Onwards to freedom!

turtlemoose

As ever, great post and insight from you squirrel.

SuperSecretSquirrel

Thanks for posting turtlemoose I have a terrible habit of going on and on, amazed that anyone made the effort to wade through the waffle!

I've done a little research and it seems we could comfortably afford to sell our house for 120k (low estimate), and buy a 220k house with the proceeds plus a 100k mortgage. A four year fixed rate mortgage at 2.29% with a 25 year term would see our monthly repayments at £438. Net savings interest should beat that rate, so no point overpaying, just keep on saving. At the end of the fixed term, having made no overpayments, the mortgage balance would be £87,576. Saving £900pm over 48 months at a net interest rate of 2.4% would see us with a savings balance of £45,294. If we were to pay the savings off the mortgage at the end of the fixed period, we would have an outstanding balance of £42,282. If we then continued paying £1,338pm, we would likely be mortgage free between two and three years later.

This would certainly be doable provided life carried on smoothly and nothing much changed regards circumstances, but would not be as straightforward if we were thrown a few curveballs along the way.

If we were to have another child for example, we'd be looking at a doubling of childcare expenses, or more realistically dropping to a single income while OH did the SAHM thing for a while. We would manage the minimum monthly mortgage repayments on top of our day to day living expenses (increased running costs of larger house factored in) on my salary, but overpayments and savings would be a pipe dream. We'd be in danger of hopping on the standard 25 year work-mortgage treadmill, and I really don't relish the thought. Still, we'd be bobbing along keeping our heads above water doing things the "normal" way, so all is well right? Not really, all it would take at that point is a huge hike in interest rates or an extended period of unemployment for us to be in trouble. Of course that might never happen, but the possibility is there.

Contrast that with the safe option of staying put. Our house is big enough to accomodate a family of four, and we live in pleasant surroundings, there is no need to move, it is merely a fancy. We are essentially mortgage free on this house, and our outgoings are relatively low. We are in a position for OH to become a SAHM while we continue saving a little towards retirement. Should anything happen to my employment, I'm in the fortunate position of being able to take a much lower paid short term "needs must" job that would keep us ticking over. A pretty solid position really.

Superficially, the people in the better house might seem to be living the dream, but I think we prefer our simpler and easier life where we are. After a little wobble, we are back with the program. Stay put for at least a few more years, make hay while the sun shines, pay down debt, save, invest, live a happy stress free life, then a few years down the line, market willing, we may be in the fortunate position of being able to trade up without risk. Of course, by then the decision would be less about risk and more about whether or not the nicer house is worth having to delay retirement for however many years!

SuperSecretSquirrel

I've been tinkering with the S&S ISA this morning. I'm increasing monthly investment from £250 to £350, and have re-jigged allocations (buying 70% VLS80 from now on, up from an initial 20% and recent 40%).

Had some fun reviewing my investment career so far... March 2013 I opened my first ever S&S ISA, paying in £50pm. Over time the monthly pay-in increased, £100, £200, £250, now £350. In total, over the past two and a half years, I have invested £4,850.

Current value of portfolio? £4,874.29 :rotfl:

In two and a half years, I'm up £24.29. Won't be giving up my day job any time soon

SuperSecretSquirrel

Penultimate MFiT3 update today! Our mortgage balance now stands at £39,579.58, and we are £9,433.67 ahead of neutral

Feels great to have the balance drop below 40k, that was the MFiT3 stretch goal and there's another three months of the challenge left to go

atush

I like your thread.

So many MFW threads involve people overpaying their mtg but not saving into S&S isas and pensions. So good for you that you do.

We too are mtg neutral to a very large degree (cash alone is more than 2x mtg balance), but we invest in other ways as well. A balanced approach (not so fanatical) seems best.

SuperSecretSquirrel

Thanks atush Spreading the love across cash savings, s&s, pensions and mortgage OPs works well for us. I can appreciate that for some people it's better to lock their money away as a mortgage OPs right away as it does make it quite difficult to spend on other things then. Sticking it in a pension would make it even harder to spend, but that's not always such a good thing if intending to retire early!

sweetdaisy

Hi SSS

I admire your approach to Mortgage Neutrality . I have an Offset mortgage and started off my MFW journey trying to OP as much towards the mortgage as I could. However, now I have balanced this out and making smaller Mortgage OP's but putting away more money into Savings than I am OP'ing. I am 72% Offset at the moment, so only 28% to go and I will be mortgage neutral.

atush

SuperSecretSquirrel wrote: »

Thanks atush Spreading the love across cash savings, s&s, pensions and mortgage OPs works well for us. I can appreciate that for some people it's better to lock their money away as a mortgage OPs right away as it does make it quite difficult to spend on other things then. Sticking it in a pension would make it even harder to spend, but that's not always such a good thing if intending to retire early!

Depends on how early, as DC pensions can be accessed at age 55. Which is 10+ years to State pension age so very early.

The best time to take such pensions is after you storp working but before SPA. As you can take up to our personal allowance each year tax free. Add in the 25% TFLS and the tax relief and you have a Win.

SuperSecretSquirrel

Thanks for posting sweetdaisy and atush. I'm up to page 22 of your diary sweetdaisy, reading a few pages as and when I get the time. Love reading posts from a couple of years ago along the lines of "Hopefully we'll be able to scrape two years off our term", then reading on to see you smashed that target. I can see from your signature that you've carried on smashing it! Also heartening to read about redundancies followed by much better paying jobs
_____________________________

Time for another quarterly review!

We've spent a little time and money on the house having decided to stay here for at least a few more years, about £500 spent on decorating this quarter. We also had a nice weekend away, bought some nice gifts, some clothes for ourselves, and a lot for LO, been out for a few meals, and enjoyed a few cinema trips. It hasn't been a particularly austere quarter but we're still heading firmly in the right direction - not having a big summer holiday has certainly helped the finances!

Pensions and S&S ISA are suffering, but that comes as no surprise. Over the past 2.5 years I've paid £5,200 into my S&S ISA, current value is now £5,115.26. It's strangely fun following the ups and even the downs Regardless of what's going on in the markets I'm sticking to the plan, I'll be investing £350pm for the forseeable future.

House value is unlikely to have changed since my last update, cash savings increased by approx 1.5k, cars depreciated by about £450, S&S and pension values crept up slightly (approx £550 and £300 respectively - far less than the amount paid in during the quarter, but that's just how it goes sometimes), mortgage reduced by approx 2k, what I owe HMRC increased by about £225 (SE earnings are low and falling), and my student loan balance has dropped by about £200.

Total net worth is just shy of 4k ahead of where we were three months ago. Considering the state of the markets and how poor my SE earnings have become, I'm very happy with that.

Full breakdown as of 1st October 2015:

House Value - £125,000.00
Cash - £47,676.39
Pensions - £37,094.61*
Car Value - £11,150.00
S&S - £5,115.26
Mortgage - £39,688.73
Due to HMRC - £2,182.50
Student Loan - £3,353.68
Total - £180,811.35

*OHs pension is in the process of being transferred so we have no online access at the moment - as a result the pension figure for this update is something of an estimate, though it should be a reasonably accurate one.

That sees us at 60.3% of the 300k by 2020 target, and £10,920.42 ahead of mortgage neutral in liquid assets

I'm looking forward to our new 10% OP allowance becoming available in January, but for now I'm happy to celebrate crossing the 10k ahead of mortgage neutral barrier I'm now aiming for 14k ahead of neutral by the end of the year. It should hopefully be a realistic target, even with Christmas and New Year complicating matters.

Finally, it has crossed my mind recently that I should perhaps pay a lump sum off the mortgage to trigger a recalculation of our monthly repayments sooner than originally planned. This would result in far smaller monthly obligations, meaning improved monthly cashflow. OH would feel happier if we had smaller monthly commitments should there be another period of maternity on the horizon (and then either a doubling of childcare costs or a drop to a single salary). I intend to spend a little time running the figures for a few scenarios - if the 'cost' is small enough I might be tempted.

sweetdaisy

SuperSecretSquirrel wrote: »

Finally, it has crossed my mind recently that I should perhaps pay a lump sum off the mortgage to trigger a recalculation of our monthly repayments sooner than originally planned. This would result in far smaller monthly obligations, meaning improved monthly cashflow. OH would feel happier if we had smaller monthly commitments should there be another period of maternity on the horizon (and then either a doubling of childcare costs or a drop to a single salary). I intend to spend a little time running the figures for a few scenarios - if the 'cost' is small enough I might be tempted.

Very sensible. I started my MFW journey 3 months after the birth of our 2nd child. It didn't think of it at the time, but I would have loved to have paid a chunk off the mortgage to reduce the monthly outgoings as it gives peace of mind and gives you options i.e. extending maternity leave, reducing working hours etc.