Trying to be Mortgage free in 5yrs(ish)

Mc_Marty

It's thanks to MSE that I am a Mortgage-Free-Wannabe and have been ever since I happened upon the site last year. However I feel that after a year of reading other people's journeys and goals that I should contribute and add my own story to the pot. So here is my MF 5 year plan:

At 21 I finished Uni and was lucky enough to move into a good job. After a couple of years of enjoying life I decided to start saving and over a 3 year period (with the joint help of my partner) we saved a total of £40k. In March of 2009, with the good fortune of being cash buyers and the house price decline having already hit from summer of 2008, we were able to put a 15% deposit down for a £135k 3 bed semi in Kent. We then used the remainder of the money to renovate the house including replacing the kitchen and bathroom. We did most of the work ourselves on weekends and in the evenings and eventually after 6 months of DIY we were able to move in at the start of Sept 2009.

At the point of moving in we had approx £115k 5 year fixed rate mortgage at 5.84% (in hindsight this was not such a great choice but at the time due to the global economic panic and us being first-time-buyers, fixed deals were the only choice, although a 3 year deal would have been better, but you live and learn…). Our mortgage allows us to overpay by 10%, so in 2010 we overpaid by approx £11k and this year we have overpaid approx £10.5k. So as of today my partner and I are 26 & 28 years of age and we currently owe 91k.

My plan, although maybe a tad ambitious is to be MF in 5 years time (2016) when I will be 33. A closer milestone would be the ending of the 5 year deal in April 2014. I hope at this point to have the mortgage down to approx 50k which would put us in a position of a LTV of around 35% (this is based on the house being conservatively valued at 145k after the value added by our DIY). The aim being that a LTV of 35% should allow us to get a much better rate than out current 5.84% (assuming that BOE interest rate hasn't shot through the roof by then).

Thanks to the site I have also been running a weekly spend diary for about 6 months now and have used this to work out exactly how much we spend in a typical month. I calculate that we comfortably put away in a separate overpaying savings fund £1300+ a month, with the aim that at the start of each New Year we will have enough to overpay the full 10% in one lump sum and then use the rest of the year to build the savings up for the next year overpayment. This is the plan behind the goal to be at 50k in April 2014 and MF at some point in 2016.

One of the driving factors behind wanting to be MF is that we would like to start a family in 5 or so years time and not having to pay a mortgage will hugely increases our quality of life. Also I don’t like the idea of paying the bank twice as much as the house is worth over a 25 year period.

Nothing is certain in this life and we are aware that a lot can change in 5 years, but here's to trying. And of course I hope this helps encourage other reader’s in their MF journeys, as your posts have done to me.

Mc_Marty

A new year and a new 10% overpayment pot. Today we have overpaid the full whack of £9k that we saved up in 2011. This leaves us with an 80k mortgage. The plan for this year is not to save up next years bulk overpayment but instead to change the mortgage duaration to a much smaller term thus allowing us to 'overpay' without penalty by making much larger monthly payments. We plan to increase the monthly payment to £1,834, which at an interest rate of 5.84%, will give a beginning monthly capital repayment of £1,445. If we are able to keep that up we should hit our 1st milestone of April 2014 (the end of the fixed rate) at the 40k level and hopefully mortgage free by March 2016. We plan to change the mortgage term in March after we have achieved £5k in emergency savings (currently 2.5k)

It's ambitious and this plan may change several times between now and mf date but its a challenge and being a mfw is addictive.

abouttimetoo

Hi McMarty, a belated welcome to the board

Well done on all you have achieved so far, you sound like a man with a plan and this will help you carry things through. You'll get some great advice and information on this board.

Is your GF on board with everthing as this will make the path easier for you

Good luck with your plans

Regards
ATT

Mc_Marty

Yeah GF is on-board but maybe not as much as I am. We have a system where i organise the savings for the mortgage and she organises the savings for the holiday pot and it seems to work well.

RosieTiger

I have said it before on here - wish i had thought this way at your age! Well done so far.

Mc_Marty

An update:

As planned we have shortend the term of the mortgage allowing us to pay more per month rather than having to wait until the new year to make an overpayment. However we didn't go with £1,834 per month as said before. Instead we decided it was bit too scary commiting that much. Now paying £1,542 a month with approx £1200 comming off the capital each month. That means we should be at £67k by christams 2012. And at this projection £48k by April 2014 when the current fixed deal ends.

Not so good news is that our old petrol guzzling car has died. So need to buy a 2nd hand car with the savings we had marked for 2013 overpayment. Very tempted to buy the sports coupe that i want but unfortunately it doesn't fit in with being a MFW, so will probably do the sensible thing and buy small with economical running costs.

I have to admit that it's getting a little bit tiring with saving/overpaying mortgage. I've read in many places in the MFW forums about it being a marathon and not a sprint and we're learning this first hand. It will be interesting to see how long we want to keep at this pace. Maybe the goal will be to keep this up until April 2014 when we can re-mortgage and hopefully get a much better rate (depending on how much the BoE base rate has bounced back by then). Then slow down a bit.

Goodluck to everyone else with their MF goals.

lexington013

Good luck with your quest. It is hard at time to keep focused, however you will reap the benifit. Keep going its worth it. Trust me I have been there and done it with cars! Go for the small economical route! Best of luck to you.

Mc_Marty

Happy New Year All!

Things have deviated a little from my original 2012 plan. We did buy the sensible but boring small economical 2nd hand car (not the sports coupe i wanted) ... probably the right decision ... however we also decided to replace the old warm air central heating system with a new gas boiler heating system, which was well overdue. This was a job on the list for the future but we got fed up of being cold. Hopefully some of this cost should be recouped in the aksing price when we come to sell.

So, we had to raid the 2013 mortgage overpayment pot to pay for the central heating, however i have now raided the emergency money pot to pay for the overpayment (bit risky i know but determined to lose this mortgage as soon as possible). So today used full year 10% overpayment allowance. Mortgage has now dropped from £67,119.96 to £60,407.96 and a new MF date of July 2016.

So plan for the remainder of the year is to replace emergency money pot as soon as possible (and maybe have a little for a 2014 overpayment ... but this may be wishful thinking). Mortgage fixed rate ends on April 2014, which seems to be taking forever as we started the 5yr fixed on March 2009 and are currrently paying 5.84%. So the goal now is to get to the fix end date with a mortgage balance of somewhere between £35-40k (a nearer milestoine being £50k balance by September 2013)

Goodluck to everyone else.

Calfuray

Hello! This is the first time I've seen your thread and I just came by to say well done, and keep up the good work, your plan is incredible!

happycamel_2

Fantastic, well done. What's the ERC on your fix? I have 4.99% for 5 yrs ending jun 2014. I'm paying £3800 ERC to ditch and switch to HSBC at 1.99%. Your LTV has improved so much it's worth investigating.

originalmiscellany

Also McMarty, you have to remember that once the mortgage falls to a certain amount, say 30k, the actual interest you are paying really is small, so if in 2 years time you situation changed, the fact that you've paid off so much mortgage already means that the monthly charges will be quite straightforward to survive on, as you may only pay several hundred a month, which can be easily done on one salary, especially if as you say you're thinking of trying for a family in a few years time. However, congrats on what you have achieved so far, it's a great feeling isn't it.