries I've decided to take plunge and start on the mortgage free path.

Me and my girlfriend bought our house in May 2009 with a 25 year mortgage of £155,590 on a 5 year Alliance & Leicester fix at 3.99%. Monthly payment of £832.

The house was a bit of a timewarp (one family had lived there for over 50 years) so needed completely new electrics, replastering, painting, carpets ripped up etc.

I'm now in the position to start overpaying the mortgage and in January made the first payment of £499 (maximum allowed each month). I can also make a 10% overpayment of the total outstanding amount each January so I'm saving £250 in an ISA account and will pay off £3k in January 2012 (and each subsequent year).

I'm now on my third overpayment and it feels great My outstanding balance has gone down more these last 3 months that the last 2 years!

The target is to pay off by December 2019.

Only 104 payments to go!

drewwa

Sounds like a good solid plan. Keep going!

Cheers,

Drew.

CathT

bownyboy wrote: »

I'm now on my third overpayment and it feels great My outstanding balance has gone down more these last 3 months that the last 2 years!

I think this is what spurs us on to make these overpayments, they really make such a difference. Wishing you luck on your mortgage free journey.

bownyboy

Wow, time really does fly sometimes. It's now October and 10 months into mortgage free mindset. I've kept up the £499 a month overpayments and had some great news in July that meant I had a pay rise and can also up my monthly ISA saving to £500.

My target is to pay £4750 as a lump sum in January and bring it down to £134k. I'm currently now at £141k. Each 2 January's after will be £6k after which I come off the 5 year fix and then look at increasing monthly payments.

Target is now march 2019, 7 years and 5 months.

As an iPad user I've found 'My Mortgage' quite useful in getting a view on the impact of overpayments.

Sepa74

Wow, what a great job you're doing. I'm looking forward to hearing more, and congrats on the payrise!

bownyboy

End of the year and balance now at £140k. Time for some before and after stats after 12 months overpaying:

Jan 2011 - £153k
Dec 2011 - £140k
Overpayments £6k

After calling A&L I've decided to have my term reduced from January so my minimum payment is increased by £500, this will allow me to overpay an additional £500 each month (rather than saving it and only being allowed to pay off in January).

Net result is that my mortgage free date is now January 2019.

Only 7 years to go!

Tilly_MFW_in_6_YRS

Hi Bownyboy, you must be delighted and will have a whole load of options available to you once you are either MF, or with a good LTV.

Good luck to you both on your journey.

Best wishes Tilly

Sepa74

That is brilliant, well done!

Just one thing - you're looking at being MF in quite a short space of time, which means that when that happens you'll have to find a home not only for the spare cash you're using to OP at the moment, but also for your mortgage payments.

ISA allowances can only be used once, but if you build them up over a period of years they can provide a significant stream of tax free income later in life, which is never to be sneezed at! So you could think about filling your ISA allowance each year and OPing everything else...

Sounds crazy when savings rates are so low compare to mortgage rates, but that tax free income stream could be very valuable in future.

It might be a good idea to talk to an independent financial advisor now so you can build up a picture of what to do with all the cash when it starts streaming into your coffers <Please note, I am GREEN with envy at this point in time!>

lvm

WOW - you have done so well so quickly.

About the reducing your term and increasing your minimum payment by £500. This is a lot of money you're now obliged to pay every month - was there no option just to increase your direct debit amount and leave the term as it was? If you're happy that you've got 2 incomes coming in and both jobs are secure then great work but I'd be little worried doing that myself. I've just been phoning my mortgage provider (Halifax) every little while and getting my direct debit increased (although they do tend to do random things and make up the amount on their own, rounding up to nearest X amount!)

Good luck with the 7 or so years - and well done for the past year!

bownyboy

Thanks for your feedback and support guys.

Lvm - I can overpay up to £499 a month which is what I've done for the past 12 months. A&L don't allow any more than this. Changing the term means my minimum payment is £500 more and gives me the option to pay up to £499 more a month without penalty. Fingers crossed my job is secure (as anyone can be) and I can always change it back for £20 fee.

SAMMYE_2

Well done on your quest for financial freedom and escape from economic slavery.